RD 4280-5 Loan Agreement

Form RD 4280-5
(06-07)

Date:

Form Approved
OMB No. 0570-0035

Amount:

RURAL ECONOMIC DEVELOPMENT LOAN AGREEMENT

This Agreement dated as of the date first written above between
, a corporation duly
organized and existing under the laws of the State of
(''Intermediary''), and Rural Development, acting through the Rural Business-Cooperative
Service sets forth the terms and understandings between the Intermediary and Rural
Development regarding a loan (''Loan'') Rural Development is making to the Intermediary
pursuant to the Rural Economic Development Loan and Grant Program (§ 313 of the Rural
Electrification Act of 1936, as amended (''Act'') and 7 CFR part 4280, Subpart
A,(''Regulations'').
The Intermediary has filed an application and supporting material (collectively, the
''Application Materials'') on [date] (''Application Date'') with Rural Development requesting
the Loan for promoting rural economic development.
~
_

Rural Development wishes to make the Loan to finance Approved Purposes for the rural
development project (''Project'') as described and defined in the Letter of Conditions
between Rural Development and the Intermediary dated
NOW, THEREFORE, in consideration of the mutual agreements herein contained, Rural
Development and the Intermediary agree as follows:

According to the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor, and a person is not required to
respond to a collection of information unless it displays a valid OMB control number. The valid OMB control number for this
information collection is 0570-0035. The time required to complete this information collection is estimated to average one hour
per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data
needed, and completing and reviewing the collection of information.

A.

Loan Terms
1. Rural Development shall lend
to the
Intermediary and the Intermediary shall lend the proceeds of the Loan to
(''Ultimate Recipient'')
to be used solely to promote rural economic development as more particularly
described in the Application Materials, as those materials may have been
subsequently and approved by Rural Development.
2. Rural Development shall advance the proceeds of the Loan to the Intermediary in
one disbursement at the time and in the manner specified in the Letter of Conditions.
3. The Intermediary shall repay the Loan in accordance with the note to be
executed by the Intermediary (''Note''). The Intermediary shall begin to repay the
Loan on the date set forth in the Note and shall continue paying without interruption
until all indebtedness associated with the Loan has been repaid in full on or before
the final maturity date of the Note.
4. The Loan will not bear interest although indebtedness not paid when due will
be subject to interest, penalties, administrative costs and late fees, as provided in
the Note.

B.

Affirmative Covenants
1. The Intermediary will abide by the terms of this Agreement, and Note. The
Intermediary shall pay all indebtedness as provided in the Note.
2. The Intermediary shall promptly use the proceeds of the Loan in the manner and
for the purposes set forth in the Application Materials previously approved by Rural
Development and in accordance with this Agreement and the Regulations.
Proceeds from the Loan must be invested in the Project within 12 months of the
loan to the Ultimate Recipient. Until disbursed by the Intermediary for authorized
Loan purposes, the Intermediary shall deposit the Loan proceeds in bank accounts
that are fully insured by the Federal Deposit Insurance Corporation.
3. The Intermediary shall return to Rural Development, as a prepayment on the
Note, all proceeds of the Loan which have not been disbursed by the Intermediary
for authorized Loan purposes within 12 months following the advance of the Loan
proceeds to the Intermediary. The Intermediary shall also return to Rural
Development all interest earned on the undisbursed Loan proceeds.
4. The Intermediary shall make all payments on the Note by using an automated
clearing house (ACH) system or, if notified by Rural Development in writing to do

so, any other reasonable method of payment specified by Rural Development.
Specific instructions for using ACH will be provided by Rural Development prior to
the first scheduled payment.
5. If the Application Materials describe a Project that will be funded, developed,
owned, leased, managed or operated by other participants, the Intermediary shall
ensure that those participants abide by the Application Materials and this
Agreement.
6. The Intermediary shall maintain a certified list of expenditures and attachments as
described in this section at its premises for review by Government representatives,
auditors or others conducting a review or audit of the Intermediary and the
expenditure of the Loan proceeds.
The Intermediary shall require the Ultimate Recipient to provide an itemized list of
Project expenditures for Approved Purposes from Loan proceeds and include a
certification to the effect ''I certify that the proceeds of the rural economic
development loan from
were expended
on Approved Purposes as shown on this list per the attached invoices, receipts, bills
of sale, and other evidence.'' The Intermediary shall require in its agreement with the
Ultimate Recipient that the invoices, receipts, bills of sale, and other evidence must
at least total the amount of funds that have been provided to the Ultimate Recipient
from Loan proceeds. The certified list must be provided upon completion of the
Project or by the first anniversary of the date of the advance of funds to the Ultimate
Recipient, whichever occurs first. If all funds have not been expended by the first
anniversary, the Ultimate Recipient must also provide to the Intermediary a
statement of its intended expenditure schedule. Upon completion of the Project, the
Ultimate Recipient must provide to the Intermediary a final certified list of the
expenditures including the attachments.
The Intermediary shall require the Ultimate Recipient to expend the Intermediary's
loan funds from the proceeds of the Loan by the second anniversary of the initial
advance of funds to the Ultimate Recipient, or such later date as Rural
Development approves in writing. The Intermediary shall require the Ultimate
Recipient to return all funds provided to the Ultimate Recipient from Loan proceeds
that have not been spent by the second anniversary of the initial advance of funds to
the Ultimate Recipient, or such later date as Rural Development approves in writing.
The Intermediary shall return as a prepayment on the Note all unexpended funds that
the Ultimate Recipient returns to the Intermediary.
7. The Intermediary shall permit Government officials to inspect and copy its
records about the Project during regular business hours. If the Project is under the
control of the Intermediary due to a servicing action, representatives of Rural
Development may inspect the Project itself during regular business hours. If the

Project is developed, owned, leased, managed or operated by others, the Intermediary
shall obtain permission for Government representatives to inspect the Project and
related records during regular business hours.
8. Unless otherwise approved in writing by Rural Development, the Intermediary
shall promptly remit to Rural Development any principal payments made by the
Ultimate Recipient on its note to the Intermediary in excess of the Ultimate
Recipient's regularly scheduled payment, including any lump sum amount the
Intermediary receives as partial or full prepayment of principal. In the event of
partial prepayment, the Intermediary is obligated to continue making regular and
uninterrupted monthly payments for the amount and on the date specified in the Note.

9. The Intermediary shall diligently monitor performance of the Ultimate Recipient to
ensure that objectives proposed in the Application Materials are being achieved. The
Intermediary shall submit a Project performance report to Rural Development on an
annual basis, beginning one year from the advance of loan proceeds to the Ultimate
Recipient (Advance) and concluding three years from the date of Advance or
completion of the Project, whichever occurs later. The Project performance report
shall describe: (i) the actual accomplishments of the Project, the number and types of
jobs created and retained; (ii) the impact of the Project on the economy and quality of
life of the rural community; (iii) reasons why any projections or objectives proposed
in the Application Materials were not met, and (iv) any problems, delays, or adverse
conditions which have occurred, or are. anticipated, which may affect the attainment
of overall objectives of the Project. This disclosure shall be accompanied by a
statement of the action taken or planned to resolve the delays, problems or adverse
conditions. The Intermediary shall provide a final written performance report,
accompanied by color photographs, including negatives, slides, or electric media,
documenting the overall accomplishments of the Project, upon completion of the
Project or three years from the Advance whichever occurs later.
10. The Intermediary shall immediately notify Rural Development in writing
whenever the Ultimate Recipient is delinquent, closes operations, transfers
operations from the original Project site, or files bankruptcy.
11. The Intermediary shall comply with the Regulations, as amended, including,
without limitation, any Federal regulations or Federal statutes applicable to Project
activities.
12. The Intermediary agrees that when it pays all of its loans to the Rural Utility
Service or Rural Telephone Bank then it will notify Rural Development and provide
replacement security, subject to Government approval, for this loan. If the parties
cannot negotiate an agreement within a reasonable time, including any additional
Rural Development reporting, servicing, and monitoring requirements, then

Intermediary shall pay the Note in full within 30 days of Rural Development's
request.
13. The Intermediary will not require the Ultimate Recipient to obtain electric or
telecommunications service from any specific utility.
14. The Intermediary covenants that the proceeds of the Loan shall be used solely
for the purpose of providing funds for a loan from the Intermediary to the Ultimate
Recipient. The loan shall be used solely for the purpose in the Intermediary's
Application Materials, as subsequently approved by Rural Development. for the
Project.
15. The Intermediary further covenants that the proceeds of the Loan shall not be
used to finance any costs or retire any debt incurred prior to the Application Date.
The Intermediary also covenants that no material changes will be made in the
Approved Purpose or the Project without prior written approval of Rural
Development. Any material changes in the Approved Purpose or the Project will be
set forth in a revised Project description to be prepared by the Intermediary and
approved by Rural Development.
16. The Intermediary covenants that after loan closing between the Intermediary and
the Ultimate Recipient, the Intermediary will deliver to Rural Development a copy of
the executed Rural Development Loan Agreement, including lower tier debarment
certification, the promissory note, and any security agreement entered into between
the Intermediary and the Ultimate Recipient, together with a copy of the legal opinion
rendered by Ultimate Recipient's counsel. The Intermediary further covenants that it
will obtain Rural Development's written approval prior to revising or amending any
agreement that has been reviewed and approved by Rural Development in connection
with the advance of Loan funds, or executing, revising, or amending any other
agreement between the Intermediary and the Ultimate Recipient.
C.

Negative Covenant
The Intermediary shall not enter into or request Rural Development to approve any
agreements which would permit third parties to fund, develop, manage, own, lease or
operate the Project in a manner that would violate the Regulations or this Agreement.

D.

Representations and Warranties

The Intermediary represents and warrants that on and as of the date first set forth above:
1. The Intermediary has been duly incorporated and validly exists as a corporation in
good standing under the laws of the State of its incorporation with the corporate

power and authority to perform its obligations under this Agreement, the Note, and
the Regulations.
2. This Agreement, the Letter of Conditions and the Note have been duly authorized,
executed and delivered by the Intermediary and such documents constitute the legal
and binding agreements of the Intermediary, enforceable against the Intermediary in
accordance with their respective terms, subject to: (i) applicable bankruptcy,
reorganization, insolvency, moratorium and other laws of general application relating
to or affecting creditors' rights generally, and: (ii) the application of general principles
of equity regardless of whether such enforceability is considered in a proceeding in
equity or at law.
3. The execution or the delivery by the Intermediary of this Agreement, the Letter of
Conditions, and the Note; the consummation of the transactions contemplated herein
or therein; and the fulfillment by the Intermediary of the terms hereof or thereof, do
not conflict with or violate, result in a breach of or constitute a default under any term
or provision of the articles of incorporation or by-laws of the Intermediary or any law
or regulation or any order now applicable to the Intermediary of any court, regulatory
body having jurisdiction over the Intermediary, or the terms of any indenture, deed of
trust, mortgage, note, note agreement or instrument to which the Intermediary or any
of its properties is bound. The Intermediary 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.
4. No approval, authorization, consent, order, registration, filing, qualification,
license or permit of or with any state or Federal court or governmental agency or
body having jurisdiction over the Intermediary is required by the Intermediary for
the consummation by the Intermediary of the transactions contemplated by this
Agreement, the Letter of Conditions, and the Note except such as have been
obtained.
5. There is no pending or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator concerning the
Intermediary, this Agreement, the Letter of Conditions, or the Note which, if
adversely determined, would have a material adverse effect on the Intermediary's
ability to perform its obligations under this Agreement, the Letter of Conditions, or
the Note.
6. All information, reports and other papers and data furnished to Rural Development
by the Intermediary concerning the application of the Intermediary for the Loan were,
at the time the same were so furnished, complete and correct in all material respects to
the extent necessary to give Rural Development a true and accurate knowledge of the
subject matter and no document furnished or other written statement made to Rural
Development in connection with the Loan contains any untrue statement of a

fact material to the financial condition of the Intermediary or the Project or omits to
state such a material fact necessary in order to make the statements contained therein
not misleading.
7. The Intermediary has reviewed the Regulations and understands and accepts the
requirements which the Regulations impose upon it, which Regulations are expressly
incorporated herein by reference.
8. The Intermediary does not expect or intend the Project to result primarily in the
transfer of any existing employment or business activity from one area to another.
E.

Miscellaneous
1. Every right or remedy herein conferred upon or reserved to the holder of the
Note shall be cumulative and shall be in addition to every other right and remedy
now or hereafter existing at law or in equity, or by statute or regulation.
2. The invalidity of any one or more phrases, clauses, sentences, paragraphs or
provisions of this Agreement shall not affect the remaining portions hereof.
3. This Loan Agreement is entered into between the parties concerning a zero
interest loan which Rural Development is making to the Intermediary pursuant to
§313 of the Rural Electrification Act of 1936, as amended, to promote rural
economic development and job creation projects. Accordingly, so long as Rural
Development shall, under the terms of this Agreement, be the holder of the Note,
this Agreement, the Letter of Conditions and the Note shall each be governed by
and construed in accordance with the laws of the United States and the regulations
that govern §313 of the Rural Electrification Act of 1936, as amended.
4. No changes may be made in the foregoing without the prior written approval of
Rural Development. Until disbursed by the Intermediary for authorized Loan
purposes, the Intermediary shall deposit the Loan proceeds in bank accounts that are
fully insured by the Federal Deposit Insurance Corporation.

IN WITNESS WHEREOF,
, as Intermediary,
has caused this Loan Agreement to be signed in its name and its corporate seal to be
hereunto affixed and attested by its duly authorized officers there unto, and Rural
Development has caused this Loan Agreement to be duly executed in its behalf, all as of the
day and year first written above.

Intermediary

by:
[Intermediary President]
[Title]
(SEAL)
Attest
:
Secretary

United States of America

by:
[Name of State Director]
State Director
Rural Business-Cooperative Service