Bulletin 1780-28 Loan Resolution Security Agreement

RUS BULLETIN
1780-28

Position 5

LOAN RESOLUTION SECURITY AGREEMENT

(Revised 2/15/00)

APPROVED OMB.
NO. 0572-0121
Exp. 11/2014

A RESOLUTION OF THE
OF THE
AUTHORIZING AND PROVIDING FOR THE INCURRENCE OF INDEBTEDNESS IN THE
PRINCIPAL AMOUNT OF

FOR THE PURPOSE

OF PROVIDING A PORTION OF THE COST OF ACQUIRING AND CONSTRUCTING A
, PROVIDING FOR THE COLLECTION, HANDLING, AND
DISPOSITION OF REVENUES THEREFROM, AND AUTHORIZING MAKINGS OF PROMISSORY NOTE(S),
SECURITY INSTRUMENTS, AND PLEDGES OF REVENUES TO EVIDENCE AND SECURE THE PAYMENT OF
SAID INDEBTEDNESS AND FOR RELATED PURPOSES.
WHEREAS, the

, (hereinafter

referred to as the "Organization"), was organized under
for the purpose of providing a

(hereinafter referred to as the
"Facility") to serve the Members of the said Organization; and
WHEREAS, a meeting of the members of the said organization was held on the
day of
pursuant to proper notice thereof to consider plans for the acquisition and construction methods of financing the Facility:
and, as shown by the minutes of said meeting, of the
present and voting

members of record of the organization there were
, and by a recorded majority vote, the Facility and its financing authorized; and,

WHEREAS, the proposed Facility is to be constructed and equipped in accordance with plans, and specifications
prepared by
and in order to finance the Facility, the
(hereinafter referred to as the “Board”) is authorized and empowered, in their discretion, for and in the name of the organization,
to make application to the United States of America, acting through the United States Department of Agriculture,
(hereinafter referred to as the "Government"), for financial assistance; to cause the execution and delivery of a
promissory note or notes or other evidence of indebtedness (hereinafter referred to as the "note"), and appropriate security instruments
to secure any loan or loans made or insured by the Government; to comply with any requirements, terms or conditions prescribed by the
Government or by Government regulations; and to execute contracts or enter into agreements and, without limitation, to take any and
all other action as may be necessary, incidental or appropriate to finance, acquire, construct, complete, and/or equip the Facility for and
on behalf of the Organization.
NOW THEREFORE, it is hereby resolved by the Board as follows:

Section 1. (Determination of Board). That it is necessary to defray a portion of the costs of financing the Facility by obtaining
a loan made or insured by the Government in accordance with applicable provisions of the Consolidated Farm and Rural Development
Act, it being determined that the Organization is unable to obtain sufficient credit elsewhere to finance the Facility, taking into
consideration prevailing private and cooperative rates and terms currently available;
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 0572-0121. The time required to complete this information
collection is estimated to average 1 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.

Section 2. (Terms of Loan). That the Organization borrow
and issue as evidence
thereof an installment promissory note in the form prescribed by the Government for the full principal amount of the loan.
The note shall be signed by the President, attested by the Secretary and have the corporate seal of the Organization affixed
thereto, and shall bear interest from its date, which shall be the date of delivery at a rate not to exceed

percent per annum;

the principal and interest shall be paid over a period of
years in accordance with the payment schedule set forth in
the promissory note, until the principal and interest are fully paid except the final payment of the entire indebtedness, if not
sooner paid, shall be due and payable
years from the date of the note. Each payment shall be applied first to the
payment of the accrued interest and second to the payment of the principal. Prepayments of any installment may be made
in any amount at any time at the option of the Organization.
Section 3. (Assignment and Pledge of Revenue). The indebtedness hereby authorized to be incurred, together with the
interest thereon, shall be payable from the gross income and revenue to be derived from the operation of the Facility, a
sufficient portion of which, to pay the principal and interest as and when the same shall become due, is hereby assigned, and
pledged and shall be set aside for that purpose and this assignment and pledge shall extend to and include any assessments
that may be levied pursuant to Section 5 (d) hereof.
Section 4. (Protection and Disposition of Funds). The
of the Organization shall be the custodian of all funds of the Organization. Funds may be deposited in institutions insured
by the State or Federal Government or invested in readily marketable securities backed by the full faith and credit of the
United States. Any income from these accounts will be considered as revenues of the system.
The
is hereby directed to establish the following accounts into which the current funds
of the Organization, note proceeds, the revenues from the Facility and any other income shall be deposited, which accounts
shall be continually maintained, except as otherwise provided, so long as the indebtedness hereby authorized remains unpaid:
(a) Construction Account.
The proceeds of the borrowing hereby authorized not disbursed contemporaneously with loan closing for incurred Facility
costs, and at least the amount of
to be contributed by the Organization from the collection of initial
connection fees, membership fees or contributions shall be deposited in the Construction Account which shall be established
as required by the Government. Withdrawals from the construction account shall be made only on checks signed by the
of the Organization as authorized by the Board from time to time,
and with prior concurrence of the Government. At the option of the Government, the construction account may be established
as a "supervised bank account". Amounts in the supervised bank account exceeding $100,000 shall be secured by the depository
bank in advance in accordance with U.S. Treasury Department Circular No. 176. Withdrawals from a supervised bank account
shall be made only on checks signed by the
of the Organization and countersigned by
an authorized official of the Department of Agriculture. The Organization’s share of any insurance or liquidated damages
and other monies paid by defaulting contractors or their sureties will be deposited in the Construction Account to assure
completion of the Facility. When all construction costs have been paid in full, any balance remaining in the Construction
Account may be applied on the loan or used for other authorized purposes that have been approved by the Government
and the Construction Account shall be closed.
(b) General Account
As soon as the facility becomes revenue producing, all funds received shall be set aside in an account to be designated as the
General Account, and disbursements and transfers from this account shall be in the following priority: Debt Service,
Operations and Maintenance, transfers to Reserve Account. Monies deposited in the General Account shall be used only in
the manner and order as follows:
(1)
Borrowers making monthly USDA Debt Service Payments shall use the General Account for making such
payments plus operating and maintenance expenses. Also, funds will be transferred from this account to the Reserve Account
in accordance with (d) below.
(2)
Borrowers making other than monthly USDA Debt Service Payments shall use the General Account to pay
operating and maintenance expenses. Other transfers from this account will be made in the following order: (i) Transfers
to the Debt Service Account will be made in accordance with (c) below, (ii) Transfers to the Reserve Account will be made in
accordance with (d) below.

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(c) Debt Service Account
For borrowers on other than monthly debt service payments, transfers, in proportion to income availability, shall be made
from the General Account and set aside in an account designated as the Debt Service Account, in sufficient amounts which
will accumulate for the next installment on the note.
(d) Reserve Account
From the remaining funds in the General Account, after transfers and payments required in (b)(1) or (b)(2) and (c), there
shall be set aside into an account(s) designated as the Reserve Account(s) the sum of
each month until the sum of
is reached. With the prior written approval of the Government,
funds may be withdrawn and used for such things as loan installments, emergency maintenance, extensions to facilities
and replacement of short-lived assets, subject to conditions established by the Government.
(e) Whenever there shall accumulate in the General Account amounts in excess of those required in
subsections (b)(1) and (2), (c), and (d), such excess will be used by the organization to make prepayments
on the loan or retained in the General Account.
(f) The accounts required in subsections (b)(1) and (2), (c), and (d) may be established and maintained
as bookkeeping accounts or as separate bank accounts at the election of the Organization, unless otherwise
directed by the Government.
Section 5. (Other Covenants and Agreements of the Organization). The Organization covenants and agrees that so long
as the indebtedness hereby authorized remains unpaid;
(a) It will indemnify the Government for any payments made or losses suffered by the Government.
(b) It will comply with applicable State laws and regulations and continually operate and maintain the Facility
in good condition.
(c) It will impose and collect such rates and charges that gross revenues will be sufficient at all times to provide
for payment of the operation and maintenance thereof; the installment payments on the note; and the maintenance of
the various funds herein created. All service rendered by or use of the Facility shall be subject to the full rates prescribed in
the rules and regulations of the Organization; no free service by or use of the Facility will be permitted.
(d) It will cause to be levied and collected such assessments as may be necessary to operate and maintain the
Facility in good condition and meet installment payments on the note when the same become due if, for any reason, gross
revenues are insufficient.
(e) It will establish and maintain such books and records relating to the operation of the system and its
financial affairs, and will provide for the annual audit thereof, in such manner as may be required by the Government; will
provide the Government without its request a copy of each such audit; and will make and forward to the Government such
additional information and reports as it may from time to time require.
(f) It will provide the Government, at all reasonable times, access to all books and records relating to the
Facility and access to the property of the Facility so that the Government may ascertain that the Organization is complying
with the provisions hereof and with the provisions of other instruments incident to the making or insuring of the loan.
(g) It will maintain at least such insurance and fidelity bond coverage as may be required by the Government.
(h) It will not borrow any money from any source or enter into any contract or agreement or incur any other
liabilities in connection with making extensions or improvements to the Facility, exclusive of normal maintenance, without
obtaining the prior written consent of the Government.
(i) It will not cause or permit any voluntary dissolution of its organization, or merge or consolidate with any
other organization, without obtaining the prior written consent of the Government. It will not dispose of or transfer title
to the facility or any part thereof, including lands and interest in lands, by sale, security instrument, lease or other
encumbrance, without obtaining the prior written consent of the Government. Revenue in excess of the amount required to
maintain the accounts described by Section 4 herein will not be distributed or transferred to any other organization or
legal entity.
(j) It will not modify or amend the Articles of Incorporation or the Bylaws of the Organization without the
written consent of the Government,
(k) It will provide adequate service to all persons within the service area who can feasibly and legally be served
and will obtain USDA’s concurrence prior to refusing new or adequate services to such persons. Upon failure to provide
services which are feasible and legal, such person shall have a direct right of action against the organization or public body.
(l) All present and future contract rights, accounts receivable, and general intangibles arising in connection
with the facility are pledged as security for the loan.
(m) It will comply with the measures identified in the Government's environmental impact analysis for this
facility for the purpose of avoiding or reducing adverse environmental impacts of the facility’s construction or operation.

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Section 6. (Security Instruments). In order to secure the payment of the principal and interest of the note, the
President and Secretary of the Organization are hereby authorized and directed to execute and deliver good and sufficient
lien instruments, where necessary, encumbering the properties and assets both real and personal constituting said Facility, as
completed or as the same may be thereafter extended, including an assignment and pledge of revenues and such other
instruments as may be prescribed by the Government
Section 7. (Refinancing). If at any time it shall appear to the Government that the Organization is able to refinance
the amount of the indebtedness then outstanding, in whole or in part, by obtaining a loan for such purposes from responsible
cooperative or private credit sources at reasonable rates and terms for loans for similar purposes and periods of time, the
Organization will, upon request of the Government, apply for and accept such loan in sufficient amount to repay the
Government and will take such actions as may be required in connection with such loan.
Section 8. ("Equal Employment Opportunity under Construction Contracts and Nondiscrimination”). The President
and the Secretary be and they are hereby authorized and directed to execute for and on behalf of the Organization, Form
RD 400-1, "Equal Opportunity Agreement", and Form RD 400-4, "Assurance Agreement".
Section 9. In the case of a grant in the sum not to exceed
, the Organization
hereby accepts the grant under the terms as offered by the Government and that the
and
of the Organization are hereby authorized and empowered to take all action necessary or
appropriate in the execution of all written instruments as may be required in regard to or as evidence of such grant and the
Organization hereby resolves to operate the facility under the terms as offered in said grant agreement(s).
Section 10. Default under the provisions of this agreement or any instrument incident to the making or issuing of the
loan may be construed by the Government to constitute default under any other instrument held by the Government and
executed or assumed by the Organization, and default under any such instrument may be construed by the Government to
constitute default hereunder.
Section 11. (Resolution of Contract). The provisions hereof and the provisions of all instruments incident to the making
or the insuring of the loan, unless otherwise specifically provided by the terms of such instruments, shall constitute a contract
between the Organization and the Government or assignee so long as the note hereby authorized remains unpaid.
Section 12. This resolution shall take effect and be in force from and after the
, being the date of its enactment.
The vote was:

Yeas

Nays

day of

Absent

(SEAL) (if applicable)

By

Attest:

Title

Title

CERTIFICATION
I, the undersigned, as secretary of the
hereby certify that the

of such Organization or Corporation is composed of _______

members of whom ___________ , constituting a quorum, were present at a meeting thereof duly called and held on the

day

of
; that the foregoing resolution was adopted at such meeting by the vote shown
above, and that said resolution has not been rescinded or amended in any way.
Dated, this

day of

.

Secretary of

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