Agenda - Economic Development Authority - 09/08/2004

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PAGE 5 If requested, an appraisal should be submitted establishing the value of all collateral that will be pledged with an analysis of the life and value of the assets. If an appraisal is secured by the city or the EDA, the cost of the appraisal is the responsibility of the applicant. A security interest will be taken by the city on real or personal property pledged. The city may subordinate its interest in the collateral to other lenders. At no time is a loan to be granted which exceeds eighty percent of the unencumbered collateral that is to be secured. For example: Ifa project's aggregate is $40,000.00, the maximum lendable amount from the RLF is $20,000.00. But if the total amount of collateral that can be used to secure the loan is only $15,000.00, the maximum allowable amount that can be lent is $12,000.00, because that total is eighty percent of the secured collateral. Also: If a project's aggregate cost is $40,000.00, the maximum lendable amount from the revolving loan fund is $20,000.00. But if the total amount of collateral is $35,000.00. the maximum allowable amount that can be lent is $20,000.00 because the policy requires that only 50% of the aggregate cost of the project can be lent. Quickly depreciating assets in use and value should not be used as security, unless those assets are secured along with other collateral. It is recommended that the minimum life of any collateral be no less than seven (7) years. The EDA will make periodic inspections of the business and may require an inventory of the collateral be provided to the EDA. In the event that the EDA feels they are in an insecure position in relationship of the loan to the collateral, the EDA may request additional collateral be pledged. All loan funds that are to be disbursed must be supported by paid receipts. The applicant will agree to promptly notify the EDA of any change in the location of the collateral and would agree not to sell, lease, offer to lease or transfer the collateral in any way without prior consent of the EDA. The applicant will keep the collateral insured at all times and safe from damage and theft and will pay promptly taxes and/or any debt to which the collateral is secured. The applicant will pay a delinquency and collection charge on each installation in default (failure to pay within 10 days of due date) in the amount of $5.00 of each installment in default, plus reasonable costs of collection including attorneys fees. An applicant will be considered in default under the agreement upon occurrence of any of the following events: (a) default in the payment of any obligation, (b) giving false information to the EDA or City, (c) loss, theft, substantial damage, destruction, sale, or encumbrances to any of the collateral, (d) death, dissolution, termination of existence, insolvency, business failure, appointment of a receiver of any part of the property, or assignment for the benefit of creditors by applicant, or (e) other conditions that may be imposed by the City.