McLeodUSA/City Loan Agreement
06/24/99 17:15 FAX 319 557 3155
MCLEOD t:SA
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McLeodUSA-
June 24, 1999
Mr. Michael VanMilIigen
Dubuque City Manager
City Hall
Dubuque, Ia
Dear Mr. VanMilligen,
Please place me on the City Council agenda for Tuesday, July 7tlt, 1999.
I wish to address the Mayor and Council members regarding the loan agreement between
the City of Dubuque and McLeodUSA.
-". J,j" for you assistance.
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Michael W. Pratt'
General Manager
McLeodUSA
ONE CyCARE PLAzA 700 LocuST STREET SUITE 818 DUlIUQUB, lA 52001-6824 PHONE 319-557-3111 FAX 319-557-3155 http://mcleodusa.com
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6/24199 @ 10 a.m.
Mary:
Mike Pratt called & he will probably fax a communication to the Mayor & Council requesting to be on the Agenda
for Tues. July 6th to give them an update on the McLeodUSA loan. I told him you will probably put him on the
"Action" part of the Agenda, but that there are several public hearings.
He will bring add'l documents that night but doesn't want to beforehand.
Karen
38
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ORIGINAL
CITY OF DUBUQUE, IOWA
ECONOMIC DEVELOPMENT LOAN AGREEMENT
McLeodUSA, Inc.
NUMBER: # 1 - 98
This AGREEMENT, dated as of the 21Stday of May , 1998, is entered
into by and between the CITY OF DUBUQUE, IOWA, a municipal corporation
organized and existing under the laws of the State of Iowa (hereinafter referred to
as "City") and MCLEODUSA INCORPORATED, a Delaware Corporation with its
principal place of business in Cedar Rapids, Iowa, (hereinafter referred to as
"Company").
WITNESSETH:
WHEREAS, City has funded an economic development loan program to
support the growth and expansion of new and existing businesses; and
WHEREAS, Company has requested a loan to offset the costs associated with
the installation of a digital telecommunications switching platform to support the
needs of existing businesses and industries and to attract new businesses to the
community; and
WHEREAS, City has considered said proposal and has determined that it will
contribute to the local economy through new investment and job creation for
community residents.
NOW, THEREFORE, in consideration of the promises and respective
covenants, agreements and representations hereinafter set forth, the parties agree
as follows:
1. SOURCE OF LOAN FUNDS. City will utilize repayments of Urban
Development Action Grant loans to carry out its obligations under this Agreement.
2. LOAN TERMS. City agrees to loan to Company the amount of five
hundred thousand dollars ($500,000). The term of the loan shall be five (5) years.
Interest shall accrue at the rate of fifty percent (50%) of prime lending rate at
Mercantile Bank of Eastern Iowa at the time of disbursement, per annum ("Prime
Rate"). Payments of principal and interest shall be made monthly during the term
of the loan, with recalculation of payment after the second disbursement. At the
time of the initial disbursement of loan funds to Company, Company shall execute
its Promissory Note in the form attached hereto as Exhibit "A" payable to the order
of City in the principal amount of five hundred thousand dollars ($500,000). In the
event the Project is not completed by the Project Completion Date, Company shall
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Loan Agreement
McLeodUSA
Page 2
pay interest at on hundred percent (100%) of the Prime Rate from date of
disbursement to date of completion. Upon Completion of the Project, the interest
rate shall return to fifty percent (50%) of the Prime Rate.
3. DISBURSEMENT AND USE OF LOAN FUNDS. Loan funds shall be
disbursed to Company by City for Qualifying Project Expenses as follows:
$400,000 on July 1, 1998 and $100,000 on July 1, 1999. Company shall furnish
to City written request for disbursement of loan funds. Such request shall be
accompanied by a statement of Company's Qualifying Project Expenses and
appropriate documentation of such expenses. It is expressly understood that all
funds advanced under this Agreement shall be specifically earmarked and used by
Company only for the purpose of paying the Qualifying Project Expenses listed in
the applicable written request and as defined in Section 26(b).
4. SECURITY. This loan shall be secured by a first priority security interest
on any machinery and equipment purchased by Company with the proceeds of this
loan, the value of which shall not be less than the amount of the loan funds
dispersed for Qualifying Project Expenses.
5. STATUS OF COMPANY. Company represents that it is a corporation
duly organized and existing under the laws of the State of Iowa; that it is
authorized to borrow under this Agreement, to execute and deliver the notes and
otherwise perform the obligations of this Agreement; that it has corporate authority
and power to own its property and conduct its business as it is currently carried on;
that the performance of its obligations under this Agreement and the issuance of
any note under it will not conflict with any provision of law, the Articles of
Incorporation or the Bylaws of Company, or any agreement binding on it; and that,
except as disclosed in writing to City, it is not a party to any pending or threatened
litigation or to any proceeding or action for the assessment or collection of
additional taxes, and that it knows of no known contingent liabilities not provided
for or disclosed in the financial statement provided City. McLeodUSA and its
subsidiaries are not parties to any material litigation, except McLeodUSA Network
Services, Inc. is a party plaintiff in a tax appeal pending before the Iowa
Department of Revenue and Finance relating to the method of assessing and taxing
its fiber optic cable installed in the State of Iowa. McLeodUSA pays the taxes
under protest, and has filed an action for refund of such payments.
6. FINANCIAL CONDITION OF COMPANY. Company has delivered to City
a statement of Company's financial condition as of the date of application for
financial assistance which fairly represents the financial condition of Company as of
the date stated, prepared in accordance with generally accepted accounting
principles consistently applied, and that Company represents that the statements
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Loan Agreement
McLeodUSA
Page 3
still correctly reflect the financial condition and status of its operations as of the
date of this Agreement. Company agrees to notify City of any material change in
Company's financial condition.
7. TITLE OF COMPANY. Company represents that it has good and
marketable title, free of mortgage, pledge, lien, security interest, encumbrance, or
charge to all those assets acquired with the loan proceeds. Company represents
that it has good and marketable title to all those assets reflected on the financial
statement and to assets since acquired. Taxes not due or payable or otherwise
delinquent are excepted, as are assets disposed of in the ordinary course of
business or disclosed in writing to City.
8. CONDITIONS OF BORROWING. On the date on which any sum is to be
borrowed, Company, in addition to the Note, shall deliver to City such other papers
and documents as may be required to comply with the conditions of this
Agreement, as counsel for City may reasonably request.
Company shall be required at the closing date to comply, or establish
compliance, as follows:
(a) That the representations and warranties of Company are correct on
the closing date, as well as on the date of execution of this Agreement;
(b) That Company has fully complied with the covenants and
agreements to the extent required before the closing date;
(c) That no default or event which might mature into a default has
occurred or continues to the closing date;
(d) That no litigation or proceeding is pending against Company which
might result in any change in the business or adversely affect the properties of
Company, taking into account the entire assets and overall business of
Company;
(e) That since the date of execution of this Agreement and to the
closing date there has been no material adverse change in the financial
condition of Company from that shown by the financial statements delivered
to City under Section 6;
(f) That since the date of execution of this Agreement no fire or
casualty has occurred in any building or to any inventories or property of
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Loan Agreement
McLeodUSA
Page 4
Company that might substantially, adversely affect the conduct of its
business;
(g) That it will furnish to City on the closing date an opinion of
Company's counsel that Company is a corporation duly organized, existing
and in good standing under the laws of the State of Iowa; that it has
corporate power to own its properties and conduct the business in which it is
then engaged; that Company is not in violation of any law, ordinance or
regulation of any governmental authority as to its business, premises or
assets; that Company has full power to execute and deliver this Agreement,
to execute and deliver the Note that evidences the sum borrowed, to borrow
moneys under this Agreement, and to perform its obligations under this
Agreement and the Note; that such actions have been duly authorized by all
necessary corporate actions and are not in conflict with any agreement
binding on Company known to counsel; and that this Agreement and the
notes when executed and delivered by Company will be a valid and binding
obligation of Company in accordance with its terms.
9. COVENANTS OF COMPANY. Company covenants that until any sums
borrowed under this Agreement are paid in full, it will, unless City agrees in writing
to a modification or otherwise stated herein:
(a) Complete the Project, as defined in Section 26(a) hereof, by
January 1, 1999, subject to extension on a day for day basis in the event of
force majeure or other delay beyond the reasonable control of Company;
(b) Make the digital switching platform funded with the City Loan
available to other long distance service providers;
(c) Furnish City within ninety (90) days after the end of each fiscal
year with a copy of its annual report, which shall be prepared in conformity
with generally accepted accounting principles consistently applied, and, within
thirty (30) days after the end of each quarter of its fiscal year, a copy of its
financial statement similarly prepared and, from time to time, such other
financial information as City may reasonably request. City reserves the right
to request audited annual reports, certified by the accountants that supplied
the statements at the execution, or such other accountants satisfactory to
City as may be retained by Company, which shall be prepared in conformity
with generally accepted accounting principles consistently applied. Reports
shall be supplied at the expense of Company;
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Loan Agreement
McLeodUSA
Page 5
(d) Maintain insurance as set forth in the attached Insurance Schedule
and to the extent and against such hazards and liabilities as is in keeping with
the current insurance program of Company and in amounts at least equal to
the unpaid balance of this note plus all other secured indebtedness, and issued
by companies satisfactory to City with acceptable loss payee clauses in favor
of City. The policy of insurance shall include a proof of insurance provision
requiring written notice to City prior to cancellation;
(e) Pay when due all taxes, assessments and other liabilities, except
those contested in good faith where notice of such contest has been given to
City pursuant to Section 5 of this Agreement;
(f) Not create or permit to exist any mortgage, pledge, security
interest, lien or other encumbrance on the security for this Loan Agreement
provided in Section 4 above and the Note provided pursuant to this Loan
Agreement without written consent of City. City approval of such written
consent will not be unreasonably withheld;
(g) Not cause, suffer or permit any of its subsidiaries to do any of the
things prohibited to Company in this Agreement;
(h) Not relocate Company's Project operations outside the city limits of
the City of Dubuque;
(I) Give prompt notice in writing to City of any adverse development,
financial or otherwise, which would materially affect its business, properties
or affairs, or the ability of Company to perform its obligations under this
Agreement or the Promissory Note executed pursuant to the terms of this
Agreement;
(j) Use loan funds only for purposes authorized herein;
(k) Pay all fees, expenses and charges in respect to this Agreement or
its making in any way connected therewith including, but not limited to, legal
fees, abstract continuation, recording and filing fees, mortgage taxes,
documentary stamps, and any other taxes, fees and expenses payable in
connection with this transaction;
1 O. DEFAULT. Company shall be in default if:
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Loan Agreement
McLeod USA
Page 6
(a) It fails to pay any installment of principal or interest on any note
(whether to City or any other public or private lender) when due or within ten
(10) days thereafter;
(b) It becomes insolvent or admits in writing its inability to pay its
debts as they mature; or applies for, consents to or acquiesces in the
appointment of a trustee or received for any of its property; or in the absence
of an application for consent, or acquiescence, a trustee or receiver is
appointed for it or a substantial part of its property and is not discharged
within sixty (60) days; or it otherwise commits an act of bankruptcy; or any
bankruptcy, reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is
instituted by or against it and if instituted is consented to or acquiesced in by
it or remains for sixty (60) days undismissed;
(c) It fails in the performance of the terms and conditions of this
Agreement (other than the payment terms referred to in (a) above) and such
non-performance continues for thirty (30) days after notice thereof from City
or from the holder of a note;
(d) Any warranty made by Company is untrue in any material respect,
or any schedule, statement, report, notice or writing furnished by Company to
City is untrue in any material respect on the date as of which the facts set
forth are stated or certified;
(e) Any government board, agency, department, commission or public
or private lender takes possession or control of any substantial part of the
property of Company and such possession or control continues for ten (10)
days.
11. ACCELERATION AT OPTION OF CITY. If any default occurs, City may
declare the Note immediately due and payable, at which time all unpaid principal
shall immediately become due and payable. City shall promptly advise Company in
writing of any acceleration under this section, but the failure to do so shall not
impair the effect of such declaration.
12. MAINTENANCE OF RECORDS AND RIGHT TO INSPECT. Company will
keep and maintain all normal business books and records and all other documents,
invoices and receipts relating directly to the receipt and disbursement of loan funds;
and any duly authorized independent accounting representative of City shall at all
reasonable times have access to and the right to inspect, copy, audit and examine
all such books and other documents of Company pertaining to the Project until the
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Loan Agreement
McLeodUSA
Page 7
completion of all closeout procedures respecting City's loan and the final settlement
and conclusion of all issues arising out of said loan.
13. ADDRESS. Company's business address is:
McLeodUSA
McLeodUSA Technology Park
6400 C Street SW
P.O. Box 3177
Cedar Rapids, Iowa 52406-3177
Attention: Legal Department
Company shall promptly give City written notice of any further change in its
principal office address. City's address is:
Department of Community and Economic Development
City Hall
50 West 13th Street
Dubuque, IA 52001
14. ACCESS TO PROJECT. Company agrees that any duly authorized
representative of City shall at all reasonable times (with appropriate McLeodUSA
escort) have access to any portion of the Project until the completion of all closeout
procedures respecting this loan.
15. LIMITATION OF CITY'S LIABILITY FOR PROJECT ACTIVITIES. City
shall not be liable to Company, or to any party for the completion of, or the failure
to complete, any activities which are part of the Project, except as may be
specifically provided in this Agreement. Company agrees to indemnify, hold
harmless and defend City from any such claims against City for which liability is
limited hereunder.
16. CONFLICT OF INTEREST. Company agrees that no member, officer or
employee of City, or its designees or agents, nor any consultant or member of the
governing body of City, and no other public official of City who exercises or has
exercised any functions or responsibilities with respect to the Project during his or
her tenure, or who is in a position to participate in a decision making process or
gain inside information with regard to the Project, shall have any interest, direct or
indirect, in any contract or subcontract, or the proceeds thereof, for work to be
Loan Agreement
McLeod USA
Page 8
performed in connection with the Project, or in any activity, or benefit therefrom,
which is part of this Project at any time during or after such person's tenure.
17. NONDISCRIMINATION. In carrying out the Project, Company shall not
discriminate against any employee or applicant for employment because of race,
religion, color, sex, national origin, age or disability. Such action shall include, but
not be limited to, the following: employment upgrading, demotion or transfer;
recruitment or recruitment advertising; layoff or termination; rate of payor other
forms of compensation; and selection for training, including apprenticeship.
Company shall post in a conspicuous place, available to employees and applicants
for employment, notices to be provided by City setting forth the provisions of this
nondiscrimination clause. Company shall state that all qualified applicants will
receive consideration for employment without regard to race, religion, color, sex,
national origin, age or disability.
18. NO ASSIGNMENT OR SUCCESSION. Company acknowledges and
agrees that no transfer of loan funds by City to Company shall be deemed an
assignment of funds, and Company shall neither succeed to any rights, benefits or
advantages of City authorities.
19. DISCLAIMER OF RELATIONSHIPS. Nothing contained in this Agreement
between the parties, nor any act of City or Company shall be deemed or construed
by any of the parties, or by any third persons, to create any relationship of third
party beneficiary, principal or agent, limited or general partnership, or joint venture,
or of any association or relationship involving the United States.
20. NOTICE. Any notice, if mailed by United States certified mail, shall be
deemed given when mailed, postage prepaid, addressed to Company at its address
shown above, or at any other address subsequently designated to City by
Company.
21. SUCCESSORS AND ASSIGNS. All covenants, representations,
warranties and agreements herein set forth shall be binding upon the Company, and
its legal representatives, successors and assigns. This Agreement may not be
assigned by City or Company, without the express written consent of the other
party.
22. LEGALITY. If any provision of this Agreement shall, for any reason, be
held to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, but this Agreement shall be construed as if such
invalid or unenforceable provision had never been contained herein.
Loan Agreement
McLeodUSA
Page 9
23. GOVERNING LAW. This Agreement and all rights and duties hereunder,
including but not limited to, all matters of construction, validity and performance
shall be governed by the laws of the State of Iowa.
24. SURVIVAL OF REPRESENTATIONS. All representations or warranties of
Company shall survive the execution and delivery of this Agreement and any notes
executed and delivered under it, and no investigation by City nor any closing shall
affect the representations or warranties or the right of City to rely on and enforce
them.
25. DELAY. No delay on the part of City or the holder of any note in the
exercise of any right shall operate as a waiver, nor shall any single or partial
exercise of any right preclude other or additional exercise of any right.
26. DEFINITIONS.
(a) "Project" shall mean those activities to be carried out by Company
to install a digital switching platform in the City of Dubuque that will conform
to the general specifications of the Nortel DMS-500 local/long distance
switch, including ISDN and xDSL switched digital services.
(b) "Qualifying Project Expenses" shall mean those expenditures or
expenses incurred by Company during and for the Project, whether paid to
third parties or incurred as wage expense, fringe benefit expense or other
costs of Company's employees, agents and contractors.
IN WITNESS WHEREOF, City has caused this Loan Agreement to be executed
by the City Manager. The Company has executed this Loan Agreement in its
corporate name by its duly authorized officer. All of the above occurred as of
the 21st day of May , 1998.
CITY OF DUBUQUE, IOWA
MCLEODUSAINCORPORATED
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eodUSA APPROVED F (h<LhCe
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Exhibit A
PROMISSORY NOTE
McLeodUSA, Incorporated
Economic Development loan Program
Number: # -98
Value:
$500,000
FOR VALUE RECEIVED, McLeod USA, Inc., ("Company"). promises to pay to the order
of the CITY OF DUBUQUE, IOWA, a municipal corporation ("City"), the principal
amount of five hundred thousand dollars ($500,000) together with interest from the
date said monies are disbursed by City pursuant to the terms of the attached Loan
Agreement dated the day of , 1998, ("Loan Agreement") which
interest shall be at the rate of fifty percent (50%) of the prime lending rate at
Mercantile Bank of Eastern Iowa at the time of the initial disbursement, per annum.
In the event the Project is not completed by the Project Completion Date as defined
in the Loan Agreement, interest shall be at the rate of one hundred percent (1 00%) of
the prime lending rate at Mercantile Bank of Eastern Iowa at the time of the initial
disbursement, per annum from the date of disbursement to the date of Project
Completion.
All payments of principal and interest shall be made by Company at the times and in
the amounts as specified on the Amortization Schedule, labeled ATTACHMENT A,
attached to this Promissory Note, and by this reference made a part hereof. All
payments hereunder shall be made in lawful money of the United States at the
administrative offices of the Finance Department of City, or at such other place as City
may from time to time in writing designate.
Company may, from time to time, prepay all or any portion of the principal balance due
hereunder without penalty and without consent of City. All such payments of principal
shall be applied to principal installments in reverse order of maturity and which last
come due under the terms of this Promissory Note.
This Promissory Note is made, executed and delivered in accordance with and subject
to all of the terms and provisions of the Loan Agreement, entered into and between
Company, as borrower, and City, as lender, which is incorporated herein by reference.
This Promissory Note is secured by a first priority security interest on any machinery
and equipment purchased by Company with the proceeds of this loan the value of
which shall at all times be equal to or greater than the unpaid balance of the loan.
In the event of a default in payment of any interest or any installment of principal
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required hereunder, or in the event of occurrence of an act of default under Section 10
of the Loan Agreement or any mortgage or security agreement between the parties,
then written notice of said default shall be given by City to Company, and Company
shall have the time specified in such agreement if any is specified, to cure said default.
If default is not cured by Company within the time allowed, City may, at its option
declare the entire unpaid amount, including interest, to be immediately due and
payable. Principal and interest not paid when due shall draw interest at a rate of ten
percent (10%) per annum. Company agrees to pay all expenses of collection,
including reasonable attorney's fees, court costs, abstracting costs, storage costs,
costs of disposition of collateral, and any and all other related and incidental expenses
thereto, all of which shall first be deducted from the proceeds of sale or foreclosure.
In addition, the holder of this Note shall have all other rights and remedies as are
provided for under the Loan Agreement, or as are provided by law.
Makers, endorsers and sureties waive demand of payment, notice of nonpayment,
protest and notice thereof. Sureties, endorsers and guarantors agree to all of the
provisions of this Note and consent that the time or times for payment of all or any
part hereof may be extended after maturity, from time to time, without notice.
McLeodUSA. Incorporated
Date
Title
. ". _ . ~,." ~
INSURANCE SCHEDULE
1. Any policy of insurance or certificate of insurance required hereunder shall be
with a carrier authorized to do business in Iowa and a carrier that has received a rating
of A or better in the current Best's Rating Guide.
2. Any policy of insurance required hereunder shall provide for a thirty-day notice to
the City of any material change or cancellation of the policy prior to its expiration date.
3. Company shall have its insurance agent or company certify in writing that any
policy of insurance required herein with an aggregate limit of liability has not been
reduced by paid or reserved claims at the time of issuance of policy or certificate.
4. Company shall furnish copies of the following policies to the City with limits not
less than the following, or greater if required by law.
COMMERCIAL GENERAL LIABILITY:
General Aggregate Limit
Products-Completed Operation Aggregate Limit
Personal and Advertising Injury Limit
Each Occurrence Limit
Fire Damage Limit (and one occurrence)
Medical Payments
$2,000,000
$1,000,000
$1,000,000
$1,000,000
$ 50,000
$ 5,000
OR
Combined Single Limit
Medical Payments
$2,000,000
$ 5,000
Coverage is to include: occurrence form, premises/operations/products/competed
operations coverage, independent contractors' coverage, contractual liability, broad
form property damage, personal injury (hazards A-C and delete employment
exclusions), City of Dubuque named as an additional insured with 30 days' written
notice of change or cancellation.
PROPERTY INSURANCE
Company shall maintain property insurance at replacement value under a
Special Perils format, to secure indebtedness and issued by companies
satisfactory to City with Loss Payee clauses in favor of City. The insurance
policy shall include a proof of insurance provision requiring 3D-day written notice
to City prior to cancellation.
INDEMNIFICATION
Company further agrees that save, defend, hold harmless and indemnify City
from and against any and all claims made against City arising out of Company's
performance or nonperformance of any of the conditions or obligations of this
Agreement.
-=;', , (fA" SfATEB'fRASSOCIATION-
__ Otflf;111 F~r_m No.171 (Tr."M.I1l_..~I......d~~." of lowJl-,J~l
FOR THE LEGAL EFFECT OF THE USE OF
THIS FORM, CONSULT YOUR LAWYER
CAVEAT: DO NOT USE THIS FORM IF THIS TRANSACTION IS A CONSUMER CREDIT TRANSACTION
,iB.,
T.
SECURITY AGREEMENT - GENERAL FORM
1. GRANT OF SECURITY INTEREST. For value received, as security for the Obligations (as defined below) the undersigned Debtor hereby grants to
("Secured
Party") a security interest in the property described in the paragraphs checked below:
D All of Debtor's inventory now owned or hereafter acquired; . . . .
D All of Debtor's accounts, now existing or hereafter arising, together with alt interest of Debtor In any goods, the sale or lease of which give rise to
any of Debtor's accounts, and aU chattel paper, documents and instruments relating to accounts;
o All of Debtor's general intangibles, now owned or hereafter acquired;
o All of Debtor's equipment now owned or hereafter acquired;
o All of Debtor's farm products now owned or hereafter acquired;
o All of Debtor's fixtures on the real estate described in Paragraph 3 below;
o Property described as
together with the proceeds, products, increase, issue, accessions attachments, accessories, parts, additions, repairs, replacements and subst!tutes of, to,
and for all of the foregoing. Debtor will promptly deliver to Secured Party, duly endorsed when necessary, all such chattel paper, documents and Instruments
and related guaranties, now on hand or hereafter received.
All such property in which a security interest is granted is herein called the "Collateral."
2. OBLIGATIONS. The aforesaid security interests secure payment of the following liabilities (the "Obligations"):
together with all other obligations of Debtor to Secured Party now existing or hereafter arising, whether direct or indirect, conti~gent or absolute and ~hether ~s
maker or surety and including, but not limited to, future advances and amounts advanced and expenses and attorneys' fees Incurred pursuant to thiS Security
Agreement.
3. REAL ESTATE. Any collateral attached to, or grown upon, land (such as fixtures, crops, timber or minerals) will be grown upon or attached to the
following described real estate:
and the name of the record owner of such real estate (if other than Debtor) is:
4. COPY - FILING. A carbon, photocopy or other reproduction of this Security Agreement may be filed as a financing statement. IF FOR FIXTURES,
TIMBER OR MINERALS, SUCH A FILING SHALL BE FILED FOR RECORDING IN THE REAL ESTATE RECORDS.
5. DEBTORS. Each of the undersigned, if more than one, execute this Security Agreement as his, her, its, their joint and several obligation and it shall be
binding upon and fully enforceable a~ainst either or both, or any or all of them, and reference herein to "Debtor" shall in such case be deemed to be plural,
provided however that nothing contained herein shall extend personal liability under any of the Obligations as to which such Debtor is not otherwise liable.
6. COLLATERAL. Debtor represents, warrants and agrees:
a. All Collateral is bona fide and genuine and Debtor is authorized 10 grant a Security Interest in the Collateral, free and clear of all liens and
encumbrances, except the security interest created hereby and except
b. Debtor's principal place of operation is the address shown herein, and Debtor shall promptly give Secured Party written notice of any change
thereof, unless prior written consent of Secured Party is obtained. All Collateral and all of the Debtor's business records are now kept, and shall continue to be
kept, at such address, or if not, at
DATED:
19
THIS AGREEMENT SPECIFICALLY INCLUDES ALL OF THE ADDITIONAL PROVISIONS SET FORTH BELOW AND ON THE REVERSE SIDE HEREOF.
DEBTOR ACKNOWLEDGES RECEIPT OF A FULLY COMPLETED COPY OF THIS SECURITY AGREEMENT
(Debtor)
ADDRESS OF SECURED PARTY (FROM WHICH INFORMATION
CONCERNING THE SECURITY INTEREST MAY BE OBTAINED)
(Deblor)
Number and Street
Number and Street
City
City
County
State
County
State
1. REPRESENTATIONS AND AGREEMENTS. Debtor represents and agrees that:
a. If a corporation or other business entity, Debtor is duly or~anized, existing, and is qualified and in good standing in all states in which it is doing
business, and the execution, delivery and performance of this Security Agreement are within Debtor's powers, have been duly authorized, and are not in
contravention of law or the terms of Debtor's charter, bylaws, if any, or any indenture, agreement, or undertaking to which Debtor is a party, or by which it is
bound. If an individual, Debtor is of legal age. Debtor will not change his, her or its name, or identity unless written notice is given in advance to Secured Party.
b. Debtor shall maintain insurance upon the Collateral which is tangible property against all customarily insured risks for the full insurable value
thereof (and furnish Secured Party with duplicate policies if Secured Party so requests), loss 10 be payable to Debtor and Secured Party as their respective
interests may appear. In the event of any loss or damage to any Collateral, Debtor will give Secured Party written notice thereof forthwith, promptly file proof of
loss with the appropriate insurer and take all other steps necessary or appropriate to collect such insurance. If Secured Party so elects, Secured Party shall
have full authority to collect all such insurance and to apply any amount collected to amounts owed hereunder, whether or not matured. Secured Party shall
have no liability for any loss which may occur by reason of the omission or the lack of coverage of any such insurance.
c. Debtor shall at all times maintain Collateral which is tanQible property in good condition and repair, defend at Debtor's expense aU Collateral from
all adverse claims and shall not use any of the Collateral for any Illegal purpose.
d. Debtor shall (i) keep such books and records pertaining to the Collateral and to Debtor's business operations as shall be satisfactory to Secured
~.~rty; (i.i) permit representatives of Secured Party at any time to inspect the Collateral and inspect and make abstracts from Debtor's books and records; and
(Ill) furnish to Secured Party such information and reports regarding the Collateral and Debtor's business operations and its financial status, as Secured Party
may from time to time reasonably require. SECURED PARTY IS HEREBY AUTHORIZED TO REQUEST CONFIRMATION OF SUCH INFORMATION OR
ADDITIONAL INFORMATION OF ANY KIND WHATSOEVER DIRECTLY FROM ANY THIRD PARTY HAVING DEALINGS WITH DEBTOR. SECURED
PARTY IS FURTHER IRREVOCABLY AUTHORIZED TO ENTER DEBTOR'S PREMISES TO INSPECT THE COLLATERAL.
~. Debtor shall give such notice in writing (including but not limited to notice of assignment or notice to pay Secured Party directly) as Secured Party
may require at any time to any or all account debtors, with respect to accounts which are Collateral, and, if Secured Party shall so request, deliver to Secured
Party copies of any and all such notices.
111 SECURITY AGREEMENT
Current December, 1985
~ '-.
f. Debtor shall promptly transmit to Secured Party alt information that it may have or receive with respect to Collateral or with respect to any account
debtor which might in any way affect the value of the Collateral or Secured Party s rights or remedies with respect thereto.
g. Unless in default under this Agreement, Debtor may sell Inventory in the ordinary course of business and consume any raw materials or supplies,
the use and consumption of which are necessary to carry on Debtor's business. Debtor shall not otherwise consume, assign or transfer any Collateral without
prior written consent of Secured Party. The provision of this Agreement granting a security interest in proceeds shall not be construed to mean that Secured
Party consents to any sale or disposition of any Collateral.
h. Debtor shall pay when due all taxes, assessments, and any other governmental levy which is, or may be, levied against any Collateral, and shall
otherwise maintain the Collateral free of all liens, charges, and encumbrances (except liens set forth herein and the Security Interest created hereby).
i. Debtor shall not store any Collateral with any warehouseman without Secured Party's consent.
j. Debtor shall promptly, unless Secured Party shall waive such requirement in writing, deliver to Secured Party all certificates of title, if any, (or any
other documents evidencing title) to all Collateral with such proper notations, assignments or endorsements as may be necessary or appropriate to create,
preserve or perfect Secured Party's security interest in the Collateral.
k. Debtor shall, at its cost and expense, execute, deliver, file or record (in such manner and form as Secured Party may require) any assignment,
financing statement or other paper that may be necessary or desirable, or that Secured Party may request, in order to create, preserve or perfect any security
interest granted hereby or to enable Secured Party to exercise and enforce its rights hereunder or under any Collateral. Secured Party is further granted the
power, coupled with an interest, to sign on behalf of Debtor as attorney.in-fact and to file one or more financing statements under the Uniform Commercial
Code namin~ Debtor as debtor and Secured Party as secured party and describing the Collateral herein specified.
2. EXPENSES. Debtor upon demand shall pay to Secured Party forthwith the amounts of all expenses, including reasonable attorneys' fees and legal
expenses, incurred by Secured Party in seeking to collect any sums secured hereunder or to enforce any rights in the Collateral. Such amounts shall be
secured hereby, and if not paid on demand shall bear interest at the highest rate payable on any of the Obligations.
3. COLLECTION AUTHORITY ON ACCOUNTS. Debtor hereby irrevocably appoints Secured Party its true and lawful attorney, with full power of
substitution, in Secured Party's name, Debtor's name or otherwise, for Secured Party's sole use and benefit, but at Debtor's cost and expense, to exercise, if
Secured Party shall elect after an event of default has occurred (whether or not Secured Party then elects to exercise any other of its rights arising upon
default) all or any of the following powers with respect to all or any Accounts which are Collateral:
a. To execute on Debtor's behalf assignments of any or all Accounts which are Collateral to Secured Party, and to notify account debtors thereunder
to make payments directly to Secured Party;
b. To demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due upon or by virtue thereof;
c. To receive, take, endorse, assign and deliver any and all checks, notes, drafts, documents and other negotiable and non-negotiable instruments
and chattel paper taken or received by Secured Party in connection therewith;
d. To settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto;
e. To sell, transfer, assign or otherwise deal in or with the same or the proceeds thereof or the relative goods, as fully and effectually as if Secured
Party were the absolute owner thereof; and
f. To extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto.
Any funds collected pursuant to such powers shall be applied to the payment of the Obligations. The exercise by Secured Party of, or failure to so exercise, any
of the foregoing authority, shall in no manner affect Debtor's liability to Secured Party on any of the Obligations. Secured Party shall be under no obligation or
duty to exercise any of the powers hereby conferred upon it and it shall be without liability for any act or failure to act in connection with the collection of or the
preservation of any rights under any such accounts. Secured Party shall not be bound to take any steps necessary to preserve rights in any instrument or
chattel paper against prior parties.
4. SET OFF. In the event of default hereunder, Secured Party, at its option at anytime, and without notice to Debtor, may apply against the Obligations
any property of Debtor held by Secured Party. As additional security for payment of the Obligations, Debtor hereby grants to Secured Party a security interest
in any funds or property of Debtor now or hereafter in possession of Secured Party and with respect thereto Secured Party will have all rights and remedies
herein specified.
5. WAIVER. Debtor waives protest, notice of dishonor, and presentment of all commercial paper at any time held by Secured Party on which Debtor is in
any way liable, notice of non-payment at maturity of any account or chattel paper, and notice of any action taken by Secured Party except where notice is
expressly required by this Agreement or cannot by law be waived.
6. DEFAULT. Debtorwill be in default upon the occurrence of any of the following events: (a) failure to make the payment, when due and payable, of any
of the Obligations; (b) failure of the performance of any obligation or covenant contained or referred to herein; (c) any warranty, representation or statement
made or furnished to Secured Party by or on behalf of Debtor proves to have been false in any material respect when made or furnished; (d) any event which
results in the acceleration of the maturity of the indebtedness of Debtor or any guarantor or co-maker of any of the Obligations to others under any indenture,
agreement or undertaking; (e) loss, theft, damage, destruction or encumbrance to, or of, the Collateral or the making of any levy, seizure of attachment thereof
or thereon; (f) death of, dissolution of, termination of existence of, insolvency of, business failure of, appointment of a receiver of any part of the property of,
assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency law by or against, Debtor or any
guarantor or co-maker of any of the Obligations; (g) the occurrence or nonoccurrence of any event or events which causes the Secured Party, in good faith, to
deem itself insecure for any reason whatsoever.
In any such event Secured Party may at its option declare any or all of the Obligations to be due and payable and such sums shall then be due and payable
immediately, without notice or demand.
7. RIGHTS AND REMEDIES ON DEFAULT. After the occurrence of any event of default, Secured Party may exercise at any time and from time to time
any rights and remedies available to it under applicable law, including but not limited to the right to sell, lease of otherwise dispose of the Collateral, and the
rightto take possession of tha Collateral. FOR THAT PURPOSE SECURED PARTY MAY ENTER UPON ANY PREMISES ON WHICH THE COLLATERAL
OR ANY PART THEREOF MAY BE SITUATED AND REMOVE IT. Secured Party may require Debtor to assemble the Collateral and make it available at a
place to be designated by Secured Party which is reasonably convenient to both parties. If at the lime of repossession any of the Collateral contains other
personal property not included in the Collateral, Secured Party may take such personal property into custody and store it at the risk and expense of Debtor.
Debtor agrees to notify Secured Party within forty-eight (48) _ hours after repossession of the Collateral of any such other personal property claimed, and
failure to do so will release Secured Party and its representatives from any liability for loss or damage thereto. Any notice of intended disposition of any of the
Collateral required by law shall be deemed reasonable if such notice is given at least ten (10) _ days before the time of such disposition. Any proceeds of
any disposition by Secured Party of any of the Collateral may be applied by it to the payment of expenses in connection with the Collateral, including.but not
limited to repossession expenses and reasonable attorneys' fees and legal expenses, and any balance of such proceeds shall be then applied against the
Obligations and other amounts secured hereby in such order of application as Secured Party may elect.
8. GENERAL
a. Secured Party may, at its option, pay any tax, assessment, or other Governmental levy, or insurance premium or any other expense or char~e
relating to Collateral which is payable by Debtor (and not timely paid by it), and further may pay any filing or recording fees. Any amount or amounts so paid,
with interest thereon at the highest rate payable on any of the Obligations (from the date of payment until repaid) shall be secured hereby and shall be payable
upon demand.
b. Secured Party shall not be deemed to have waived any of its rights hereunder or under any other agreement, instrument or paper signed by
Debtor unless such waiver be in writing and signed by Secured Party. No delay or omission on the part of Secured Party in exercising any right shall operate as
a waiver of such right or any other right. A waiver on anyone occasion shall not be construed as a bar to, or waiver of, any right or remedy on any future
occasion.
c. Any notice, if mailed, shall be deemed given when mailed postage prepaid, addressed to Debtor at its address shown above, or at any other
address of Debtor appearing on Secured Parties' records.
d. Covenants, representations, warranties and agreements herein set forth shalf be binding upon Debtor, its legal representatives, successors an~
assigns. This Agreement may be assigned by Secured Party and all rights and privileges of Secured Party under this Agreement shall then inure to the benefit
of its successors and assigns. (Note: Perfection requires a filing of notice of assignment.)
e. If any provision of this Agreement shall be for any reason held to be invalid or unenforceable, s~~h invalidity or unenforcea~i1ity shall ':1ot effect any
other provision hereof, but this Agreement shall be construed as if such invalid or unenforceable prOVISion had never been contained herein.
f. If Debtor is a guarantor, endorser, co-maker, or an accommodation party with respect to the Obligations, Debtor hereby waives the bene~it of. any
and all defenses and claims of damage which are dependent upon Debtor's character as a party other. t~an the .maker. Each party to ~ny of the Obhgatlons
hereby consents to and waives notice of (1) any and all extensions (whether or not for longer than the anginal penod) granted as to the ttme of payment of any
or alt of the Obligations, and (2) any renewal of any or all of the Obligations.
g. This Agreement and all rights and duties hereunder, including but not limited to aU matters of construction, validity, and performance, shall be
governed by the law of Iowa.
h. Unless otherwise defined or the context otherwise requires, all terms used herein which are defined in the Iowa Uniform Commercial Code s~all
have the meanings therein stated. The rights and remedies herein conferred upon Secured Party shall be in addition to, and not in substitution or in derogaltOn
of, rights and remedies conferred by the Iowa Uniform Commercial Code and other applicable law.
i. All words and phrases used herein shall be construed as in the singular or plural number, and as masculine, feminine or neuter gender, as the
context may require.
j. Captions are inserted for convenience only and shall not be taken as altering the text.