§ 5110. Farm Loan Definitions.

In addition to the definitions set forth in Section 5000 of these regulations, and section 14010 of the Corporations Code, the following definitions apply to article 9:

(a) “Authorized Farm Costs” means the costs incurred by a Farm, including:

(1) Operating and production expenses, including the purchase, construction or repair of buildings, machinery, equipment and storage and drying facilities, the purchase of animals, seed and fertilizer, the purchase of real estate and the costs of improvement or repairs thereto.

(2) Costs associated with the purchase of real estate, including easements and rights-of-way to establish or enlarge a Farm.

(3) Costs associated with water development, soil conservation, forestation, drainage, pollution abatement and related measures.

(4) Disaster losses including actual losses incurred in connection with disaster damaged or destroyed farm property or production enterprises, or both, including annual operating and production expenses, construction and improvement of buildings and facilities, and land and water development.

(5) Refinancing debt including the costs associated with the issuance of such debt and lender fees and charges, where the debt to be refinanced was incurred for Authorized Farm Costs. No costs set forth in this clause shall be authorized unless the Farm Lender shall certify that, in the Farm Lender's opinion, sufficient collateral or cash flow exists to reasonably preclude the chance of loan losses.

(b) “Farm” means a business which is primarily engaged in producing crops, livestock products or aquatic organisms through the utilization and management of land, water, labor, capital and basic materials including seed, feed, fertilizer and fuel.

(c) “Farm Borrower” means a Farm which has applied for, or which has entered into, a Farm Borrower Agreement.

(d) “Farm Borrower Agreement” means a written loan agreement whereby the Farm Lender agrees to lend funds to the Farm Borrower to finance Authorized Farm Costs, and which includes at a minimum: a note, security agreement and loan agreement each consistent with commercial practices and containing the following:

(1) A list of Farm Borrower security for the Farm Borrower Loan and plans for at least an annual accounting for security.

(2) The Authorized Farm Costs for which loan funds shall be used.

(3) The interest rate, which shall not exceed four percent (4%) above the prime rate listed in the western edition of the Wall Street Journal on the date of the loan commitment.

(4) The term, which shall not exceed seven years, except for a Guaranteed Farm Borrower Loan. The term of a Guaranteed Farm Borrower Loan shall not exceed that authorized by USDA. The aggregate outstanding balance of loans with a remaining term to maturity in excess of eighty-four (84) months shall not comprise more than twenty-five percent (25%) of the Farm Lender's trust fund account assets.

(5) The loan amount, which shall not exceed the maximum amount allowed by the USDA.

(6) Default and Liquidation provisions which shall comply with Sections 5114 and 5115, respectively.

(7) Fees pursuant to section 5118.

(e) “Farm Borrower Loan” means a Term Loan or Line of Credit Loan from a Farm Lender to a Farm Borrower pursuant to a Farm Borrower Agreement. At least ninety percent (90%) of Farm Borrower Loans funded from the Corporation's trust fund account, calculated by dollar amount, must be guaranteed by the USDA. In determining the percentage, the numerator is the loan amount for outstanding Guaranteed Farm Borrower Loans, and the denominator is the loan amount of all outstanding Farm Borrower Loans.

(f) “Farm Lender” means a Corporation that has been approved by the USDA as a lender.

(g) “Farm Lender Credit Agreement” means a written agreement whereby the Agency agrees to lend funds to Farm Lender, for the purpose of funding Farm Borrower Loan(s). The Farm Lender Credit Agreement may be a Master Agreement, and will include provisions that require the Farm Lender to request disbursement of loan proceeds from the Agency only after the Farm Borrower Loan(s) and respective Farm Borrower Agreement(s) have been approved and are in effect. The Farm Lender Credit Agreement will also include provisions covering the following:

(1) Security. No funds shall be disbursed except to fund a previously approved Farm Borrower Agreement assigned as security to the Farm Lender Credit Agreement. As used in this subsection “assigned as security” means:

(A) For a Guaranteed Farm Borrower Loan, that the Agency is the Holder, or the Guaranteed portion has been sold at par value and the proceeds have been deposited in the trust fund account from which the funds originated.

(B) For a Nonguaranteed Farm Borrower Loan, the Farm Lender Credit Agreement is secured by assignment of all notes, security agreements and similar instruments contained in the Farm Borrower Agreement.

(2) The loan amount, which shall not exceed the total amount of Farm Borrower Loans authorized for the Farm Lender by the Director.

(3) The interest rate, which shall be two percent (2%) below the prime rate listed in the western edition of Wall Street Journal for each respective day for which funds are owed to the Agency.

(4) Repayment terms, which shall be based upon the repayment terms in the Farm Borrower Agreement(s) funded with proceeds from the Farm Lender Credit Agreement.

(h) “Farm Lender Disbursement Request” means a signed request for disbursement of trust funds under an existing Farm Lender Credit Agreement made in writing to the Agency by a Farm Lender in compliance with Section 5111.

(i) “Guarantee” means a signed commitment, issued by the USDA, to guarantee payment of all or part of a Farm Borrower Loan.

(j) “Guaranteed Farm Borrower Loan” means a Farm Borrower Loan which is in whole or part subject to the Guarantee.

(k) “Holder” means a person or an organization other than the Farm Lender who purchases all or part of the Guarantee portion of a Guaranteed Farm Borrower Loan.

(l) “Liquidation” means the exercise of rights provided for in the event of any Default under a Farm Borrower Agreement or the related Farm Lender Credit Agreement, including the right to foreclose in accordance with the terms of any financing statement, security interest or similar instrument obtained or entered into in relation to such Farm Borrower Agreement or Farm Lender Credit Agreement.

(m) “Nonguaranteed Farm Borrower Loan” means a Farm Borrower Loan not subject to a Guarantee.

(n) “USDA” means the United States Department of Agriculture.

HISTORY

1. Repealer and new section filed 2-1-94 as an emergency; operative 2-1-94 (Register 94, No. 5). A Certificate of Compliance must be transmitted to OAL by 8-1-94 pursuant to Corporations Code section 14024 or emergency language will be repealed by operation of law on the following day. For prior history, see Register 92, No. 28.

2. Amendment filed 12-27-2004 as a deemed emergency pursuant to Corporations Code section 14024; operative 12-27-2004 (Register 2004, No. 53). A Certificate of Compliance must be transmitted to OAL by 6-27-2005 or emergency language will be repealed by operation of law on the following day.

3. Editorial correction of History 2 (Register 2005, No. 27).

4. Certificate of Compliance as to 12-27-2004 order, including amendment of Note, transmitted to OAL 5-25-2005 and filed 7-7-2005 (Register 2005, No. 27).

5. Amendment filed 8-4-2008 as an emergency; operative 8-4-2008 (Register 2008, No. 32). A Certificate of Compliance must be transmitted to OAL by 2-2-2009 or emergency language will be repealed by operation of law on the following day.

6. Certificate of Compliance as to 8-4-2008 order transmitted to OAL 1-26-2009 and filed 2-19-2009 (Register 2009, No. 8).

Note

Note: Authority cited: Section 14024, Corporations Code. Reference: Sections 14067 and 14070(c) & (e), Corporations Code.