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HomeMy WebLinkAbout03/10/2026Position S USDA Form RD 1942-47 LOAN RESOLUTION FORM APPROVED (Rev. 12-97) (Public Bodies) OMB NO.0575-0015 A RESOLUTION OF THE City Council OF THE City of Dunn AUTHORIZING AND PROVIDING FOR THE INCURRENCE OF INDEBTEDNESS FOR THE PURPOSE OF PROVIDING A PORTION OF THE COST OF ACQUIRING, CONSTRUCTING, ENLARGING, IMPROVING, AND/OR EXTENDING ITS 2026 Grapple Truck and Utility Tractor FACILITY TO SERVE AN AREA LAWFULLY WITHIN ITS JURISDICTION TO SERVE. WHEREAS, it is necessary for the City of Dunn ("Public Body) (herein after called Association) to raise a portion of the cost of such undertaking by issuance of its bonds in the principal amount of $275,000.00 pursuant to the provisions of N. C. General Statutes 160 ; and WHEREAS, the Association intends to obtain assistance from the Rural Housing Service, Rural Business - Cooperative Service, Rural Utilities Service, or their successor Agencies with the United States Department of Agriculture, (herein called the Government) acting under the provisions of the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.) in the planning, financing, and supervision of such undertaking and the purchasing of bonds lawfully issued, in the event that no other acceptable purchaser for such bonds is found by the Association: NOW THEREFORE in consideration of the premises the Association hereby resolves: 1. To have prepared on its behalf and to adopt an ordinance or resolution for the issuance of its bonds containing such items and in such forms as are required by State statutes and as are agreeable and acceptable to the Government. 2. To refinance the unpaid balance, in whole or in part, of its bonds upon the request of the Government if at any time it shall appear to the Government that the Association is able to refinance its bonds by obtaining a loan for such purposes from responsible cooperative or private sources at reasonable rates and terms for loans for similar purposes and periods of time as required by section 333(c) of said Consolidated Farm and Rural Development Act (7 U. S. C. 1983 (c)). 3. To provide for, execute, and comply with Form RD 400-4, "Assurance Agreement," and Form RD 400-1, "Equal Opportunity Agreement," including an "Equal Opportunity Clause," which clause is to be incorporated in, or attached as a rider to, each construction contract and subcontract involving in excess of $ 10,000. 4. To indemnify the Government for any payments made or losses suffered by the Government on behalf of the Association. Such indemnification shall be payable from the same source of funds pledged to pay the bonds or any other legal permissible source. 5. That upon default in the payments of any principal and accrued interest on the bonds or in the performance of any covenant or agreement contained herein or in the instruments incident to making or insuring the loan, the Government at its option may (a) declare the entire principal amount then outstanding and accrued interest immediately due and payable, (b) for the account of the Association (payable from the source of funds pledged to pay the bonds or any other legally permissible source), incur and pay reasonable expenses for repair, maintenance, and operation of the facility and such other reasonable expenses as may be necessary to cure the cause of default, and/or (c) take possession of the facility, repair, maintain, and operate or rent it. Default under the provisions of this resolution or any instrument incident to the making or insuring 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 Association, and default under any such instrument may be construed by the Government to constitute default hereunder. 6. Not to sell, transfer, lease, or otherwise encumber the facility or any portion thereof, or interest therein, or permit others to do so without the prior written consent of the Government. 7. Not to defease the bonds, or to borrow money, enter into any contract or agreement, or otherwise incur any liabilities for any purpose in connection with the facility (exclusive of normal maintenance) without the prior written consent of the Government if such undertaking would involve the source of funds pledged to pay the bonds. 8. To place the proceeds of the bonds on deposit in an account and in a manner approved by the Government. 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. 9. To comply with all applicable State and Federal laws and regulations and to continually operate and maintain the facility in good condition. 10. To provide for the receipt of adequate revenues to meet the requirements of debt service, operation and maintenance, and the establishment of adequate reserves. Revenue accumulated over and above that needed to pay opeptingand maintenance, debt service and reserves may only be retained or used to make prepayments on the loan. Revenue cannot be use any expenses which are not directly incurred for the facility financed by the Government. No free service or use of the facility will be permitted. According 14r) the Paperwork Reduction Act oj' 1995, no persons are 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 0575-0015. The time required to complete 11is information collection is estimated io arerage 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the ddna needed, and completing and reviewing the collection of i f ormaiion. -2- 11. To acquire and maintain such insurance and fidelity bond coverage as may be required by the Government. 12. To establish and maintain such books and records relating to the operation of the facility and its financial affairs and to provide for required audit thereof as required by the Government,to provide the Government a copy of each such audit without its request,and to forward to the Government such additional information and reports as it may from time to time require. 13. To provide the Government at all reasonable times access to all books and records relating to the facility and access to the property of the system so that the Government may ascertain that the Association is complying with the provisions hereof and of the instruments incident to the making or insuring of the loan. 14. That if the Government requires that a reserve account be established and maintained,disbursements from that account may be used when necessary for payments due on the bond if sufficient funds are not otherwise available.With the prior written approval of the Government,funds may be withdrawn for: (a)Paying the cost of repairing or replacing any damage to the facility caused by catastrophe. (b)Repairing or replacing short-lived assets. (c)Making extensions or improvements to the facility. Any time funds are disbursed from the reserve account,additional deposits will be required until the reserve account has reached the required funded level. 15. To provide adequate service to all persons within the service area who can feasibly and legally be served and to obtain the Government'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 Association or public body. 16. To comply with the measures identified in the Government's environmental impact analysis for this facility for the purpose of avoiding or reducing the adverse environmental impacts of the facility's construction or operation. 17. To accept a grant in an amount not to exceed$ 0 under the terms offered by the Government;that the and of the Association 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 to operate the facility under the terms offered in said grant agreement(s). 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 instrument,shall be binding upon the Association as long as the bonds are held or insured by the Government or assignee.The provisions of sections 6 through 17 hereof may be provided for in more specific detail in the bond resolution or ordinance;to the extent that the provisions contained in such bond resolution or ordinance should be found to be inconsistent with the provisions hereof,these provisions shall be construed as controlling between the Association and the Government or assignee The vote was: Yeas Nays Absent IN WITNESS WHEREOF,the city Council of the City of Dunn has duly adopted this resolution and caused it to be executed by the officers below in duplicate on this 10th day March , 2026 (SEAL) dz.: CITY %` \`0.' • �G� By William Elmore, Jr. •Att st ,p _ �'`�1 Z Title Mayor f? s75 �: • Melissa Matti, City Clerk . /% •'• Title F LEA 0 -r ,0 �,,sll000 -3- CERTIFICATION TO BE EXECUTED AT LOAN CLOSING I,the undersigned,as l./- Cof the City of Dunn hereby certify that the CH11 COCLJUL(J' of such Association is composed of (AO' members,of whom q ,constituting a quorum,were present at a meeting thereof duly called and held on the /00777 day of 1L t / , a.72t,and that the foregoing resolution was adopted at such meeting by the vote shown above.I further certify that as of ,the date of closing of the loan from the Government,said resolution remains in effect and has not been rescinded or amended in any way. Dated,this !1% day of apj/C4 , / . (:\•. .7' 1118 6 Title ''., 47�. • i(i ' 'I 'GORPORq Tom' - SEAL • CAR USDA United States Department of Agriculture Date : March 10, 2026 City of Dunn Attn:William Elmore,Jr., Mayor 401 East Broad Street-PO Box 1065 Dunn, NC 28334 Subject: Letter of Conditions for a Community Facilities Program Loan 2026 Grapple Truck and John Deere Utility Cab Tractor Dear Mayor Elmore: This letter,with attachments, establishes conditions that must be understood and agreed to by the applicant before further consideration may be given to the application for Federal Assistance. The State and Area Office staff of USDA Rural Development (RD or Agency) will administer the loan and/or grant funds for this project on behalf of the Rural Housing Service. All parties may access information and regulations referenced in this letter at our website located at: https://www.rd.usda.gov/programs-services/community-facilities. Any changes in project cost, source of funds, scope of services, or any other significant changes in the project or applicant(this includes significant changes in the applicant's financial condition, operation, organizational structure or executive leadership) must be reported to and approved by RD by written amendment to this letter. Any changes not approved by RD will be cause for discontinuing processing of the application. If you do not meet the conditions of this letter,the Agency reserves the right to withdraw Agency funding. This letter is not to be considered as loan approval or as representation to the availability of funds. The application can be processed on the basis of a RD loan not to exceed$275,000.00Funds for this project are provided by the Rural Housing Service (RHS). Please complete and return the attached Form RD 1942-46, "Letter of Intent to Meet Conditions," and Form RD 1940-1, "Request for Obligation of Funds,"within the next ten (10) days, if you desire that we give further consideration to your application. The execution of these and all other documents required by RD must be authorized by appropriate resolutions of the applicant's governing body. The loan will be considered approved on the date Form RD 1940-1, "Request for Obligation of Funds," is mailed to the applicant by RD. This is also the date that the interest rate is established. If the interest rate is lower at the time of loan closing,you must make a request in writing to receive the lower rate in effect. The loan will be repayable over a period not to exceed 10 years from the date of loan closing at the intermediate interest rate.The first combined principal and/or interest payment will be due one (1) year following loan closing.The loan repayment will be made in amortized with annual installments. City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page 12 Project Budget—Based on Standard Form 424, "Application for Federal Assistance," the project cost and funding will be as follows: a. Project Expenses Costs Development Land &Rights Legal $1,750.00 Architect Fees Interest Equipment $276,544.00 Contingencies Refinancing Other(Described) Resident Inspection Total $278,294.00 Source of Funds b. Funds Total USDA Loan $275,000.00 Applicant Contributions $3,294.00 Other Total $278,294.00 Any changes in funding sources following obligation of Agency funds must be reported to the processing official. Project feasibility and funding will be reassessed if there is a significant change in project costs after bids are received. If actual project costs exceed the project cost estimates,an additional contribution by the applicant may be necessary. The applicant will ensure projects are completed in a timely, efficient, and economical manner. Section I of the attached conditions (Items 1-21) must be satisfied prior to interim loan closing or before construction begins,whichever occurs first, in either case not later than one(1)year from the date of this letter. The Agency reserves the right to cancel funds if the applicant does not comply with all requirements as presented or subsequently modified, as needed. In the event the project has not advanced to the point of construction within one (1)year, RD reserves the right to discontinue the processing of the application. This Letter of Conditions will require written approval to extend the Letter of Conditions offer after one year from the date of this letter. City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page 13 Also, please be aware of statute 31 US Code §1552 outlining procedure for appropriation account for definite time period of five years:"on September 30th of the 5th fiscal year after the period of availability ends, account shall be closed any remaining balance shall be cancelled. If you have any questions,feel free to contact this office. Sincerely, TOBAIS FULLWOD AREA SPECIALIST cc: Community Programs Director, USDA Rural Development, City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page 14 ATTACHMENT TO LETTER OF CONDITIONS SECTION I. CONDITIONS TO BE SATISFIED PRIOR TO LOAN CLOSING OR BEFORE CONSTRUCTION BEGINS,WHICHEVER OCCURS FIRST 1. Reserves-The applicant will establish a separate debt service reserve account in an amount at least equal to an average annual loan installment. This reserve will be accumulated at the rate of at least one-tenth of the average annual installment each year until the required level is reached,which is one average annual loan installment. The reserve account balance must be reported annually to the State Office and included in the audit as a separate and identifiable line item as restricted. For any fiscal year end in which the debt service reserve account balance is less than the required account total;the applicant will provide the Agency with a twelve-month budget and plan to correct the cash shortfall. 2. Disbursement of Funds a. The applicant will provide evidence that funds from other sources will be made available for the project cost in the amount of$3,294.00. This evidence should include a copy of the loan/grant award that addresses how funds will be disbursed. b. The applicant's contribution of funds toward the project cost shall be considered the first funds expended and must be deposited in its project account before construction is started. The applicant must provide evidence of this deposit to RD. c. Agency funds will not be used to pre-finance funds committed to the project from other sources. d. The Debt Collection Improvement Act(DCIA)of 1996 requires that all Federal payments be made by Electronic Funds Transfer/Automated Clearing House (EFT/ACH). Applicants receiving payments by EFT will have funds directly deposited to a specified account at a financial institution with funds being available to the recipient on the date of payment. The borrower should complete Form SF-3881, Electronic Funds Transfer Payment Enrollment Form,for each account where funds will be electronically received. The completed form(s) must be received by RD at least forty-five (45) days prior to the first advance of funds. Failure to do so could delay loan closing. e. The applicant must formally adopt Form RD 400-4,"Assurance Agreement,"at a properly called meeting of the governing body. Adoption of this document should be made a part of the official minutes of the meeting. A certified copy of the minutes is to be attached to the resolution and delivered to Rural Development. Security Requirements City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page 15 a. At loan closing the applicant will execute the attached Form RD 1942-47, "Loan Resolution (Public Bodies)". Please note the refinancing provision in paragraph 2. Also, on page 3 there is a certification to be executed at loan closing. b. At loan closing, the applicant will execute the attached Form RD 1942-9 "Loan Resolution (Security Agreement)". Please review the refinancing provision on page 4, section 7. Also note the certification on the bottom of page 4,which is to be executed at the time of loan closing. c. A UCC Financing Statement lien search will be conducted by the Agency to identify lien priority position. Form UCC-1, "Financing Statement," with Form UCC-1 Ad, "UCC Financing Statement Addendum," as appropriate, or other action as allowed by State statute,will be prepared by RD and filed with the North Carolina Secretary of State and a copy recorded with the County Recorder (if applicable) to perfect a security interest in collateral to encumber the following: A$38.00 filing fee (fee subject to change based on current North Carolina Secretary of State fee schedule) payable to the Secretary of State must be provided to the Agency at least 90 days prior to loan closing. d. An Installment Purchase Contract will be secured by the United States of America,Acting through the Rural Housing Service being named as the registered lien holder on the Certificate of Title for the vehicle being financed. e. The applicant is required to execute Form RD 440-15, Security Agreement, if required by OGC. f. The applicant and the applicant's financial institution(s) will execute the USDA RHS Community Facility Program, Deposit Account Control Agreement.This is required on all account(s) the applicant has which the Agency will be taking a security interest in, including but not limited to, all primary accounts where the facilities operating and non- operating revenues are deposited and any accounts holding the debt service reserve(s) for the Agency loan(s).Please note the Termination of Agreement provision,item number 8. 3. Insurance and Bonding Requirements—The applicant must provide evidence of adequate insurance and fidelity bond coverage by loan closing or start of construction, whichever occurs first. Adequate coverage, in accordance with RD's regulations, must then be maintained for the life of the loan and evidence must be submitted to RD annually. Evidence that coverage is being maintained must be provided annually thereafter. It is the City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page 16 responsibility of the applicant and not that of RD to assure that adequate insurance and fidelity bond coverage is maintained. Applicants are encouraged to review coverage amounts and deductible provisions with their attorney, consulting engineer, and/or insurance provider(s). a. Property Insurance—Fire and extended coverage will be required on all above-ground structures, including applicant-owned equipment and machinery housed therein. Provide RD with proof of coverage and attach Lender's Loss Payable Endorsement(438 BFU or equivalent) naming the UNITED STATES OF AMERICA as lender. b. Corporate Liability Insurance - The Applicant will provide public liability, and property damage insurance in an amount to adequately protect the applicant from civil action arising from the function of the applicant relative to the project. c. Workers' Compensation Insurance—The applicant will be required to carry workers' compensation insurance for all employees in accordance with the State law. d. General liability and vehicular coverage must be maintained. e. Fidelity Bond—Persons who have access to the funds and custody to any property will be covered by a fidelity bond or an adequate crime policythat protects the applicant from an employee crime. Coverage may be provided either for all individual positions or persons, or through "blanket" coverage providing protection for all appropriate employees and/or officials. The amount of coverage required by RD will be sufficient to cover the total annual debt and reserve service requirements for the loan. The United States of America will be named as co-obligee on the bond. A certified power-of-attorney with effective date will be attached to each bond. 4. Civil Rights&Equal Opportunity—The borrower has received an award of Federal funding and is required to comply with U.S. statutory and public policy requirements, including but not limited to: a. Section 504 of the Rehabilitation Act of 1973—Under Section 504 of the Rehabilitation Act of 1973, as amended (29 U.S.C. 794), no handicapped individual in the United States shall,solely by reason of their handicap, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Agencyfinancial assistance.The Standard for compliance is the Architectural Barriers Act Accessibility Standards(ABAAS). b. Civil Rights Act of 1964—All recipients are subject to, and facilities must be operated in accordance with, Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.) and 7 CFR 1901,Subpart E, particularly as it relates to conducting and reporting of compliance reviews. Instruments of conveyance for loans and/or grants subject to the Act must contain the covenant required by Paragraph 1901.202(e)of this Title. City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page 17 c. The Americans with Disabilities Act(ADA) of 1990—This Act (42 U.S.C. 12101 et seq.) prohibits discrimination on the basis of disability in employment, State and local government services, public transportation, public accommodations, facilities, and telecommunications. d. Age Discrimination Act of 1975—This Act(42 U.S.C.6101 et seq.)provides that no person in the United States shall on the basis of age, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance. e. Controlled Substances Act - Even though state law may allow some activities, as a recipient of Federal funding,you are subject to the Controlled Substances Act. Specific questions about the Controlled Substances Act should be directed to the Servicing Official who will contact OGC, as appropriate. f. Limited English Proficiency(LEP)- LEP statutes and authorities prohibit exclusion from participation in, denial of benefits of, and discrimination under Federally assisted and/or conducted programs on the ground of race, color, or national origin. Title VI of the Civil Rights Act of 1964 covers program access for LEP persons. LEP persons are individuals who do not speak English as their primary language and who have a limited ability to read, speak, write, or understand English. These individuals may be entitled to language assistance,free of charge. The recipient must take reasonable steps to ensure that LEP persons receive the language assistance necessary to have meaningful access to USDA programs, services,and information the recipient provides. Agency financial programs must be extended without regard to race, color, religion, sex, national origin, marital status, age, or physical or mental handicap. The recipient must display posters (provided by the Agency) informing users of these requirements, and the Agency will monitor the recipient's compliance with these requirements during regular compliance reviews. As a recipient of RD funding, you are required to post a copy of the Non-Discrimination Statement listed below in your office and include in full,on all materials produced for public information, public education, and public distribution both print and non-print. Non-Discrimination Statement "This institution is an equal opportunity provider and employer." If you wish to file a Civil Rights program complaint of discrimination, complete the USDA Program Discrimination Complaint Form, found online at https://www.usda.gov/about- usda/general-information/staff-offices/office-assistant-secretary-civil-rights/how-file- program-discrimination-complaint, or at any USDA office, or call(866) 632-9992 to request the form.You may also write a letter containing all of the information requested in the form. Send your completed complaint form or letter to us by mail at U.S.Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue, S.W., Stop 9410, Washington, D.C. 20250-9410, by fax (202) 690-7442 or email at program.intake(@usda.gov. City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page 18 If the material is too small to permit the full statement to be included, the material at a minimum includes the statement in print size no smaller than the text that "This institution is an equal opportunity provider and employer." 5. Written Agreements for Professional Services a. The legal service agreement submitted by Pope Law, PLLC is satisfactory to RD. 6. Electronic Funds Transfer—All loan funds will be transferred to borrowers via Electronic Funds Transfer/Automated Clearinghouse Systems (EFT/ACH). Normal transfers will be ACH, with money being placed in Borrower's account two business days after the RD processing office approves the pay request.The applicant must submit the Electronic Funds Transfer Form containing the banking (ACH) information to the RD Servicing Office at least 90 days prior to the date of loan closing. Failure to do so could delay loan closing. 7. Automatic Payments -The applicant is required to participate in the Pre-Authorized Debit (PAD) payment process for all new and existing indebtedness to RD. It will allow for the applicant's payment to be electronically debited from its account on the date their payment is due. Form RD 3550-28, "Authorization Agreement for Pre-Authorized Payments," is attached. Please fill out and sign your"Individual/Company Information"section,then have your financial institution/bank fill out the bottom portion prior to submitting the form to the RD service office. 8. Loan Closing—The permanent loan will be closed in accordance with RD instructions, the legal requirements of the USDA OGC, and this Letter of Conditions. All DRAFT applicable closing documents, including bond documents, must be submitted to RD at least 90 days prior to the planned closing date. Prior to loan closing,a request for reimbursement must be submitted to RD with all the supporting invoices. 9. Operating Budget— Prior to loan closing, RD must review the applicant's approved operating budget. The budget must balance and include the proposed USDA debt service and reserve obligations. Each year the USDA loan is outstanding,the applicant will adopt an annual budget which provides for the annual debt service and reserve payments. 10. System for Award Management Registration and Unique Entity ID—You as the recipient must maintain the currency of your information in the System for Award Management(SAM) until you submit the finalfinancial report required under this award and all grant funds under this award have been disbursed or de-obligated, whichever is later. This requires that you review and update the information at least annually after the initial registration, and more frequently if required by changes in your information or another award term. Recipients can register on-line at(https://www.sam.gov)You as the recipient may not make a sub-award to an entity unless the entity has provided its Unique Entity ID from SAM.gov to you. 11. Suspension and Debarment Screening—You will be asked to provide information on the principals of your organization. Agency staff must conduct screening for suspension and debarment of the entity, as well as its principals through the Do Not Pay Portal. a. Principal— City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page 19 i. An officer, director, owner, partner, principal investigator, or other person within a participant with management or supervisory responsibilities related to a covered transaction;or ii. A consultant or other person,whether or not employed by the participant or paid with federal funds,who— 1. Is in a position to handle federal funds; 2. Is in a position to influence or control the use of those funds;or, occupies a technical or professional position capable of substantially influencing the development or outcome of an activity required to perform the covered transaction. (2 CFR§180.995) 12. Litigation. You are required to notify the Agency within 30 days of receiving notification of being involved in any type of litigation prior to loan closing or start of construction,whichever occurs first. Additional documentation regarding the situation and litigation may be requested by the Agency. SECTION III. LOAN CONDITIONS TO BE SATISFIED AFTER PROJECT COMPLETION 1. Financial Statements—To be submitted on an annual basis in accordance with the following: a. 2 CFR Part 200, Subpart F establishes audit requirements that borrowers and grantees must follow. Borrowers and grantees who expend$1,000,000 or more in Federal awards in their fiscal year, have CF loan balances totaling$1,000,000 or more,or a combination of the two must submit an audit in accordance with 2 CFR 200,Subpart F. Federal funds expended during a borrowers fiscal year: 2 CFR Part 200, Subpart F requires a borrower that expends $1,000,000 or more in Federal awards in their fiscal year to submit a single or program-specific audit. A CF direct loan, guaranteed loan, and/or grant,or any combination thereof,are considered Federal awards. Grantees: Grantees that expend $1,000,000 or more in a year in Federal awards must have an audit conducted in accordance with 2 CFR Part 200, Subpart F except when the grantee elects to have a program specific audit conducted. Prior loan and loan guarantees: 2 CFR Part 200, §200.502(b) establishes the basis for including loan and loan guarantees (loans) on the Schedule of Expenditures of Federal Awards(SEFA).The value of new loans made or received during the audit period plus the beginning of the audit period balance of loans from previous years for which the Federal Government imposes continuing compliance requirements must be reported on the SEFA. CF Program loans require its borrowers to meet continuing compliance requirements. Continuing compliance requirements that CF borrowers must meet include, but are not limited to,funding reserves, maintaining insurance,deposit funds in Federally insured banks, meet financial covenants, maintain sufficient debt service ratios, comply with civil rights requirements, and comply with additional requirements established as part of the loan approval process. City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page I10 Borrowers and grantees must submit audits within nine months from the end of the borrower's fiscal year or 30 days after receipt from the auditor,whichever is earlier.The audited financial statements must be submitted to the Federal Audit Clearinghouse. b. All borrowers exempt from the audit requirements cited in 1(a) above, and who do not otherwise have annual audits, will within 60 days following the end of the borrower's fiscal year furnish RD with annualfinancial statements,consisting of a verification of the organizations, balance sheet and statement of income and expenses. Grantees exempt from the audit requirements cited in 1(a) above, and who do not otherwise have annual audits, will within 60 days following the end of the fiscal year in which any grant funds were expended furnish RD with annual financial statements consisting of a verification of the organizations, balance sheet and statement of income and expenses. The borrower/grantee may use Forms RD 442-2 "Statement of Budget, Income and Equity"and 442-3"Balance Sheet",or similar format to provide the financial information. For borrowers using Form RD 442-2, the dual purpose of fourth quarter management reports, when required, and annual statements of income will be met with this one submission. 2. Quarterly Reports—A quarterly management report will be required for the first year of operations for new borrowers,and existing borrowers operating a new facility,starting a new type of operation or proposing a significant expansion of an existing facility. The borrower may use Form RD 442-2 or similar format to provide this information, and the reports are to be signed bythe appropriate borrower official and submitted within 30 days of each quarter's end. 3. Audit agreement—If you are required to obtain the services of a licensed Certified Public Accountant(CPA),you must enter into a written audit agreement with the auditor. The audit agreement may include terms and conditions that you and auditor deem appropriate. 4. Limitations of Additional Debt-You 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 obtainingthe prior written consent of the Agency. 5. Compliance Reviews—RD will be required to periodically conduct a compliance review of this facility and operation.Compliance reviews will be completed one year after loan closing and every three years thereafter by utilizing Form RD 400-8. You will need to provide the local office the statistical information as requested.The Agency will conduct regular compliance reviews of the borrower and its operation in accordance with Architectural Barriers Act(ABA) Accessibility Guidelines. 6. Continuation of Financing Statement-At the time of renewal(every 5 years)the borrower must provide a$38.00(or applicable filing fee)check payable to the Secretary of State(fee subject to change based on current Secretary of State fee schedule)for the continuation of the Financing Statement until the loan is paid in full. City of Dunn —2026 Grapple Truck and Tractor March 10, 2026 Letter of Conditions Page I11 7. Security Inspections—RD is required to conduct an inspection of the facility a minimum of once every three years.The recipient must participate in these inspections and provide the required information. Compliance reviews will typically be conducted in conjunction with the security inspections described in this letter. If beneficiaries (users) are required to complete an application or screening for the review to collect data by race(American Indian or Alaska Native, Asian, Black or African) the Agency will utilize this data as part of the required compliance review. 8. Graduation—You may be required to refinance(graduate)the unpaid balance of the RD loan, in whole or in part, if at any time RD determines your entity is able to obtain a loan for such purposes from responsible cooperative or private sources at reasonable rates and terms for loans for similar purposes and periods of time, the recipient will be requested to refinance. The ability to refinance will be assessed every other year for those loans that are five years old or older. 9. Prepayment and Extra Payments- Prepayments of scheduled installments, or any portion thereof, may be made at any time at the option of borrower,with no penalty. Security instruments, including bonding documents, must contain the following language regarding extra payments, unless prohibited by State statute: Prepayments of scheduled installments, or any portion thereof, may be made at any time at the option of borrower. Refunds, extra payments and loan proceeds obtained from outside sources for the purpose of paying down the Agency debt, shall, after payment of interest, be applied to the installments last to become due under this note and shall not affect the obligation of borrower to pay the remaining installments as scheduled in your security instruments. 10. Financial Covenants a) Beginning in the First Full Year of 202x and tested annually, a debt service coverage ratio (DSCR)of a least 1.25 will be maintained with debt service to include the loan payments plus all required reserves. If the DSCR drops below 1.25 for any audited year, then an independent management consultant shall be engaged at the expense of the Applicant to prepare a fiscal strategy report that documents how the debt service requirement will be met.This report must be provided to the Agency no later than 90 days after receipt of the annual audit. *Debt service coverage is defined as net income plus depreciation and amortization expense plus interest expense on structured debt divided by the sum of all structured debt payments including required reserve payments still due.