EXHIBIT 10.2
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FIRST AMENDMENT TO LOAN AGREEMENT
Entered into as of December 20, 1996
Effective as set forth herein
between
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
as the Lender
and
KANSAS ELECTRIC POWER COOPERATIVE, INC.
as the Cooperative
Rural Electric Cooperative Grantor Trusts (KEPCO)
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TABLE OF CONTENTS
Page
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Parties............................................................................... 1
Recitals.............................................................................. 1
ARTICLE 1
Purchase of Notes
SECTION 1.1. Designation of CFC; Notice of Deposit Date and Refinancing Date to CFC. 3
SECTION 1.2. Purchase Price......................................................... 3
SECTION 1.3. Deposit Date-CFC's Obligations......................................... 3
SECTION 1.4. Deposit Date-Cooperative's Obligations................................. 5
SECTION 1.5. Closing................................................................ 5
ARTICLE 2
Deposit of Notes with Series 1997 Trust & Issuance of the Certificates
SECTION 2.1. Agreements of CFC...................................................... 6
SECTION 2.2. Agreement of the Cooperative........................................... 6
ARTICLE 3
Amendments to Original Loan Agreement
SECTION 3.1. Amendments to Article I................................................ 6
SECTION 3.2. Amendments to Article III.............................................. 9
SECTION 3.3. Amendment to Article VII............................................... 10
SECTION 3.4. Amendment to Annex C (Note One) to Loan Agreement...................... 12
SECTION 3.5. Amendment to Annex C (Note Two) to Loan Agreement...................... 12
ARTICLE 4
Further Amendments to Original Loan Agreement
SECTION 4.1. Amendments to Article III.............................................. 13
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Page
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ARTICLE 5
Representations and Warranties
SECTION 5.1. Representations in Loan Agreement...................................... 14
ARTICLE 6
Miscellaneous
SECTION 6.1. Effective Dates........................................................ 15
SECTION 6.2. Definitions............................................................ 15
SECTION 6.3. Successor Entities..................................................... 16
SECTION 6.4. Expenses............................................................... 16
SECTION 6.5. Governing Law.......................................................... 16
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THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Agreement") is entered into
as of December 20, 1996 and effective as provided herein, by and between
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION ("CFC"), a District of
Columbia cooperative association, and KANSAS ELECTRIC POWER COOPERATIVE, INC.
(the "Cooperative"), a Kansas nonprofit cooperative corporation, for the
purposes of, among others, amending that certain Loan Agreement, dated as of
February 15, 1988, among the Cooperative and CFC (the "Original Loan Agreement"
and, as amended hereby, the "Loan Agreement") and setting forth the terms
pursuant to which CFC will purchase certain of the Original Notes (as
hereinafter defined).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Cooperative prepaid certain of its loans from the Federal
Financing Bank (the "FFB Loans"), which were guaranteed by the Administrator
(the "Administrator") of the Rural Electrification Administration of the
Department of Agriculture, which has been succeeded with respect to the
administration of certain electric and telephone loan programs by the Rural
Utilities Service (the "RUS"), an agency of the United States Department of
Agriculture established pursuant to Section 232 of the Federal Cooperative
Insurance Reform and Department of Agriculture Reorganization Act of 1994 (Pub.
L. 103-354, 108 Stat. 3178); and
WHEREAS, CFC (CFC in such capacity, the "Lender") loaned the Cooperative
the amounts necessary to prepay the FFB Loans on the terms and subject to the
conditions set forth in the Original Loan Agreement; and
WHEREAS, CFC, pursuant to that certain Trust Agreement, dated as of
February 15, 1988, among CFC, the Cooperative and The First National Bank of
Chicago (the "Trustee") (the "1988 Trust Agreement"), established Rural Electric
Cooperative Grantor Trusts (KEPCO) Series 1988 K1-1988 K3 (the "Original
Trusts") for the purpose of holding the notes (the "Original Notes") evidencing
the Cooperative's repayment obligations under the loan (the "Loan") made by CFC
to the Cooperative pursuant to the Original Loan Agreement, which repayment
obligations are guaranteed by the United States of America acting through the
Administrator of the RUS; and
WHEREAS, CFC, as depositor of the Trust and Servicer (in such capacity, the
"Servicer") of the Original Notes caused the Original Notes to be delivered to
the Original Trusts; and
WHEREAS, pursuant to the 1988 Trust Agreement, certificates of beneficial
interests (the "Original Certificates") in 100% of the Original Trusts were
issued to CFC in consideration of CFC's deposit of the Original Notes into the
Original Trusts; and
WHEREAS, CFC has transferred and sold such Original Certificates to
certificateholders (the "Certificateholders"); and
WHEREAS, pursuant to Section 3.9(a) of the Original Loan Agreement, the
Original Notes may be prepaid or purchased prior to their stated maturities,
provided that, among other things, the
Servicer gives its consent to a purchase if it is to continue serving in such
capacity, and full payment is delivered to the Trustee at least 30 days prior to
the proposed prepayment or purchase date; and
WHEREAS, Note One and Note Two of the Original Notes, evidencing a portion
of the Loan in the original principal amounts of $11,075,000 and $51,340,000,
respectively (the "Notes"), will be eligible for prepayment or purchase on any
Business Day on or after the Business Day immediately prior to December 15,
1997; and
WHEREAS, the Cooperative has notified the Trustee that, with the approval
of the Administrator, it desires that CFC purchase the Notes and the Trustee
redeem the Original Certificates relating thereto and terminate the Original
Trusts relating thereto on the Refinancing Date (as hereinafter defined), for
the purpose of amending certain terms of the Loan and the Notes and issuing new
certificates of beneficial interest ("Certificates") therein; and
WHEREAS, the Cooperative has agreed to compensate CFC as provided herein
for yield on the Purchase Price (as hereinafter defined) of the Notes which must
be delivered by CFC to the Trustee at least 30 days prior to the date on which
the Notes are to be purchased; and
WHEREAS, CFC desires to continue to service the Notes and receive the
benefits therefrom; and
WHEREAS, the Cooperative has entered into the Swap Agreement (as defined in
that certain Trust Agreement, entered into as of December 20, 1996 among the
Cooperative, CFC and the Trustee (the "1997 Trust Agreement")) with the Swap
Provider (as defined in the 1997 Trust Agreement), which Swap Agreement will be
assigned to and deposited in the Series 1997 Trust (as defined in the 1997 Trust
Agreement) and pursuant to which the Swap Provider will pay to the 1997 Trust a
variable rate of interest and the 1997 Trust will pay to the Swap Provider a
fixed rate of interest; and
WHEREAS, CFC and the Cooperative desire to amend the Original Loan
Agreement primarily for the purpose of reflecting the aforesaid transactions;
and
WHEREAS, such acts will result in the reduction of the interest rate
payable by the Cooperative relating to such obligations, thereby improving the
financial strength of the Cooperative as contemplated by Section 306A of the
Act; and
WHEREAS, the RUS will benefit from such reduction in interest rate as the
guarantor of the Notes; and
WHEREAS, the RUS, CFC and the Cooperative have consented, pursuant to
Section 8.1 of the Loan Guarantee and Servicing Agreement, dated as of February
15, 1988, among the RUS, the Cooperative, CFC and the Trustee, (the "Original
Loan Guarantee Agreement") as amended by that certain First Amendment to Loan
Guarantee and Servicing Agreement, entered into as of even date herewith, among
the RUS, the Cooperative, CFC and the Trustee (as amended, the "Loan Guarantee
2
Agreement") and Section 7.2(b) of the Original Loan Agreement, to the amendment
of certain provisions of the Original Loan Agreement for the purpose of
reflecting the aforesaid transactions; and
WHEREAS, the Servicer has consented, pursuant to Section 3.9 of the
Original Loan Agreement, to the Purchase (as defined herein);
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
CFC and the Cooperative agree to provide for CFC's purchase of the Notes (the
"Purchase"), and, effective upon such Purchase, to amend the Original Loan
Agreement as follows:
ARTICLE 1
PURCHASE OF NOTES
-----------------
SECTION 1.1. DESIGNATION OF CFC; NOTICE OF DEPOSIT DATE AND REFINANCING
DATE TO CFC. (A) In accordance with Section 3.9(a) of the Original Loan
Agreement, the Cooperative hereby designates CFC as the Cooperative's designee
to purchase the Notes in advance of their scheduled maturities on the
Refinancing Date (as hereinafter defined).
(B) At least fifteen Business Days prior to the Deposit Date (as
hereinafter defined), the Cooperative shall, by delivering a letter in the form
attached hereto as Exhibit A, (i) give written notice to CFC of the date of the
Deposit Date and the date of the Refinancing Date, and (ii) direct CFC to make
the Deposit (as hereinafter defined) on the Deposit Date (as hereinafter
defined).
(C) The Refinancing Date shall be December 18, 1997. The Deposit Date
shall be November 18, 1997.
SECTION 1.2. PURCHASE PRICE. The purchase price for the Notes (the
"Purchase Price") shall be $60,105,903.83, which is equal to the sum of (i) the
principal amount of the Notes outstanding on the date of the Purchase
($57,390,000) (the "Principal Amount"), and (ii) the Guaranteed Interest accrued
on the Notes from December 4, 1997 through, and including, the Refinancing Date,
($218,212.83) and (iii) premium, if any, and any other amounts due under the
Original Loan Agreement that are required to be paid by Section 3.9(a) thereof
($2,497,691.00), all as shall be set forth in the Servicer's notice required by
the Original Loan Agreement (the "Servicer's Notice"). The Purchase Price shall
not include the Advance Note Payment (as hereinafter defined), which Advance
Note Payment shall be paid by the Cooperative to the Trustee in accordance with
Section 1.4 hereof and the Original Loan Agreement.
SECTION 1.3. DEPOSIT DATE-CFC'S OBLIGATIONS. Subject to the terms and
conditions of this Agreement and relying on the representations and warranties
herein set forth, CFC agrees to make the Purchase by delivering, in accordance
with this article, notice and payment to the Trustee.
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(B) On the Deposit Date, CFC shall deliver to the Trustee, in accordance
with Section 3.9(a) of the Original Loan Agreement, in immediately available
funds, the Purchase Price, accompanied by (i) a notice, in the form attached
hereto as Exhibit B, that sets forth the Refinancing Date (the "Notice"), and
(ii) the Servicer's Notice (the act of delivering the Purchase Price, the Notice
and the Servicer's Notice shall be referred to collectively herein as the
"Deposit"). The Cooperative acknowledges and agrees that the funds representing
the Purchase Price shall at all times prior to the Purchase constitute the sole
property of CFC, and the Cooperative disclaims any legal or beneficial interest
in such funds.
(C) As a condition to CFC making the Deposit, the following conditions
shall be satisfied:
(i) CFC shall have received copies or executed originals of all of the
agreements, opinions and documents described in Section 2.3 of the 1997
Trust Agreement, and the Loan Agreement, the 1997 Trust Agreement, the
Loan Guarantee Agreement and the Underwriting Agreement (as defined in the
1997 Trust Agreement) shall be in full force and effect;
(ii) All necessary regulatory approvals (including without limitation that of
the United States Department of Labor under the Employee Retirement Income
Security Act) shall have been obtained in form and substance satisfactory
to CFC, shall not be subject to any unsatisfied condition and shall be in
full force and effect and CFC shall not have received notice that any law,
rule, or order in effect prohibiting consummation of the transactions
contemplated hereby;
(iii) CFC and the Trustee shall have received the amounts described in Section
1.4 hereof as well as any other amounts to which CFC is entitled pursuant
to the terms hereof;
(iv) The representations and warranties in Section 4.1 hereof and in the Letter
Agreement, dated as of even date herewith, between the Cooperative and CFC
(the "Letter Agreement") shall be true and correct at the time and the
Cooperative shall have complied with all its obligations hereunder,
thereunder and under the Loan Agreement and there shall be no default
under the Loan Agreement;
(v) the Registration Statement (as defined in the Underwriting Agreement, as
defined in the 1997 Trust Agreement) shall have become effective or
provision shall have been made for the Certificates to be issued pursuant
to Section 4(2) of the Securities Act of 1933 and resold pursuant to Rule
144A of the United States Securities and Exchange Commission;
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(vi) the Certificates to be issued by the Series 1997 Trust (as defined above)
shall have been prospectively or finally rated A-1 or higher by Standard &
Poor's, a division of The McGraw Hill Companies, Inc. and prospectively or
finally rated P-1 or higher by ▇▇▇▇▇'▇ Investors Service, Inc., and such
ratings (or prospective ratings) shall be in effect and shall not have
been withdrawn or downgraded; and
(vii) The Swap Agreement (as defined above) shall not have been modified or
terminated except as consented to by CFC.
SECTION 1.4. DEPOSIT DATE-COOPERATIVE'S OBLIGATIONS. (A) As consideration
to induce CFC to make the Purchase, on the Deposit Date, immediately prior to
CFC's payment of the Purchase Price to the Trustee, the Cooperative shall pay
and deliver to CFC, in immediately available funds, an amount equal to the
prepayment premium and accrued interest which would be due on the Notes on the
Refinancing Date.
(B) On the Deposit Date, immediately prior to CFC's payment of the Purchase
Price to the Trustee, the Cooperative shall pay and deliver to CFC, in
immediately available funds, yield on the Principal Amount of the Purchase
Price, computed for the period of time between the Deposit Date and the
Refinancing Date at CFC's then applicable 30 day loan rate (or CFC's most
comparable loan rate). CFC shall notify the Cooperative in writing of such
amount at least five days prior to the Deposit Date.
(C) On the Deposit Date, immediately prior to CFC's payment of the Purchase
Price to the Trustee, the Cooperative shall pay and deliver to the Trustee, in
accordance with the Original Loan Agreement, the payment due on December 4, 1997
under the Original Loan Agreement, consisting of (i) principal due on Note One
on December 4, 1997, in the amount of $900,000, and (ii) Guaranteed Interest due
on Note One and Note Two through December 4, 1997, in the amount of
$2,905,290.42 (collectively, the "Advance Note Payment"). The Advance Note
Payment shall constitute Available Funds (as defined in the 1988 Trust
Agreement) and shall be used by the Trustee to make the payment of Interest and
Principal due to the holders of the Original Certificates on December 15, 1997,
as provided in the 1988 Trust Agreement.
SECTION 1.5. CLOSING. The closing of the transactions to occur on the
Deposit Date (the "Closing") shall be held at 9:00 a.m. (Washington, D.C. time)
on the Deposit Date at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., The ▇▇▇▇▇▇▇ Office
Building, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇-▇▇▇▇ or at such
other time or place agreed to by CFC and the Cooperative. A pre-closing may take
place at the same location beginning at 1:30 p.m. on the preceding Business Day.
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ARTICLE 2
DEPOSIT OF NOTES WITH SERIES 1997 TRUST & ISSUANCE OF THE CERTIFICATES
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SECTION 2.1. AGREEMENTS OF CFC. CFC, as purchaser of the Notes and
depositor of the Series 1997 Trust shall direct the Trustee for the Original
Trusts to deliver Note One and Note Two with the Guarantees endorsed thereon to
the Trustee of the Series 1997 Trust on the Refinancing Date to be deposited in
the Series 1997 Trust and shall direct the Trustee to issue the Certificates to
CFC.
(B) Upon receipt of the Certificates in the Series 1997 Trust from the
Trustee of the Series 1997 Trust, CFC agrees to sell the Certificates to the
Underwriter on the Refinancing Date pursuant to the Underwriting Agreement (as
defined in the 1997 Trust Agreement). CFC agrees to cooperate in all reasonable
ways in the registration and public offering of the Certificates and in
obtaining ERISA exemptions for the refinancing for the benefit of CFC, the
Trustee and the Swap Provider if requested by the Swap Provider. Should Alex.
▇▇▇▇▇ & Sons Incorporated be unable to perform (or provide notice of its
inability to perform to the Cooperative, CFC or the Swap Provider) under the
Underwriting Agreement on the Refinancing Date, CFC may, with the consent of the
Cooperative and the Swap Provider appoint a substitute Underwriter to purchase
the Certificates on the Refinancing Date, the costs of such substitute
Underwriter to be paid by the Cooperative.
SECTION 2.2. AGREEMENT OF THE COOPERATIVE. The Cooperative will deposit the
Swap Agreement in the Series 1997 Trust on the Refinancing Date and has assigned
the Swap Agreement to the Trustee as provided in the 1997 Trust Agreement.
ARTICLE 3
AMENDMENTS TO ORIGINAL LOAN AGREEMENT
-------------------------------------
Effective on the Refinancing Date, and subject to deposit of the Notes in
the Series 1997 Trust, the Original Loan Agreement shall be amended as follows:
SECTION 3.1. AMENDMENTS TO ARTICLE I. Article I shall be amended as
follows:
(A) The introductory phrase of Article I shall be deleted in its entirety
and the following shall be substituted in lieu thereof:
"SECTION 1.1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:"
(B) The definition of "Business Day" shall be deleted in its entirety and
the following shall be substituted in lieu thereof:
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"Business Day" shall have the meaning assigned to it in the 1997 Trust
Agreement.
(C) The definition of "Certificate" shall be deleted in its entirety and
the following shall be substituted in lieu thereof:
"Certificate of Beneficial Interest" or "Certificate" shall mean a Rural
Electric Cooperative Grantor Trust Certificate (KEPCO) Series 1997, each
executed, authenticated and delivered by the Trustee substantially in the form
of Exhibit A to the 1997 Trust Agreement.
(D) The definition of "Fixed Rate" shall be deleted in its entirety and
the following shall be substituted in lieu thereof:
"Fixed Rate" shall mean (i) through and including December 4, 1997, 9.5274%
per annum with respect to Note One and 10.0281% per annum with respect to Note
Two, (ii) from and including December 5, 1997 until Article 4 of the First
Amendment to Loan Agreement becomes effective, 9.33% per annum with respect to
Note One and 9.83% per annum with respect to Note Two, and (iii) after Article 4
of the First Amendment to Loan Agreement becomes effective, the Fixed Rate on
Note One and the Fixed Rate on Note Two specified in Section 3.4(d) of the Loan
Agreement.
(E) The definition of "Loan Guarantee Agreement" shall be deleted in its
entirety and the following shall be substituted in lieu thereof:
"Loan Guarantee Agreement" shall mean the Loan Guarantee and Servicing
Agreement dated as of February 15, 1988 among RUS, CFC, the Trustee and the
Cooperative, as amended by the First Amendment to Loan Guarantee Agreement.
(F) The definition of "Trust Agreements" shall be deleted in its entirety
and the following shall be substituted in lieu thereof:
"Trust Agreements" shall mean the 1997 Trust Agreement.
(G) The definition of "Trusts" shall be deleted in its entirety and the
following shall be substituted in lieu thereof:
"Trusts" shall mean the Series 1997 Trust.
(H) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Agreement" or "Loan Agreement" shall mean this Loan Agreement, as amended
by the First Amendment to Loan Agreement.
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(I) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"First Amendment to Loan Agreement" shall mean the First Amendment to Loan
Agreement, entered into as of December 20, 1996, between the Cooperative and
CFC.
(J) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"First Amendment to Loan Guarantee Agreement" shall mean the First
Amendment to Loan Guarantee and Servicing Agreement, entered into as of December
20, 1996, among the Cooperative, CFC, the Trustee and the Rural Utilities
Service on behalf of the United States of America (as successor to the Rural
Electrification Administration).
(K) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"1997 Trust Agreement" shall mean the Trust Agreement, entered into as of
December 20, 1996, among CFC, the Cooperative and the Trustee.
(L) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Note One" shall mean Note One of the Cooperative issued pursuant to
Section 3.3 of the Loan Agreement.
(M) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Note Two" shall mean Note Two of the Cooperative issued pursuant to
Section 3.3 of the Loan Agreement.
(N) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Notes" shall mean Note One and Note Two.
(O) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Refinancing Date" shall mean December 18, 1997.
(P) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Series 1997 Certificates" shall mean the Rural Electric Cooperative
Grantor Trust Certificates of Beneficial Interests (KEPCO) Series 1997,
executed, authenticated and delivered by the Trustee substantially in the form
of Exhibit A to the 1997 Trust Agreement.
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(Q) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Series 1997 Trust" shall mean the Rural Electric Cooperative Grantor Trust
(KEPCO) Series 1997 created by the 1997 Trust Agreement, and into which Note One
and Note Two shall be deposited on the Refinancing Date.
(R) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Swap Agreement" shall have the meaning assigned to it in the 1997 Trust
Agreement.
(S) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Swap Provider" shall have the meaning assigned to it in the 1997 Trust
Agreement.
(T) The following definition shall be inserted in Section 1.1 in
alphabetical order:
"Underwriter" shall have the meaning assigned to it in the 1997 Trust
Agreement.
(U) The following shall be added at the end of Article I:
Section 1.2. Interpretation. References herein to any document or agreement
(including this Agreement) shall mean that document or agreement as it may have
been or may be amended, restated or supplemented from time to time. References
herein to any Person shall mean that Person, its successors and permitted
assigns.
SECTION 3.2. AMENDMENTS TO ARTICLE III. Article III shall be amended as
follows:
(A) Section 3.7 shall be amended and restated to read in its entirety as
follows:
SECTION 3.7 Payment of Interest and Principal. The Cooperative agrees to
pay Guaranteed Interest on each Note by 11:00 a.m. (New York, New York time) on
each applicable Interest Payment Date in immediately available funds to the
Noteholder. Overdue principal, premium and (to the extent lawful) interest on
each Note shall bear interest at the Guaranteed Interest Rate applicable to such
Note when payment thereof was due and shall be payable on demand. Principal on
each Note shall be payable by 11:00 a.m. (New York, New York time) on the dates
designated on such Note in immediately available funds to the Noteholder.
(B) Section 3.9(a) shall be amended and restated to read in its entirety as
follows:
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(a) Each Note may be prepaid or purchased (by the Cooperative or, with
CFC's consent if CFC is to remain the Servicer of either Note, such consent not
to be unreasonably withheld, by any third party designated by the Cooperative)
in whole, but not in part, at the option of the Cooperative on the dates, and
upon the payment of all principal outstanding on the date of prepayment or
purchase plus Guaranteed Interest accrued on such Note through the date of
prepayment or purchase and any other amounts due from the Cooperative under this
Agreement to any Person. The Cooperative, or a third party designated by the
Cooperative, may elect to make such prepayment or purchase only by delivering to
the Trustee, at least 30 (or if the Note at the time bears interest at a
Variable Rate, not less than five nor more than 10) days prior to the proposed
prepayment or purchase date, (i) irrevocable notice of such prepayment or
purchase and of the prepayment or purchase date (which shall be a Business Day),
(ii) a copy of a notice from the Servicer as to the amount of principal,
Guaranteed Interest and premium, if any, and any other amounts due hereunder
required to be paid on such prepayment or purchase date to prepay such Note,
(iii) payment in full of the amount set forth in such notice from the Servicer
and (iv) in the case of any such prepayment or purchase, evidence satisfactory
to the Trustee that such prepayment or transfer of the Note and the related
Guarantee has been approved by the RUS; provided, however, if such Note is to be
prepaid or purchased when it bears interest at a Variable Rate, the Cooperative
need not deliver the interest to be accrued on such Note through the date of
prepayment or purchase until the Business Day after it receives notice of the
Variable Rate through the day next preceding the date of prepayment or purchase;
provided further, that anything contained in Annex C hereto or this Section 3.9
to the contrary notwithstanding, the Cooperative shall have no right to purchase
or prepay any Note bearing interest at a Variable Rate during the 45-day period
following the Closing Date (except on the fourth Business Day of any month) or
for 12 days following notice from CFC that it has entered into an underwriting
agreement in connection with the conversion of such Note to bear interest at a
Fixed Rate.
(C) Article III of the Original Loan Agreement shall be further amended,
pursuant to the terms of Article IV hereof.
SECTION 3.3. AMENDMENT TO ARTICLE VII. Article VII shall be amended as
follows:
(A) Paragraph 1 of Section 7.3 shall be amended and restated in its
entirety as follows:
SECTION 7.3. Notices. All communications and notices under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed, postage prepaid, by certified mail, return receipt
requested, by telecopy, when such telecopy is transmitted to the specified
telecopier number and its receipt is acknowledged or by overnight mail, return
receipt requested, to the appropriate following addresses; provided, however,
that notices by telecopy to the RUS shall be followed by another form of written
notice permitted
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hereby and shall not be deemed received unless the sender receives oral
confirmation of receipt from the RUS:
(B) The first notice address, "If to REA:" shall be deleted and the
following shall be substituted in its place:
If to RUS:
Rural Utilities Service
United States Department of Agriculture
Washington, D.C. 20250-1535
Telecopy No: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Director, Financial Operations Division
Subject: KEPCO-Kansas 54
with a copy addressed to:
Rural Utilities Services
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Telecopy No: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Administrator
Subject: KEPCO-Kansas 54
(C) The second notice address, "If to CFC:" shall be deleted and the
following shall be substituted in its place:
If to CFC:
National Rural Utilities Cooperative Finance Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ - ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Finance Officer
(D) The third notice address, "If to the Cooperative:" shall be deleted
and the following shall be substituted in its place:
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If to the Cooperative:
Kansas Electric Power Cooperative, Inc.
P. ▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Executive Vice President
(E) A fourth notice address "If to the Trustee:" shall be added as follows:
If to the Trustee:
The First National Bank of Chicago
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
(F) The following paragraph shall be added at the end of Section 7:
Any notice address provided herein may be amended, and this Agreement shall
be amended to include such amended notice address, upon the provision, in
accordance herewith, of notice of the amended notice address to all parties
entitled to receive notices pursuant to this Section.
SECTION 3.4. AMENDMENT TO ANNEX C (NOTE ONE) TO LOAN AGREEMENT. Annex C
(Note One) shall be amended as follows:
(A) The last sentence in the paragraph entitled "Prepayment or Purchase
Dates" shall be amended and restated to read as follows:
Note 1 One may be prepaid or purchased on any Business Day; provided that if
the Swap Agreement is in effect, provision must be made for termination of the
Swap Agreement as provided therein (including payment of all amounts payable by
the Cooperative or the RUS in connection with such termination, if any). The
Cooperative hereby agrees to pay such amounts, but such payments shall not be
guaranteed by the RUS.
(B) The paragraph entitled "Prepayment or Purchase Premium" shall be
deleted.
SECTION 3.5. AMENDMENT TO ANNEX C (NOTE TWO) TO LOAN AGREEMENT. Annex C
(Note Two) shall be amended as follows:
12
(A) The last sentence in the paragraph entitled "Prepayment or Purchase
Dates" shall be amended and restated to read as follows:
Note 2 Two may be prepaid or purchased on any Business Day; provided that if the
Swap Agreement is in effect, provision must be made for termination of the Swap
Agreement as provided therein (including payment of all amounts payable by the
Cooperative or the RUS in connection with such termination, if any). The
Cooperative hereby agrees to pay such amounts, but such payments shall not be
guaranteed by the RUS.
(B) The paragraph entitled "Prepayment or Purchase Premium" shall be
deleted.
ARTICLE 4
FURTHER AMENDMENTS TO ORIGINAL LOAN AGREEMENT
---------------------------------------------
On the Refinancing Date, effective on the sale of the Certificates by CFC
to a person other than an affiliate of CFC pursuant to a registered public
offering of the Certificates or an offering of the Certificates that is exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, the
Original Loan Agreement shall be further amended as follows:
SECTION 4.1. AMENDMENTS TO ARTICLE III. Article III shall be amended as
follows:
Subsection (d) of Section 3.4 shall be amended and restated to read in its
entirety as follows:
(d) The Fixed Rate on Note One shall be the sum of (i) 7.654% per annum,
and (ii) the Servicer Spread; provided, however, that (y) if at any time on or
after the Refinancing Date, the Certificates have been registered with the
United States Securities and Exchange Commission and are issued in a registered
public offering, the Fixed Rate shall, pursuant to the mechanism provided in the
Swap Agreement (as defined in the 1997 Trust Agreement), thereafter be reduced
by 10 basis points (.10%) per annum and (x) if at any time on or after the
Refinancing Date, all requirements of ERISA are satisfied so that the Series
1997 Certificates can be sold without any limitations to "employee benefit
plans" (as such term is defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended), the Fixed Rate shall, pursuant to the
mechanism provided in the Swap Agreement (as defined in the 1997 Trust
Agreement), thereafter be reduced by 5 basis points (.05%) per annum.
The Fixed Rate on Note Two shall be the sum of (i) 7.654% per annum and
(ii) the Servicer Spread; provided, however, that (y) if at any time on or after
the Refinancing Date, the Certificates have been registered with the United
States Securities and Exchange Commission and are issued in a registered public
offering, the Fixed Rate shall, pursuant to the mechanism provided in the Swap
Agreement (as
13
defined in the 1997 Trust Agreement), thereafter be reduced by 10 basis points
(.10%) per annum and (x) if at any time on or after the Refinancing Date, all
requirements of ERISA are satisfied so that the Series 1997 Certificates can be
sold without any limitations to "employee benefit plans" (as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended), the Fixed Rate shall, pursuant to the mechanism provided in the
Swap Agreement (as defined in the 1997 Trust Agreement), thereafter be reduced
by 5 basis points (.05%) per annum.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 5.1. REPRESENTATIONS IN LOAN AGREEMENT. (A) The representations and
warranties originally made by the Cooperative in Article II of the Loan
Agreement (other than in Section 2.6) are incorporated herein by reference as if
set forth in their entirety herein. The Cooperative hereby represents that such
representations and warranties (except for Section 2.1(b). Section 2.4 and
Section 2.5 which are modified by Subsection (b) of this Section and, as
modified, are true and correct as provided herein) are true and correct on and
as of the date hereof. As incorporated by reference herein, the term "Agreement"
shall be deemed to mean the Loan Agreement and this Agreement.
(B) The representation contained in Section 2.1(b), Section 2.4 and
Section 2.5 of the Original Loan Agreement are hereby modified to read as
follows and, as modified, are true and correct on the date hereof:
(B) This Agreement, the Notes, the Substitute Notes, the Current Mortgage
Instrument, the Trust Agreements and the Loan Guarantee Agreement have been duly
authorized, executed and delivered by the Cooperative and such documents and the
Mortgage constitute the legal, valid and binding agreements of the Cooperative,
enforceable against the Cooperative in accordance with their respective terms
subject to (i) applicable bankruptcy, reorganization, insolvency, moratorium and
other laws of general applicability relating to or affecting creditors' rights,
generally, (ii) the application of general principles of equity regardless of
whether such enforceability is considered in a proceeding in equity or at law
and (iii) as to the Current Mortgage Instrument, such other exceptions, if any,
as are set forth in the opinion of ▇▇▇▇▇▇ ▇▇▇▇, Esq., Counsel to the
Cooperative; provided that such exceptions do not make the rights and remedies
provided in the current Mortgage Instrument, taken as a whole, inadequate for
enforcing payment of the Notes and the Substitute Notes and security interests
provided by the Current Mortgage Instrument or the realization of the benefits
intended to be provided by the Current Mortgage Instrument.
14
SECTION 2.4 Approvals. No approval, authorization, consent, order,
registration, filing, qualification, license or permit of or with any state or
Federal court or governmental agency or body including, without limitation, RUS,
having jurisdiction over the Cooperative is required for the consummation by the
Cooperative of the transactions contemplated by this Agreement, the Notes, the
Substitute Notes, the Current Mortgage Instrument, the Trust Agreements and the
Loan Guarantee Agreement except such as have been obtained from the RUS.
SECTION 2.5. Litigation. Except as set forth in the officer's certificate
of the Cooperative delivered in connection with the execution and delivery of
the Basic Documents (as defined in the 1997 Trust Agreement), there is no
pending or threatened action, suit or proceeding before any court or any
governmental agency, authority or body or any arbitrator with respect to the
Cooperative, this Agreement, the Notes, the Substitute Notes, the Current
Mortgage Instrument, the Trust Agreements or the Loan Guaranty Agreement
challenging the validity or enforceability of this Agreement, the Notes, the
Substitute Notes, the Current Mortgage Instrument, the Trust Agreements or the
Loan Guaranty Agreement for which, if adversely determined, would have a
material adverse effect on the Cooperative's ability to perform its obligations
under this Agreement, the Notes, the Substitute Notes, the Current Mortgage
Instrument, the Trust Agreements or the Loan Guaranty Agreement.
(C) The Cooperative represents and warrants that after the Notes, Swap
Agreement and Guarantee are deposited in the Series 1997 Trust and the
Certificates are issued to CFC, the Series 1997 Trust will be exempt from
registration as an Investment Company under the Investment Company Act of 1940
pursuant to Rule 3a-7 under such Act, provided that the Certificates are rated,
at the time of initial sale, in one of the four highest categories assigned
long-term debt or in an equivalent short-term category by at least one
nationally recognized statistical rating organization that is not an affiliated
person of the issuer or any person involved in the organization or operation of
the issuer (such terms having the meanings given to them by Rule 3a-7).
ARTICLE
MISCELLANEOUS
-------------
SECTION 6.1. EFFECTIVE DATES. This Agreement shall be the valid and binding
obligation of the parties as of the date of its execution, but the amendments to
the Original Loan Agreement set forth in Articles 3 and 4 shall become effective
in accordance with the terms of such Articles.
SECTION 6.2. DEFINITIONS. As used in this Agreement, all terms which are
not otherwise defined herein but which are defined in the Loan Agreement shall
have the same meanings herein, to the extent that the context so permits.
15
SECTION 6.3. SUCCESSOR ENTITIES. The Loan Agreement, Loan Guarantee
Agreement, Notes, Guarantee, and all other documents executed to carry out the
transactions contemplated herein and therein shall be amended, in all necessary
places, to reflect that the Rural Utilities Service has succeeded the Rural
Electrification Administration of the United States Department of Agriculture
with respect to the administration of certain electric and telephone loan
programs by replacing the term "REA" with the term "RUS" everywhere such term
appears and by making such other changes as are necessary to effectuate such
succession. In addition, the reference in the Notes to the 1988 Trust Agreement
shall be amended to mean the 1997 Trust Agreement.
SECTION 6.4. EXPENSES. The Cooperative's obligation to pay expenses
originally set forth in Section 5.2 of the Original Loan Agreement is
incorporated herein by reference as if set forth in its entirety herein. The
Cooperative hereby reaffirms such obligation. In addition, the Cooperative
agrees to pay all reasonable costs of CFC (including reasonable fees and
expenses of counsel) in connection with the negotiation, preparation, execution
and delivery of this Agreement, the First Amendment to Loan Guarantee Agreement,
the Underwriting Agreement and the other Related Documents (as defined therein)
and the transactions contemplated hereby and thereby.
SECTION 6.5. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of New York,
except that the obligations of the Cooperative to RUS hereunder and under the
Notes shall be governed by, and construed and enforced in accordance with, the
laws of the United States of America, to the extent applicable and otherwise by
the laws of the State of New York.
Except as specifically amended hereby, the Original Loan Agreement shall
remain in full force and effect and is ratified in all respects by the parties
thereto.
16
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed on its behalf by an authorized officer as of the day and year first
above written.
KANSAS ELECTRIC POWER COOPERATIVE, INC.
as the Cooperative
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇,
Executive Vice President &
Chief Executive Officer
17
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
as the Lender
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Assistant Secretary-Treasurer
18
EXHIBIT A
[LETTERHEAD OF THE COOPERATIVE]
November __, 1997
Governor
National Rural Utilities Cooperative
Finance Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ - ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Purchase of Note One and Note Two (the "Notes") evidencing a loan made
pursuant to that certain Loan Agreement, dated as of February 1, 1988,
between the National Rural Utilities Cooperative Finance Corporation
("CFC") and the Kansas Electric Power Cooperative, Inc. (the
"Cooperative"), pursuant to that certain First Amendment to Loan
Agreement, entered into as of December 20, 1996, between CFC and the
Cooperative (the "First Amendment to Loan Agreement")
Dear Governor:
Pursuant to Section 1.1 (b) of the First Amendment to Loan Agreement, the
undersigned is writing to notify you that the Deposit Date (as defined in the
First Amendment to Loan Agreement) shall be November 18, 1997, and the
Refinancing Date (as defined in the First Amendment to Loan Agreement) shall be
December 18, 1997.
Pursuant to the First Amendment to Loan Agreement, the Closing (as defined
in the First Amendment to Loan Agreement) will be held on the Deposit Date.
KANSAS ELECTRIC POWER
COOPERATIVE, INC.
By:
------------------------------
A-1
EXHIBIT B
November __, 1997
The First National Bank of Chicago, as Trustee
of the 1997 Trust
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
Re: Purchase of Note One and Note Two (the "Notes") evidencing a loan made
pursuant to that certain Loan Agreement, dated as of February 1, 1988
(the "Loan Agreement"), between the National Rural Utilities
Cooperative Finance Corporation ("CFC") and Kansas Electric Power
Cooperative, Inc. (the "Cooperative")
Ladies and Gentlemen:
Pursuant to Section 3.9 of the captioned Loan Agreement, CFC hereby gives
irrevocable notice of its intent to purchase the captioned Notes in whole on
December 18, 1997 (the "Refinancing Date"), which is a date at least 30 days
from the date hereof. The Cooperative joins in executing this letter to confirm
and agree to the matters stated herein and to confirm that CFC is the
Cooperative's designee under Section 3.9 of the Loan Agreement to make such
purchase. CFC, in its capacity as Servicer of the Notes (the "Servicer"), has
consented to CFC's purchase of the Notes.
Pursuant to the terms of Section 3.9 of the Loan Agreement, (a) we are
enclosing (i) a copy of a notice from the Servicer, indicating the amount of
principal, Guaranteed Interest (as defined in the Loan Agreement) and premium,
if any, and any other amounts due under the Loan Agreement required to be paid
on the Refinancing Date (the "Purchase Amount"), and (ii) a copy of the First
Amendment to Loan Guarantee Agreement (as defined in the Loan Agreement)
evidencing that the Rural Utilities Service has consented to the purchase of the
Notes by CFC and (b) we are delivering immediately available funds for the
Purchase Amount (the "Purchase Price").
In addition, immediately prior to the delivery of this notice to you, the
Cooperative paid, in advance in accordance with the Loan Agreement, the payment
of Interest and Principal required to be distributed to holders of the
Certificates (as defined below) on December 15, 1997. You are to hold these
funds in accordance with the Trust Agreement until this disbursement on December
15, 1997.
B-1
You are the owner and holder of the Notes, which are subject to two trusts,
Rural Electric Cooperative Grantor Trust (KEPCO) 1988-K1 and Rural Electric
Cooperative Grantor Trust (KEPCO) 1988-K2 maintained by you (the "Trusts") with
respect to which certificates of beneficial interests ("Certificates") were
previously issued. We request that, (i) pursuant to Section 7.1 of the Trust
Agreements establishing each Trust (collectively, the "Trust Agreement"), you
deliver notice of the Call Date (as defined in the Trust Agreement) to the
Certificateholders and (ii) pursuant to Article XI of the Trust Agreement, you
distribute all Principal, Interest and Premium due to the Certificateholders on
the Call Date so the Trusts will be terminated in accordance with Section 11.2
of the Trust Agreement on the Call Date.
You agree, as owner and holder of the Notes and as Trustee of the Trusts,
in consideration of CFC's delivery to you of the Purchase Price, and in
accordance with the Trust Agreement, to endorse the Notes to the order of the
Series 1997 Trust (as defined in the Loan Agreement), without recourse, and to
deliver the Notes to the Trustee of the Series 1997 Trust (or if the Series 1997
Trust is not in existence or refuses such delivery, to CFC).
The Servicer confirms its obligations under Section 9.6 of the Trust
Agreement, including its indemnification of the Trustee, which shall include the
Trustee's transfer of the Notes pursuant to this letter.
Please acknowledge your receipt of this notice by executing the enclosed
originals of this letter and returning one original to CFC and one original to
the Cooperative at the addresses indicated below.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By:
-----------------------------
Address:
--------------------------
--------------------------
KANSAS ELECTRIC POWER
COOPERATIVE, INC.
By:
-----------------------------
Address:
--------------------------
--------------------------
B-2
Acknowledged and Agreed to:
November __, 1997
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
By:
-------------------------------