Document:

ex10-1.htm

Exhibit 10.1

 

 

PROMISSORY NOTE

 

	
$1,500,000.00
	
    July 16, 2015

 

FOR VALUE RECEIVED, the undersigned, Art’s-Way Manufacturing Co., Inc., a Delaware corporation (“Borrower”), whose address for purposes of this Promissory Note (“Note”) is 5556 Highway 9, Armstrong, Iowa 50514, promises to pay to the order of U.S. Bank National Association (“Lender”), whose address for purposes of this Note is 405 Main Street, Ames, Iowa 50010, the sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS and 00/100 (51,500,000.00), together with interest on the principal balance of this Note at the Interest Rate (as defined in Par. 2 herein) in the amounts and in the manner set forth herein.

 

1.     TERM. The term of this Note shall commence on July 16, 2015 (the “Commencement Date”) and shall mature on May 1, 2016 (the “Maturity Date”).

 

2.     INTEREST. This Note shall accrue interest at a variable rate per annum equal to the prime rate announced by Lender and in effect from time to time (the “Interest Rate”), and shall commence on the Commencement Date. Notwithstanding, the Interest Rate under this Note shall not be less than three and five-tenths of a percent (3.5%) per annum. Interest on this Note shall be calculated on the basis of a 360-day year, counting each day as 1130th of a month, and each month as 1/12th of a year.

 

3.     DRAW FEATURE; DRAW CONDITIONS. Except as expressly provided herein, Lender shall make available to Borrower one or more Advances (as defined herein) during the period that begins on the Commencement Date and which ends on May 1, 2016, in an aggregate amount not to exceed the principal amount of this Note. As a condition to the disbursement of any Advance, Borrower shall, at least two (2) Business Days (as defined herein) prior to the requested disbursement date, deliver to Lender a written notice (the “Borrowing Notice”) setting out (a) that no default has occurred and is continuing; (b) the amount of the Advance (the “Advance Amount”); (c) the date on which the Advance is to be disbursed (the “Advance Disbursement Date”); (d) a copy of the Dealer’s Note related to the Advance (each, a “Dealer’s Note”); (e) a copy of the Security Agreement that secures the applicable Dealer’s Note (each, a “Dealer’s Security Agreement”); and (f) an identification of the equipment financed under the applicable Dealer’s Note. Upon receipt of the Borrowing Notice, Lender shall make available to Borrower on the Advance Disbursement Date the amount set out in the Borrowing Notice in immediately available funds.

 

For purposes of this Note, (i) the terms “Advance” or “Advances” shall mean each and every disbursement made hereunder by Lender to Borrower, (ii) the terms “Business Day” or “Business Days” shall mean a day other than Saturday, Sunday, or other day on which commercial banks in Ames, Iowa are authorized or required by law to close; and (iii) and the term “Advance Maturity Date” shall mean, with respect to each Advance, the earlier to occur of the date that is nine (9) months after the Advance Disbursement Date, the Maturity Date, or the date of the sale to a third party of the equipment identified in the Borrowing Notice related to each applicable Advance.

 

 

 

 

 

Lender is authorized to record on the grid attached hereto as Exhibit 1 each Advance made to Borrower and each payment or prepayment thereof. The entries made by Lender shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of Borrower therein recorded; provided, however, that the failure of Lender to record such payments or prepayments, or any inaccuracy therein, shall not in any manner affect the obligation of Borrower to repay (with applicable interest) the Advances in accordance with the terms of this Note.

 

4.     PAYMENT. Payments under this Note shall be made in the following manner:

 

	 	
(i)
	
Monthly, interest-only payments in amounts to be determined by Lender based on the then unpaid principal balance due under this Note and the Interest Rate shall be paid by Borrower to Lender on the 15th day of each month commencing August 15, 2015 and continuing to and until the Maturity Date;

 

	 	
(ii)
	
With respect to each Advance, the entire Advance Amount shall be paid by Borrower to Lender on the Advance Maturity Date.

 

	 	
(iii)
	
The entire remaining principal balance and accrued and unpaid interest under this Note shall be due and payable in full on the Maturity Date; and

 

	 	
(iv)
	
Any payment accruing under the provisions of this Note which may be due Lender which shall not be paid within ten (10) days after the date when due shall bear interest at ten percent (10%), per annum (the “Default Rate”).

 

Unless otherwise agreed or required by law, payments will be first applied to fees and expenses, including attorney fees, due to Lender hereunder, then unpaid interest, and any remaining amount to principal. Borrower may prepay the principal balance, in whole or in part, at any time without premium or penalty upon three (3) business days’ prior notice to Lender.

 

5.     DEFAULT. Borrower and this Note shall be in default upon the occurrence of any of the following: (a) Borrower fails to make any payment when due; (b) Borrower becomes insolvent; a receiver is appointed for any part of Borrower’s property and such receiver has not been removed or discharged within thirty (30) days of its appointment; Borrower makes an assignment for the benefit of creditors; or any proceeding is commenced either by or against Borrower under any bankruptcy or insolvency laws and such proceeding has not been vacated, discharged or stayed within thirty (30) days of the commencement of the proceeding; (c) a default or an event of default occurs under any document given to secure or guaranty this Note; (d) Borrower fails to provide Lender with an original Dealer’s Note within five (5) Business Days after an Advance Disbursement Date; or (e) Borrower fails to provide Lender, within five (5) Business Days after an Advance Disbursement Date, with adequate documentation related to the perfection of any and every security interest or lien created in favor of Borrower pursuant to a Dealer Security Agreement with respect to the equipment identified in the Borrowing Notice.

 

6.     SECURITY. This Note is secured by the following:

 

	 	
(i)
	
Pledge Agreement dated June I, 2014 between Ohio Metal Working Products/Art’s-Way, Inc. (“Ohio Metal”), as Assignor therein, and Lender (“Pledge Agreement-1”) (a copy of Pledge Agreement-I is attached hereto as Exhibit A and by this reference incorporated herein as if fully set forth);

 

 

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(ii)
	
Pledge Agreement dated May 1, 2013 between Art’s-Way Vessels, Inc. (“Vessels”), as Assignor therein, and Lender (“Pledge Agreement-2”) (a copy of Pledge Agreement-2 is attached hereto as Exhibit B and by this reference incorporated herein as if fully set forth);

 

	 	
(iii)
	
Pledge Agreement dated May 1, 2013 between Art’s-Way Scientific, Inc. (“Scientific”), as Assignor therein, and Lender (“Pledge Agreement-3’’) (a copy of Pledge Agreement-3 is attached hereto as Exhibit C and by this reference incorporated herein as if fully set forth);

 

	 	
(iv)
	
Pledge Agreement dated May 1, 2013 between Universal Harvester by Art’s-Way, Inc. (“UHAW”), as Assignor therein, and Lender (“Pledge Agreement-4”) (a copy of Pledge Agreement-4 is attached hereto as Exhibit D and by this reference incorporated herein as if fully set forth);

 

	 	
(v)
	
Business Security Agreement dated May 1, 2013 between Borrower, as Debtor therein, and Lender, as Bank therein (“Security Agreement-1”) (a true and accurate copy of Security Agreement-1 is attached hereto as Exhibit E and by this reference incorporated herein as if fully set forth);

 

	 	
(vi)
	
Business Security Agreement dated May 1, 2013 between Vessels, as Debtor therein, and Lender, as Bank therein (“Security Agreement-2”) (a true and accurate copy of Security Agreement-2 is attached hereto as Exhibit F and by this reference incorporated herein as if fully set forth);

 

	 	
(vii)
	
Business Security Agreement dated May 1, 2013 between Scientific, as Debtor therein, and Lender, as Bank therein (“Security Agreement-3”) (a true and accurate copy of Security Agreement-3 is attached hereto as Exhibit G and by this reference incorporated herein as if fully set forth);

 

	 	
(viii) 
	
Business Security Agreement dated May 1, 2013 between UHAW, as Debtor therein, and Lender, as Bank therein (“Security Agreement-4”) (a true and accurate copy of Security Agreement-4 is attached hereto as Exhibit H and by this reference incorporated herein as if fully set forth);

 

	 	
(ix)
	
Business Security Agreement dated October 25, 2013 between Ohio Metal, as Debtor therein, and Lender, as Bank therein (“Security Agreement-5”) (a true and accurate copy of Security Agreement-5 is attached hereto as Exhibit I and by this reference incorporated herein as if fully set forth);

 

	 	
(x)
	
Continuing Guaranty (Unlimited) dated May 1, 2013 between Vessels, as Guarantor therein, and Lender (“Guaranty-1”) (a copy of Guaranty-1 is attached hereto as Exhibit J and by this reference incorporated herein as if fully set forth);

 

 

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(xi)
	
Continuing Guaranty (Unlimited) dated May 1, 2013 between Scientific, as Guarantor therein, and Lender (“Guaranty-2”) (a copy of Guaranty-2 is attached hereto as Exhibit K and by this reference incorporated herein as if fully set forth);

 

	 	
(xii) 
	
Continuing Guaranty (Unlimited) dated May 1, 2013 between UHAW, as Guarantor therein, and Lender (“Guaranty-3”) (a copy of Guaranty-3 is attached hereto as Exhibit L and by this reference incorporated herein as if fully set forth);

 

	 	
(xiii) 
	
Continuing Guaranty (Unlimited) dated October 25, 2013 between Ohio Metal, as Guarantor therein. and Lender (“Guaranty-4”) (a copy of Guaranty-4 is attached hereto as Exhibit M and by this reference incorporated herein as if fully set forth); and

 

	 	
(xiv) 
	
Collateral Assignment of Dealer’s Notes and Security Agreements of even date herewith between Borrower, as Company therein, and Lender (the “Assignment”) (a copy of the Assignment is attached hereto as Exhibit N and by this reference incorporated herein as if fully set forth).

 

7.     LATE FEES. In the event that any payment required to be made pursuant to this Note is not made on or before ten (10) days from the date same is due, and if Lender shall not have theretofore declared a default hereunder, a late charge of five cents ($.05) for each dollar ($1.00) so overdue shall become immediately due and payable as liquidated damages for defraying expenses incident to handling such delinquent payment and by reason of failure to make prompt payment, and the same shall be deemed to be evidenced by this Note. In the event of the failure of Borrower to pay any such late charge within ten (10) days after demand, then the unpaid principal balance and accrued interest shall, at the option of Lender, become immediately due and payable without further notice and demand, such notice and demand being expressly waived, but in such event said late charge shall be voided and shall not be payable by Borrower nor receivable by Lender and the Default Rate interest shall be applicable.

 

8.     ACCELERATION. Time is of the essence hereof and it is expressly agreed that should default be made in the payment of any installment of principal or interest more than ten (10) days of the date when due under this Note, or if any other default shall occur, then the entire unpaid principal balance and accrued interest shall, at the option of Lender, become immediately due and payable, without further notice and demand, such notice and demand being expressly waived, anything contained herein or in any instrument now or hereafter securing this Note to the contrary notwithstanding. Said option shall continue until all such defaults have been cured.

 

9.     ATTORNEY’S FEES. Borrower agrees that if, and as often as, this Note is placed in the hands of an attorney for collection or to defend or enforce Lender’s rights hereunder or under any instrument securing payment hereof, whether suit be brought or not, Borrower will pay to Lender its reasonable attorneys’ fees and all court costs and other expenses incurred in connection therewith.

 

10.   WAIVERS. Borrower and all other persons who may become liable for all or any part of this obligation severally waive demand, presentment for payment, protest and notice of nonpayment. Said parties consent to any extension of time (whether one or more) of payment hereof, or release of any party liable for payment of this obligation. Any such extension or release may be made without notice to any party and without discharging said party’s liability hereunder.

 

 

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11.     NO WAIVER. Lender shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by Lender and then, only to the extent specifically set forth in the writing. A waiver with reference to one event shall not be construed as continuing or as a bar to or waiver of any right or remedy as to a subsequent event.

 

12.     REMEDIES. The remedies of Lender, as provided herein and in the documents hereinabove referenced, shall be cumulative and concurrent and may be pursued singularly, successively or together, at the sole discretion of Lender, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof.

 

13.     USURY. All agreements between Borrower and Lender as contained in this Note are expressly limited so that in no event whatsoever shall the amount paid or agreed to be paid to Lender exceeds the highest lawful rate of interest permissible under the laws of the State of Iowa. If, from any circumstances whatsoever, fulfillment of any provision of this Note or any other document securing the indebtedness, at the time performance of such provision shall be due, shall involve the payment of interest exceeding the highest rate of interest permitted by law which a court of competent jurisdiction may deem applicable hereto, then, ipso facto, the obligation to be fulfilled shall be reduced to the highest lawful rate of interest permissible under the laws of Iowa; and if for any reason whatsoever Lender shall ever receive as interest an amount which would be deemed unlawful, such interest shall be applied to the payment of the last maturing installment or installments of the principal indebtedness hereunder (whether or not then due and payable) and not to the payment of interest.

 

14.     NOTICE. Any notice or demand to be given under this Note (a “Notice”) shall be in writing and may be given by personal delivery, by facsimile transmission, by Electronic Transmission, by a nationally recognized overnight delivery service, or by United States mail, postage prepaid, sent certified or registered, and addressed to the addresses set forth herein, or to such other address as either party may hereafter designate in writing. A Notice shall be effective on receipt or refusal if by personal delivery or Electronic Transmission, the first business day after the deposit of such Notice with an overnight courier service by the time deadline for next business day delivery if by commercial courier and the earlier of actual receipt or refusal (which shall include a failure to respond to notification of delivery by the U.S. Postal Service) or three (3) business days following mailing if sent by U.S. Postal Service mail. By Notice complying with the foregoing, each party may from time to time change the address to be subsequently applicable to it for the purpose of the foregoing.

 

For purposes of this Note, “Electronic Transmission” means any process of communication not directly involving the physical transfer of paper that is suitable for the retention, retrieval, and reproduction of information by the recipient.

 

 

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15.     MISCELLANEOUS. This Note may not be amended or modified except by written agreement signed by Borrower and Lender. This Note shall be governed by and construed in accordance with the laws of the State of Iowa. The terms of this Note are severable, and if any provision, or the application of any provision shall be declared invalid or unenforceable, the remaining provisions and all other applications of such provisions shall remain in full force and effect, and shall not be impaired in any way. Any suit, action or proceeding arising out of or relating to this Note, or any action or proceeding to execute on or otherwise enforce any judgment arising out of an event of default or other default under this Note may be brought by Lender in the applicable federal district court or in the state court having jurisdiction for Story County, Iowa. Whenever used herein, the singular number shall include the plural, the plural the singular, and the words “Borrower” or “Lender” shall be deemed to include their successors and assigns.

 

THE PARTIES HERETO, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED ON OR ARISING OUT OF THIS AGREEMENT OR INSTRUMENT, OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR ACTION OF ANY PARTY HERETO. NO PARTY SHALL SEEK TO CONSOLIDATE BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY PARTY HERETO EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL PARTIES.

 

IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. BORROWER MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT. THIS NOTICE ALSO APPLIES TO ANY OTHER CREDIT AGREEMENTS (EXCEPT EXEMPT TRANSACTIONS) NOW IN EFFECT BETWEEN YOU AND THIS LENDER.

 

Borrower acknowledges receipt of a copy of this Note at the time of its execution.

 

 

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IN WITNESS WHEREOF, Borrower has executed this Note on the date set forth above.

 

ART’S-WAY MANUFACTURING CO., INC., Borrower

 

By:           /s/ Carrie Majeski

Carrie Majeski, President & CEO

 

 

STATE OF IOWA, COUNTY OF STORY, SS:

 

This record was acknowledged before me on this 16th day of July, 2015, by Carrie Majeski, as the President of Art’s-Way Manufacturing Co., Inc.

 

/s/ Brooke J Brewington

Notary Public in and for the State of Iowa 

My commission expires March 29, 2016

 

 

- 7 -ex10-2.htm

Exhibit 10.2

 

BUSINESS SECURITY AGREEMENT

 

This Business Security Agreement (“Agreement”) is made and entered into by the undersigned borrower, guarantor and/or other obligator/pledger (the “Debtor”) in favor of U.S. Bank M.A. (the “Bank”) as of the date set forth on the last page of this Agreement.

 

ARTICLE I. SECURITY INTEREST

 

1.1     Grant of Security Interest. Debtor hereby grants a security interest in and collaterally assigns the Collateral (defined below) to Bank to secure all of Debtor’s Obligations (defined below) to Bank. The intent of the parties hereto is that the Collateral secures all Obligations of Debtor to Bank, whether or not such Obligations exist under this Agreement or any other agreements, whether now or hereafter existing, between Debtor and Bank or in favor of Bank, including, without limitation, any note, any loan or security agreement, any lease, any mortgage, deed of trust or other pledge of an interest in real or personal property, any guaranty, any letter of credit or banker’s acceptance, any agreement for any other services or credit extended by Bank to Debtor even though not specifically enumerated herein, and any other agreement with Bank (together and individually, the “Loan Documents”).

 

1.2     “Collateral” means all of the following whether now owned or existing or hereafter acquired by Debtor (or by Debtor with spouse), wherever located (including all document, general intangibles, additions and accessions, spare and repair parts, special tools, replacements, returned or repossessed goods and books and records relating to the following; and all proceeds, supporting obligations and products of the following) [check all that apply]:

 

☒  All accounts, instruments, documents, chattel paper, general intangibles, contract rights, investment property (including any securities entitlements and/or securities accounts held by Debtor), certificates of deposit, deposit accounts, and letter of credit rights; and

 

☒  All inventory; and

 

☒  All equipment; and

 

☐  All fixtures; and

 

☐  Specific Collateral (the following, whether constituting instruments, chattel paper, general intangibles, equipment, accounts, inventory, fixtures or other collateral):   

 

 

 

 

In the event only the first three boxes are checked, Debtor acknowledges and agrees that the foregoing collateral description covers all assets (except fixtures) of Debtor. Bank may at any time and from time to time file financing and continuation statements and amendments thereto reflecting the same.

 

1.3     “Obligations” means all Debtor’s debts (except for consumer credit if Debtor is a natural person), liabilities, obligations, covenants, warranties, and duties to Bank and/or any affiliate of Bank (including, without limitation, any credit card debt, but specifically excluding any type of consumer credit), whether now or hereafter existing or incurred, whether liquidated or unliquidated, whether absolute or contingent, whether arising out of the Loan Documents or otherwise, and all other debts and obligations due Bank under any lease, agricultural, real estate or other financing transaction and regardless of whether such financing is related in time or type to the financing provided at the time of grant of this security interest, and regardless of whether such Obligations arise out of existing or future credit granted by Bank to any Debtor, to any Debtor and others, to others guaranteed, endorsed or otherwise secured by any Debtor or to any debtor-in-possession or other successor-in-interest of any Debtor, and including principal, interest, fees, expenses and charges relating to any of the foregoing.

 

 

 

 

 

1.4     Other Definitions. Unless otherwise defined, the terms set forth in this Agreement shall have the meanings set forth in the Uniform Commercial Code as adopted in the Loan Documents and as amended from time to time. The defined terms hereunder shall be interpreted in a manner most favorable to Bank.

 

ARTICLE II. WARRANTIES AND COVENANTS

 

In addition to all other warranties and covenants of Debtor under the Loan Documents which are expressly incorporated herein as part of this Agreement and while any part of the credit granted Debtor under the Loan Documents is available or any Obligations of Debtor to Bank are unpaid or outstanding, Debtor continuously warrants and agrees as follows:

 

2.1 Debtor’s Name, Location; Notice of Location Changes. Except as otherwise disclosed to Bank in writing, Debtor’s name and organizational structure have remained the same during the past five (5) years. Debtor will continue to use only the name set forth with Debtor’s signature unless Debtor gives Bank prior written notice of any change. Furthermore, Debtor shall not do business under another name nor use any trade name without giving ten (10) days prior written notice to Bank. Debtor will not change its status or organizational structure without the prior written consent of Bank. Debtor will not change its location or registration (if Debtor is a registered organization) to another state without prior written notice to Bank.

 

2.2 Status of Collateral. All Collateral is genuine and validly existing. Except for items of insignificant value or as otherwise reflected in writing by Debtor to Bank under a borrowing base or otherwise, (i) Collateral constituting inventory, equipment and fixtures is in good condition, not obsolete and is either currently saleable or usable; and (ii) Collateral constituting accounts, contract rights, notes, chattel paper and other third-party obligations to pay if sully enforceable in accordance with its terms and not subject to return, dispute, setoff, credit allowance or adjustment, except for discounts for prompt payment. Unless Debtor provides Bank with written notice to the contrary, Debtor has no notice or knowledge of anything that would impair the ability of any third-party obligor to pay any debt to Debtor when due.

 

2.3 Ownership; Maintenance of Collateral; Restrictions on Liens and Dispositions. Debtor is the sole owner of the Collateral free of all liens, claims, other encumbrances and security interests except as permitted in writing by Bank. Debtor shall: (i) maintain the Collateral in good condition and repair (reasonable wear and tear excepted), and not permit its value to be impaired; (ii) not permit waste, removal or loss of identity of Collateral; (iii) keep the Collateral free from all liens, executions, attachments, claims, encumbrances and security interest (other than Bank’s paramount security interest and those permitted in writing by Bank); (iv) defend the Collateral against all claims and legal proceedings by persons other than Bank; (v) pay and discharge when due all taxes, levies and other charges or fees upon the Collateral except for payment of taxes contested by Debtor in good faith by appropriate proceedings so long as no levy or lien has been imposed upon the Collateral; (vi) not lease, sell or transfer the Collateral to any party nor move it to any new location outside of the ordinary course of business; (vii) not permit the Collateral, without the consent of Bank, to become a fixture or an accession to other goods; (viii) not permit the Collateral to be used in violation of any applicable law, regulation or policy of insurance; and, (ix) as to the Collateral consisting of instruments and chattel paper, preserve Bank’s rights in it against all other parties. Notwithstanding the above, Debtor may sell, lease or transfer inventory in the ordinary course of its business provided that no sale, lease or transfer shall include any transfer or sale in satisfaction (partial or complete) of a debt owed by Debtor; title will not pass to buyer until Debtor physically delivers the goods to buyer or Debtor ships the goods F.O.B. to buyer’s destination; and sales and/or leases to Debtor’s affiliates shall be for fair market value, cash on deliver, with the proceeds remitted to Bank.

 

2.4 Maintenance of Security Interest; Purchase Money Security Interests. Debtor shall take any action requested by Bank to preserve the Collateral and to establish the value of, the priority of, to perfect, to continue the perfection of or to enforce Bank’s interest in the Collateral and Bank’s rights under this Agreement; and shall pay all costs and expenses related thereto. Debtor shall also cooperate with Bank in obtaining control (for purposes of perfection under the Uniform Commercial Code) of Collateral consisting of deposit accounts, investment property, letter of credit rights, electronic chattel paper and any other collateral where Bank may obtain perfection through control. Debtor hereby authorizes Bank to take any and all actions described above and in place of Debtor with respect to the Collateral and hereby ratifies any such actions Bank has taken prior to the date of this Agreement and hereafter, which actions may include, without limitation, filing UCC financing statements and obtaining or attempting to obtain control agreements from holders of the Collateral. Debtor an Bank intend to maintain the full effect of any purchase money security interest granted in favor of Bank notwithstanding the fact that the Collateral so purchased is also pledged as security for other Obligations under the Loan Documents.

 

 

 

 

 

2.5 Collateral Inspections; Modifications and Changes in Collateral. At reasonable times, Bank may examine the Collateral and Debtor’s records pertaining to it, wherever located, and make copies of such records at Debtor’s expense; and Debtor shall assist Bank in so doing. Without Bank’s prior written consent, Debtor shall not alter, modify, discount, extend, renew or cancel any Collateral, except for ordinary discounts for prompt payment on accounts, physical modifications to the inventory occurring in the manufacturing process or alterations to equipment which do not materially affect its value. Debtor shall promptly notify Bank in writing of any material change in the condition of the Collateral and of any change in location of the Collateral.

 

2.6 Collateral Records, Reports and Statement. Debtor shall keep accurate and complete records respecting the Collateral in such form as Bank may approve. At such times as Bank may require, Debtor shall furnish to Bank any records/information Bank might require, including, without limitation, a statement certified by Debtor and in such form and containing such information as may be prescribed by Bank showing the current status and value of the Collateral.

 

2.7 Chattel Paper, Instruments, Etc. Chattel paper, instruments, drafts, notes, acceptances, and other documents which constitute Collateral shall be on forms satisfactory to Bank. Debtor shall promptly mark chattel paper to indicate conspicuously Bank’s security interest therein, shall not deliver any chattel paper or negotiable instruments to any other entity and, upon request, shall deliver all original chattel paper, instruments, drafts, notes, acceptances and other document which constitute Collateral to Bank.

 

2.8 United States Government Contracts. If any accounts or contract rights arose out of contracts with the United States or any of its departments, agencies or instrumentalities, Debtor shall promptly notify Bank and execute any writings required by Bank so that all money due or to become due under such contracts shall be assigned to Bank under the Federal Assignment of Claims Act.

 

2.9 Environmental Matters. Except as disclosed in a written schedule attached to this Agreement (if no schedule is attached, there are no exceptions), there exists no uncorrected violation by Debtor of any federal, state or local laws (including statutes, regulations, ordinances or other governmental restrictions and requirements) relating to the discharge of air pollutants, water pollutants or process waste water or otherwise relating to the environment or Hazardous Substances as hereinafter defined, whether such laws currently exist or are enacted in the future (collectively “Environmental Laws”). The term “Hazardous Substances” shall mean any hazardous or toxic wastes, chemicals or other substances, the generation, possession or existence of which is prohibited or governed by any Environmental Laws. Debtor is not subject to any judgment, decree, order or citation, or a party to (or threatened with) any litigation or administrative proceeding, which asserts that Debtor (i) has violated any Environmental Laws; (ii) is required to clean up, remove or take remedial or other action with respect to any Hazardous Substances (collectively “Remedial Action”); or (iii) is required to pay all or a portion of the costs of any Remedial Action, as a potentially responsible party. There are not now, nor to Debtor’s knowledge after reasonable investigation have there ever been, any Hazardous Substances (or tanks or other facilities for the storage of Hazardous Substances) stored, deposited, recycled or disposed of on, under or at any real estate owned or occupied by Debtor during the periods that Debtor owned or occupied such real estate, which if present on the real estate or in soils or ground water, could require Remedial Action. To Debtor’s knowledge, there are no proposed or pending changes in Environmental Laws which would adversely affect Debtor or its business, and there are no conditions existing currently or likely to exist while the Loan Documents are in effect which would subject Debtor to Remedial Action or other liability. Debtor currently complies with and will continue to timely comply with all applicable Environmental Laws; and will provide Bank, immediately upon receipt, copies of any correspondence, notice, complaint, order or other document from any source asserting or alleging any circumstance or condition which requires or may require a financial contribution by Debtor or Remedial Action or other response by or on the part of Debtor under Environmental Laws, or which seeks damages or civil, criminal or punitive penalties from Debtor for an alleged violation of Environment Laws.

 

 

 

 

 

2.10 Insurance. Debtor will maintain insurance to such extent, covering such risks and with such insurers as is usual and customary for businesses operating similar properties, and as is satisfactory to Bank, including insurance for fire and other risks insured against by extended or comprehensive coverage, public liability insurance and workers’ compensation insurance; and will designate Bank as loss payee with a “Lender’s Loss Payable” endorsement on any casualty policies and take such other action as Bank may reasonably request to ensure that Bank will receive (subject to no other interests) the insurance proceeds of the Collateral. Debtor hereby assigns all insurance proceeds to and irrevocably directs, while any Obligations remain unpaid, any insurer to pay to Bank the proceeds of all such insurance and any premium refund; and authorizes Bank to endorse Debtor’s name to conduct the same, to make, adjust or settle, in Debtor’s name, any claim on any insurance policy relating to the Collateral; and, at the option of Bank, to apply such proceeds and refunds to the Obligations or to restoration of the Collateral, returning any excess to Debtor. In the event of any failure of the Debtor to obtain or maintain any insurance required hereunder, the Bank shall have the authority, but not the obligation, to obtain any such insurance coverage, and the Debtor shall immediately reimburse the Bank for the cost thereof, together with interest on such amount at the highest rate of interest then accruing on any of the Obligations.

 

ARTICLE III. RIGHTS AND DUTIES OF BANK

 

In addition to all other rights (including setoff) and duties of Bank under the Loan Documents which are expressly incorporated herein as a part of this Agreement, the following provisions shall also apply:

 

3.1 Authority to Perform for Debtor. Debtor presently appoints any officer of Bank as Debtor’s attorney-in-fact (coupled with an interest and irrevocable while any Obligations remain unpaid) to do any of the following upon default by Debtor hereunder (notwithstanding any notice requirements or grace/cure periods under this or other agreements between Debtor and Bank): (i) to file, endorse or place the name of Debtor on any invoice or document of title relating to accounts, drafts against customers, notices to customers, notes, acceptances, assignments of government contracts, instruments, financing statements, checks, drafts, money orders, insurance claims or payments or other documents evidencing payment or a security interest relating to the Collateral; (ii) to receive, open and dispose of all mail addressed to Debtor and to notify the Post Office authorities to change the address for delivery of mail addressed to Debtor to an address designated by Bank; (iii) to do all such other acts and things necessary to carry out Debtor’s duties under this Agreement and the other Loan Documents; and (iv) to perfect, protect and/or realize upon Bank’s interest in the Collateral. If the collateral includes funds or property in depository accounts, Debtor authorizes each of its depository institutions to remit to Bank, without liability to Debtor, all of Debtor’s funds on deposit with such institution upon written direction by Bank after default by Debtor hereunder. All acts by Bank are hereby ratified and approved, and Bank shall not be liable for any acts of commission or omission, nor for any errors of judgment or mistakes of fact or law.

 

3.2 Verification and Notification; Bank’s Rights. Bank may verify Collateral in any manner, and Debtor shall assist Bank in so doing. Upon the occurrence of a default hereunder, Bank may at any time and Debtor shall, upon request of Bank, notify the account debtors to make payment directly to Bank; and Bank may enforce collection of, sell, settle, compromise, extend or renew the indebtedness of such account debtors; all without notice to or the consent of Debtor. Until account debtors are so notified, Debtor, as agent of Bank, shall make collections on the Collateral. Bank may at any time notify any bailee possessing Collateral to turn over the Collateral to Bank.

 

3.3 Collateral Preservation. Bank shall use reasonable care in the custody and preservation of any Collateral in its physical possession but in determining such standard of reasonable care, Debtor expressly acknowledges that Bank has no duty to: (i) insure the Collateral against hazards; (ii) ensure that the Collateral will not cause damage to property or injury to third parties; (iii) protect it from seizure, theft or conversion by third parties, third parties’ claims or acts of God; (iv) give to Debtor any notices received by Bank regarding the Collateral; (v) perfect or continue perfection of any security interest in favor of Debtor; (vi) perform any services, complete any work-in-process or take any other action in connection with the management or maintenance of the Collateral; or (vii) sue or otherwise effect collection upon any accounts even if Bank shall have made a demand for payment upon individual account debtors. Notwithstanding any failure by Bank to use reasonable care in preserving the Collateral, Debtor agrees that Bank shall not be liable for consequential or special damages arising therefrom.

 

3.4 Setoff. As additional security for the payment of the Obligations, Debtor hereby grants to Bank a security interest in, a lien on and an express contractual right to set off against all depository account balances, cash and any other property of Debtor now or hereafter in the possession of Bank and the right to refuse to allow withdrawals from any account (collectively “Setoff”). Bank may, at any time upon the occurrence of a default hereunder (notwithstanding any notice requirements or grace/cure periods under this or other agreements between Debtor or Borrower and Bank), Setoff against the Obligations whether or not the Obligations (including future installments) are then due or have been accelerated, all without any advance or contemporaneous notice or demand of any kind to Debtor, such notice and demand being expressly waived.

 

 

 

 

 

ARTICLE IV. DEFAULTS AND REMEDIES

 

4.1 Defaults. Bank may enforce its rights and remedies under this Agreement upon default. A default shall occur if Debtor fails to comply with the terms of any Loan Documents (including this Agreement or any guaranty by Debtor), a demand for payment is made under a demand loan, or any other obligor fails to comply with the terms of any Loan Documents for which Debtor has given Bank a guaranty or pledge.

 

4.2 Cumulative Remedies; Notice; Waiver. In addition to the remedies for default set forth in the Loan Documents, Bank upon default shall have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and this Agreement, including, without limitation, the right to repossess, render unusable and/or dispose of the collateral without judicial process. The rights and remedies specified herein are cumulative and are not exclusive of any rights or remedies which Bank would otherwise have. With respect to such rights and remedies;

   

	 	(a)	Assembling Collateral; Storage; Use of Debtor’s Name/Other Property. Bank may require Debtor to assemble the Collateral and to make it available to Bank at any convenient place designated by Bank. Debtor recognizes that Bank will not have an adequate remedy in Law if this obligation is breached and accordingly, Debtor’s obligation to assemble the Collateral shall be specifically enforceable. Bank shall have the right to take immediate possession of said Collateral and Debtor irrevocable authorizes Bank to enter any of the premises wherever said Collateral shall be located, and to store, repair, maintain, assemble, manufacture, advertise and sell, lease or dispose of (by public sale or otherwise) the same on said premises until sold, all without charge or rent to Bank. Bank is hereby granted an irrevocable license to use, without charge, Debtor’s equipment, inventory, labels, patents, copyrights, franchises, names, trade secrets, trade names, trademarks and advertising matter and any property of a similar nature; and Debtor’s rights under all licenses and franchise agreements shall inure to Bank’s benefit. Further, Debtor releases Bank from obtaining a bond or surely with respect to any repossession and/or disposition of the Collateral. 

 

	 	
(b)
	
Notice of Disposition. Written notice, when required by law, sent to any address of Debtor in this Agreement, at least five (5) calendar days (counting the day of pending) before the date of a proposed disposition of the Collateral is reasonable notice but less notice may be reasonable under the circumstances. Notification to account debtors by Bank shall not be deemed a disposition of the Collateral. Notice of any record shall be deemed delivered when the record has been (a) deposited in the United States Mail, postage pre-paid, (b) received by overnight delivery service, (c) received by telex, (d) received by telecopy, (e) received through the internet, or (f) when personally delivered.

 

	 	(c)	Possession of Collateral/Commercial Reasonableness. Bank shall not, at any time, be obligated to either take or retain possession or control of the Collateral. With respect to Collateral in the possession or control of Bank, Debtor and Bank agree that as a standard for determining commercial reasonableness, Bank need to liquidate, collect, sell or otherwise dispose of any of the Collateral if Bank believes, in food faith, that disposition of the Collateral would not be commercially reasonable, would subject Bank to third-party claims or liability, that other potential purchasers could be attracted or that a better price could be obtained if Bank held the Collateral for up to 2 years. Bank may sell Collateral without giving any warranties and may specifically disclaim any warranties of title or the like. Furthermore, Bank may sell the Collateral on credit (and reduce the Obligations only when payment is received from the buyer), at wholesale and/or with or without an agent or broker; and Bank need not complete, process, repair, clean-up or otherwise prepare the Collateral Prior to disposition. If the purchaser fails to pay for the Collateral, Bank may resell the Collateral and Debtor shall be credited with the cash proceeds of the sale. Bank may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

 

 

 

 

 

	 	
(d)
	
Waiver by Debtor. Bank has no obligation and Debtor waives any obligation to attempt to satisfy the Obligations by collecting the obligations from any third parties and Bank may release, modify or waive any collateral provided by any third party to secure any of the Obligations, all without affecting Bank’s rights against Debtor. Debtor further waives any obligation on the part of Bank to marshal any assets in favor of Debtor or in payment of the Obligations. Notwithstanding any provisions in this Agreement or any other agreement between Debtor and Bank, Debtor does not waive any statutory rights except to the extent that the waiver thereof is permitted by law.

 

	 	
(e)
	
Waiver by Bank. Bank may permit Debtor to attempt to remedy any default without waiving its rights and remedies hereunder, and Bank may waive any default without waiving any other subsequent or prior default by Debtor. Furthermore, delay on the part of Bank in exercising any right, power or privilege hereunder or at law shall not operate as a waiver thereof, nor shall any single or partial exercise of such right, power or privilege preclude other exercise of any other right, power or privilege. No waiver or suspension shall be deemed to have occurred unless Bank has expressly agreed in writing specifying such waiver or suspension.

 

ARTICLE V. MISCELLANEOUS

 

All other provisions in the Loan Documents are expressly incorporated as a part of this Agreement.

 

5.1 Deposit with Bank. At any time upon default, Bank may require that all proceeds of Collateral received by Debtor shall be held by Debtor upon an express trust for Bank, shall not be commingled with any other funds or property of Debtor and shall be turned over to Bank in precisely the form received (but endorsed by Debtor, if necessary for collection) not later than the business day following the day of their receipt. All proceeds of Collateral received by Bank directly or from Debtor shall be applied against the Obligations in such order and at such times as Bank shall determine.

 

5.2 Attachments. All documents attached hereto, including any appendices, schedules, riders, and exhibits to this Agreement, are hereby expressly incorporated by reference.

 

 

 

 

 

 

 

  

IN WITNESS WHEREOF, the undersigned has/have executed this BUSINESS SECURITY AGREEMENT as October 25, 2013.

	 	.
	 	Ohio Metal Working Products/Art's-Way
	
(Individual Debtor)
	
Debtor Name (Organization)

 

	
 
	
 
	a	 Ohio Corporation

 

	
Debtor Name  
	 N/A	 	
Name and Title
	 Carrie L Majeski, Secretary

 

	
 
	 	By	
 /s/ Carrie Majeski

 

	
Debtor Name 
	 N/A	 	
Name and Title
	 Carrie L Majeski

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