1
EXHIBIT 10.27
CREDIT AND SECURITY AGREEMENT
AGREEMENT made this 1st day of April, 1999, IntraNet Solutions, Inc., a
Minnesota corporation (herein called "Borrower"), for the benefit of Diversified
Business Credit, Inc., a Minnesota corporation (herein, with its participants,
successors and assigns, called "Lender").
RECITALS
Borrower has requested that Lender make loans to Borrower from time to
time at Lender's sole discretion and, in connection therewith, has executed and
delivered for Lender's benefit the following security documents (herein called
the "Security Documents"):
1. UCC Financing Statements
2. Various ancillary and supplemental agreements and documents
executed and delivered in connection with the foregoing.
This Agreement sets forth certain additional obligations undertaken by Borrower
to induce Lender to make such loans.
ACCORDINGLY, to induce Lender to make one or more loans to Borrower,
and for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower hereby represents, warrants and agrees for the
benefit of Lender that:
1. THE LOANS. Lender shall not be obligated to make any loans to
Borrower. All loans which Lender may determine to make under this Agreement
shall be repayable on demand. Borrower will comply with the following procedure
in requesting loans from Lender:
(a) Borrower will request loans from Lender in such manner as Lender
may from time to time prescribe.
(b) Lender may make loans in any amount and in any manner requested
orally or in writing (i) by any officer of Borrower; or (ii) by any
person designated as Borrower's agent by any officer of Borrower in a
writing delivered to Lender; or (iii) by any person reasonably believed
by Lender to be an officer of Borrower or such a designated agent.
Except as otherwise instructed in writing by such officer, agent or
person, Lender may disburse loan proceeds by deposit with any bank to
or for the account of Borrower or to or for the account of any third
party designated by such officer, agent or person, or by an instrument
payable to Borrower or to any such third party, or in any other manner
deemed appropriate by Lender. All principal of and interest on loans
made by Lender shall be repayable at the offices of Lender in
Minneapolis, Minnesota, unless Lender designates a different place of
payment by written notice to Borrower.
2
(c) Lender may make loans on the basis of Collateral available
hereunder and under the Security Documents or any other basis deemed
appropriate by Lender from time to time. Lender may change from time to
time, at its sole discretion and without notice to Borrower, the
standards, criteria and formulae used by Lender in determining the type
and amount of Collateral eligible for advance. In any event, subject to
change at Lender's discretion, Borrower shall not request loans on the
basis of the following Collateral:
(1) Accounts receivable which are (i) disputed or
subject to claims or setoffs; or (ii) progress xxxxxxxx; or
(iii) owed by an account debtor not located in the United
States or Canada and not secured by a bank letter of credit
satisfactory to Lender in its sole discretion; or (iv) owed by
an account debtor which is the subject of any bankruptcy or
insolvency proceeding or is insolvent or has made an
assignment for the benefit of creditors or has failed or
suspended or gone out of business.
(2) Collateral which is not as warranted herein or in
the Security Documents.
(3) Collateral which Lender, in its discretion, has
declared ineligible collateral by written notice to Borrower.
(4) Accounts receivable not paid within 90 days after
invoice or, if Lender in its discretion has determined that a
particular dated receivable is eligible for advance, within 30
days after the due date stated.
(5) Accounts receivable owed to Borrower by any
shareholder, subsidiary or affiliate of Borrower or by any
person or company obligated to pay any receivable deemed
ineligible under clauses (1) through (4), if such ineligible
receivable is 10% or more of the total amount due from such
person or company.
Notwithstanding any apportionment, exclusion or segregation of
collateral made by Lender for purposes of determining the amount or
maximum amount of loans made to Borrower, all rights and interests of
Lender hereunder and under the Security Documents, and all other
collateral rights, interests and properties available to Lender, shall
secure and may be applied to pay any or all indebtedness of Borrower
secured thereby, in any manner or order of application and without
regard to any such apportionment, exclusion or segregation.
(d) Borrower will pay interest on all outstanding loans under this
Agreement at an annual rate (computed on the basis of actual days
elapsed in a 360-day year) which
- 2 -
3
shall at all times be equal to the greater of (i) seven percent (7.0%)
per annum, or (ii) two percent (2.0%) above the rate of interest
publicly announced by National City Bank of Minneapolis from time to
time as its base rate (or any similar successor rate), each change in
the interest rate to take effect simultaneously with the corresponding
change in the designated bank's base rate or any similar successor
rate; provided that in no event shall the Borrower pay interest at a
rate greater than the highest rate permitted by law. All interest shall
accrue on the principal balance outstanding from time to time and shall
be payable on the first day of the next month in which accrued and in
any event on demand. Borrower agrees that Lender may at any time or
from time to time, without further request by Borrower, make a loan to
Borrower, or apply the proceeds of any loans, for the purpose of paying
all such interest promptly when due. In the computation of interest,
Lender may allow three (3) banking days for the collection of
uncollected funds. Notwithstanding anything to the contrary stated
herein, the interest charges payable pursuant to this subparagraph 1(d)
for each twelve month period shall never be less than $50,000.00. If
for any twelve month period, the interest pursuant to subparagraph 1(d)
shall be less than $50,000.00, Borrower shall pay on the anniversary
date of this Agreement ending each twelve months the amount of the
difference between $50,000.00 and the interest charges for such twelve
month period.
(e) In addition to any other amounts payable by Borrower to Lender,
Borrower agrees to pay to the Lender on the date of this Agreement and
on each anniversary date, so long as Lender, in its sole discretion, is
willing to make loans to Borrower for ordinary working capital purposes
subject to the availability of Collateral deemed eligible by Lender, an
annual fee equal to the greater of $22,500.00 or one percent (1.0%) of
the maximum amount that the Lender may loan to Borrower during the
twelve (12) months following such payment, provided, however, payment
of such fee does not obligate Lender to make any loans to Borrower, and
Lender, in its sole discretion, shall determine if it will make loans
and the amounts of any such loans pursuant to the terms of Paragraphs
1(a) through 1(h).
(f) Lender may maintain from time to time, at its discretion,
liability records as to any and all loans made or repaid and interest
accrued or paid under this Agreement. All entries made on any such
record shall be presumed correct until Borrower establishes the
contrary. On demand by Lender, Borrower will admit and certify in
writing the exact principal balance which Borrower then asserts to be
outstanding to Lender for loans under this Agreement. Any billing
statement or accounting rendered by Lender shall be conclusive and
fully binding on Borrower unless specific written notice of exception
is given to Lender by Borrower within 30 days after its receipt by
Borrower.
(g) Borrower's obligations with respect to all loans shall be fully
binding and enforceable without any note or other evidence of
indebtedness. Nevertheless, if Lender so requests, Borrower will duly
execute and deliver to Lender a promissory note
- 3 -
4
negotiable in form payable on demand to the order of Lender in a
principal amount equal to the principal balance then outstanding to
Lender for loans under this Agreement, together with interest as set
forth in Paragraph 1(d).
(h) In requesting any loans under this Agreement, Borrower shall be
deemed to represent and warrant to Lender that, as of the date of the
proposed loans, (i) all of the representations and warranties made in
Paragraphs 3 and 4 will be true and correct except for changes caused
by transactions permitted under this Agreement, and (ii) no breach or
default under, and no Event of Default defined or described in, this
Agreement or any of the Security Documents will exist.
2. AFFILIATE. For the purposes of this Agreement, "Affiliate" refers to
IntraNet Integration Group, Inc.; IntraNet Distribution Group, Inc.; Xxx Xxxxxx
Sports & Fitness, Inc. and other corporation, partnership, individual or other
entity which now or hereafter controls, is controlled by, or is under common
control with Borrower. Borrower agrees that any breach, default or event of
default by or attributable to any Affiliate under any agreement between such
Affiliate and Lender shall constitute a breach of this Agreement and an Event of
Default hereunder and under the Security Documents.
3. SECURITY INTEREST
(A) GRANT OF SECURITY INTEREST. Borrower hereby assigns to Lender
and grants Lender a security interest (collectively referred to as the
"Security Interests") in the property described below, as security for
the payment and performance of each and every debt, liability and
obligation of every type and description which Borrower may now or at
any time hereafter owe to Lender (whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it
arises in a transaction involving Lender alone or in a transaction
involving other creditors of Borrower, and whether it is direct or
indirect, due or to become due, absolute or contingent, primary or
secondary, liquidated or unliquidated, or sole, joint, several or joint
and several, and including specifically, but not limited to all
indebtedness or Borrower arising under this or any other present or
future loan or credit agreement, promissory note, guaranty or other
undertaking of Borrower enforceable by Lender; all such debts,
liabilities and obligations are herein collectively referred to as the
"Obligations"). The Security Interests shall attach to the following
property of Borrower (the "Collateral"), including all proceeds and
products thereof:
INVENTORY: All inventory of every type and description, now
owned or hereafter acquired by Borrower, including inventory
consisting of whole goods, spare parts or components, supplies
or materials and inventory acquired, held or furnished for
sale, for lease or under service contracts or for manufacture
or processing, or any other purpose, and wherever located.
- 4 -
5
DOCUMENTS OF TITLE; All warehouse receipts, bills of lading
and other documents of title of every type and description now
owned or hereafter acquired by Borrower.
RECEIVABLES: Each and every right of Borrower to the payment
of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of
a sale, lease or other disposition of goods or other property,
out of a rendering of services, out of a loan, out of the
overpayment of taxes or other liabilities, or any other
transaction or event, whether such right to payment is
created, generated or earned by Borrower or by some other
person whose interest is subsequently transferred to Borrower,
whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests
(including all liens, security interests and guaranties) which
Borrower may at any time have by law or agreement against any
account debtor or other person obligated to make any such
payment or against any property of such account debtor or
other person; all contract rights, chattel papers, bonds,
notes and other debt instruments, and all loans and
obligations receivable, tax refunds and other rights to
payment in the nature of general intangibles; all checking
accounts, savings accounts and other depository accounts and
all savings certificates and certificates of deposit
maintained with or issued by Lender or any other bank or other
financial institution.
EQUIPMENT AND FIXTURES: All equipment and fixtures of every
type and description now owned or hereafter acquired by
Borrower, including (without limitation) all present and
future machinery, vehicles, furniture, fixtures, manufacturing
equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies and all other goods (except inventory)
used or bought for use by Borrower for any business or
enterprise; including (without limitation) all goods that are
or may be attached or affixed or otherwise become fixtures
upon any real property; and including specifically (without
limitation) the goods described in any equipment schedule or
list herewith or hereafter furnished to Lender by Borrower,
all accessions thereto, all substitutions and replacements
thereof, and all like or similar property now owned or
hereafter acquired by Borrower. (No such schedule or list need
be furnished in order for the security interest granted herein
to be valid as to all of Borrower's equipment.)
EQUITY SECURITIES: All stocks and other instruments, now owned
or hereafter acquired by Borrower, evidencing an ownership
interest in any partnership, corporation, entity or
enterprise.
- 5 -
6
GENERAL INTANGIBLES: All general intangibles of every type and
description now owned or hereafter acquired by Borrower,
including (without limitation) all present and future foreign
and domestic patents, patent applications, trademarks,
trademark applications, copyrights, trade names, trade
secrets, shop drawings, engineering drawings, blueprints,
specifications, parts lists, manuals, operating instructions,
customer or supplier lists and contracts, licenses, permits,
franchises, the right to use Borrower's corporate name, and
the goodwill of Borrower's business.
(B) REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower
represents, warrants and covenants as follows:
(1) Borrower has (or will have at the time it
acquires rights in Collateral hereafter arising) and will
maintain so long as the Security Interests may remain
outstanding, absolute title to each item of Collateral and all
proceeds thereof, free and clear of all interests, liens,
attachments, encumbrances and security interests except the
Security Interests and as provided herein and except as Lender
may otherwise agree in writing. Borrower will defend the
Collateral against all claims or demands of all persons (other
than Lender) claiming the Collateral or any interest therein.
Borrower will not sell or otherwise dispose of the Collateral
or any interest therein, except the sale of inventory in the
ordinary course of Borrower's business, without Lender's prior
written consent. Borrower's interest in the Collateral is
freely transferable to any person, without condition,
limitation, jurisdiction or restriction of governmental
authority, or any other qualification whatsoever.
(2) Borrower does business solely under its own name
and trade names (if any) set forth below. The place(s) of
business and chief executive office of Borrower are located at
the address(es) set forth below, and all tangible Collateral
is located at such address(es). All of Borrower's records
relating to its business or the Collateral are kept at its
chief executive office. Borrower will not permit any tangible
Collateral or any records pertaining to Collateral to be
located in any state or area in which, in the event of such
location, a financing statement covering such Collateral would
be required to be, but has not in fact been, filed in order to
perfect the Security interests. Borrower will not change its
name, identity or corporate structure or the location of its
place of business, without prior written notice to Lender.
(3) None of the Collateral is or will become a
fixture on real estate, unless a sufficient fixture filing is
in effect with respect thereto.
- 6 -
7
(4) Each account and other right to payment and each
instrument, document, chattel paper and other agreement
constituting or evidencing Collateral is (or, in the case of
all future Collateral, will be when arising or issued) the
valid genuine and legally enforceable obligation, subject to
no defense, setoff or counterclaim, of the account debtor or
other obligor named therein or in Borrower's records
pertaining thereto as being obligated to pay such obligation.
Borrower will not modify, amend, subordinate, cancel or
terminate the obligation of any such account debtor or other
obligor, without Lender's prior written consent.
(5) Borrower will keep all tangible Collateral in
good repair, working order and condition, normal depreciation
excepted, and will, from time to time, replace any worn,
broken or defective parts.
(6) Borrower will promptly pay all taxes and other
governmental charges levied or assessed upon or against any
Collateral or upon or against the creation, perfection or
continuance of the Security Interests.
(7) Borrower will keep all Collateral free and clear
of all security interests, liens and encumbrances except the
Security Interests and as provided herein and except other
security interests approved in writing by Lender.
(8) Borrower will at all reasonable times permit
Lender or its representatives to examine or inspect any
Collateral, or any evidence of Collateral, wherever located.
(9) Borrower will promptly notify Lender of any loss
of or material damage to any Collateral or of any substantial
adverse change, known to Borrower, in any Collateral or the
prospect of payment thereof.
(10) Upon request by Lender, whether such request is
made before or after the occurrence of any Event of Default,
Borrower will promptly deliver to Lender a pledge of all
instruments, documents and chattel papers constituting
Collateral, duly endorsed or assigned by Borrower.
(11) Borrower will at all times keep all tangible
Collateral insured against risks of fire (including so-called
extended coverage), theft, collision (for Collateral
consisting of motor vehicles) and such other risks and in such
amounts as Lender may reasonably request, with any loss
payable to Lender to the extent of its interest.
- 7 -
8
(12) Borrower will use and keep the Collateral, and
will require that others use and keep the Collateral, only for
lawful purposes, without violation of any federal, state or
local law, statute or ordinance.
(13) Borrower from time to time will execute and
deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing
statements and other agreements and writings which Lender may
reasonably request in order to secure, protect, perfect or
enforce the Security Interests or the rights of Lender under
this Agreement (but any failure to request or assure that
Borrower executes, delivers or endorses any such item shall
not affect or impair the validity, sufficiency or
enforceability of this Agreement and the Security Interests,
regardless of whether any such item was or was not executed,
delivered or endorsed in a similar context or on a prior
occasion).
(14) The proper place(s) to file financing statements
to perfect the Security Interests is(are) Secretary of State,
Minnesota. When the financing statements heretofore signed by
Borrower are filed there, Lender will have valid and perfected
security interests in the Collateral, subject to no prior
security interest, assignment, lien or encumbrance (except
interests, if any, specifically approved by Lender in
writing).
If Borrower at any time fails to perform or observe any of the
foregoing agreements, and if such failure shall continue for a period
of ten calendar days after Lender gives Borrower written notice thereof
(or in the case of the agreements contained in subsections (7) and (11)
above, immediately upon the occurrence of such failure, without notice
or lapse of time), Lender may, but need not, perform or observe such
agreement on behalf and in the name, place and stead of Borrower (or,
at Lender's option, in the name of Lender) and may, but need not, take
any and all other actions which Lender may reasonably deem necessary to
cure or correct such failure (including, without limitation, the
payment of taxes, the satisfaction of security interests, liens or
encumbrances, the performance of obligations owed to account debtors or
other obligors, the procurement and maintenance of insurance, the
execution of assignments, security agreements and financing statements,
and the endorsement of instruments); and Borrower shall thereupon pay
to Lender on demand the amount of all monies expended and all costs and
expenses (including reasonable attorneys' fees and legal expenses)
incurred by Lender in connection with or as a result of the performance
or observance of such agreements or the taking of such action by
Lender, together with interest thereon from the date expended or
incurred at the highest lawful rate then applicable to any of the
Obligations. To facilitate the performance or observance by Lender of
such agreements of Borrower, Borrower hereby irrevocably appoints
Lender, or the delegate of Lender, acting alone, as the attorney in
fact of Borrower with the right (but not the duty) from time to time to
create, prepare, complete, execute, deliver, endorse or file in the
name and on behalf of Borrower
- 8 -
9
any and all instruments, documents, assignments, security agreements,
financing statements, applications for insurance and other agreements
and writings required to be obtained, executed, delivered or endorsed
by Borrower under this subparagraph (b).
(C) PROCEEDS; COLLATERAL ACCOUNT. Borrower agrees to deliver to
Lender, or, at Lender's option, to deposit in one or more special
collateral accounts maintained for Lender by any bank reasonably
satisfactory to Lender, all proceeds of cash sales of inventory, all
collections on accounts, contract rights, chattel paper and other
rights to payment constituting Collateral, and all other cash proceeds
of Collateral, immediately upon receipt thereof, in the form received,
except for Borrower's endorsement when deemed necessary. Amounts
deposited in a collateral account shall not bear interest and shall not
be subject to withdrawal by Borrower, except after full payment and
discharge of all Obligations. All such collections shall constitute
proceeds of Collateral and shall not constitute payment of any
Obligation. Until delivered to Lender or deposited in a collateral
account, all proceeds or collections of Collateral shall be held in
trust by Borrower for and as the property of Lender and shall not be
commingled with any funds or property of Borrower. Lender may deposit
any and all collections received by it from Borrower or out of any
collateral account in Lender's general account and may commingle such
collections with other property of Lender or any other person. All
items shall be delivered to Lender or deposited in any collateral
account subject to final payment. If any such item is returned
uncollected, Borrower will immediately pay Lender, or, for items
deposited in a collateral account, the bank maintaining such account,
the amount of that item, or such bank in its discretion may charge any
uncollected item to Borrower's commercial account or other account.
Borrower shall be liable as an endorser on all items deposited in any
collateral account, whether or not in fact endorsed by Borrower. Lender
from time to time at its discretion may apply funds on deposit in a
collateral account to the payment of any or all Obligations, in any
order or manner of application satisfactory to Lender.
(D) COLLECTION RIGHTS OF LENDER. In addition to the rights of Lender
under subparagraph (c), with respect to any and all rights to payment
constituting Collateral Lender may at any time (either before or after
the occurrence of an Event of Default under Paragraph 7) notify any
account debtor or other person obligated to pay the amount due that
such right to payment has been assigned or transferred to Lender for
security and shall be paid directly to Lender. Borrower will join in
giving such notice, if Lender so requests. At any time after Borrower
or Lender gives such notice to an account debtor or other obligor,
Lender may, but need not, in Lender's name or in Borrower's name (i)
demand, xxx for, collect or receive any money or property at any time
payable or receivable on account of, or securing, any such right to
payment, or grant any extension to, make any compromise or settlement
with or otherwise agree to waive, modify, amend or change the
obligations (including collateral obligations) of any such account
debtor or other obligor; and (ii) as agent and attorney in fact of
Borrower, notify the United States
- 9 -
10
Postal Service to change the address for delivery of Borrower's mail to
any address designated by Lender and otherwise intercept, receive, open
and dispose of Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for Borrower's account
or forwarding such mail to Borrower's last known address.
(E) ASSIGNMENT OF INSURANCE. As additional security for the payment
and performance of the Obligations, Borrower hereby assigns to Lender
any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under,
and all other rights of Borrower with respect to, any and all policies
of insurance now or at any time hereafter covering the Collateral or
any evidence thereof or any business records or valuable papers
pertaining thereto, and Borrower hereby directs the issuer of any such
policy to pay all such monies directly to Lender. At any time, whether
before or after the occurrence of any Event of Default, Lender may (but
need not), in Lender's name or in Borrower's name, execute and deliver
proofs of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
(F) REPRODUCTIONS. A carbon, photographic or other reproduction of
this Agreement or of any financing statement signed by Borrower shall
be sufficient as a financing statement.
(G) VERIFICATION. At any time or from time to time, under its own
name or under a trade name, Lender may (but shall not be obligated to)
send to and discuss with Borrower's account debtors requests for
verification of amounts owed to Borrower. If Lender so requests at any
time, Borrower will send requests for verification to its account
debtors or join in any requests for verification sent by Lender.
(H) SURPLUS AND DEFICIENCY; CARE OF COLLATERAL. This Agreement does
not contemplate a sale of accounts, contract rights or chattel paper,
and, as provided by law, Borrower is entitled to any surplus and shall
remain liable for any deficiency. Lender's duty of care with respect to
Collateral in its possession (as imposed by law) shall be deemed
fulfilled if it exercises reasonable care in physically keeping such
Collateral or, in the case of Collateral in the custody or possession
of a bailee or other third person, exercises reasonable care in the
selection of the bailee or other third person, and Lender need not
otherwise preserve, protect, insure or care for any Collateral. Lender
shall not be obligated to preserve any rights Borrower may have against
prior parties, to realize on the Collateral at all or in any particular
manner or order or to apply any cash proceeds of the Collateral in any
particular order of application.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender that:
- 10 -
11
(a) Borrower is a corporation duly organized and existing in good
standing under the laws of the State of Minnesota. It has the corporate
power to own its property and to carry on its business as now conducted
and is duly qualified to do business in all states in which such
qualification is required. During its corporate existence, Borrower has
done business solely under the name IntraNet Solutions, Inc. Borrower
does not own any capital stock of any corporation, except IntraNet
Integration Group, Inc., IntraNet Distribution Group, Inc.
(b) Borrower is duly authorized and empowered to execute, deliver
and perform this Agreement and the Security Documents and to borrow
money from Lender.
(c) The execution and delivery of this Agreement and the Security
Documents, and the performance by Borrower of its obligations
thereunder, do not and will not violate or conflict with any provision
of law or the Articles of Incorporation or By-Laws of Borrower and do
not and will not violate or conflict with, or cause any default or
event of default to occur under, any agreement binding upon Borrower.
(d) The execution and delivery of this Agreement and the Security
Documents have been duly approved by all necessary action of the
directors and shareholders of Borrower; and this Agreement and the
Security Documents have in fact been duly executed and delivered by
Borrower and constitute its lawful and binding obligations, legally
enforceable against it in accordance with their respective terms
(subject to laws generally affecting the enforcement of creditors'
rights).
(e) No litigation, tax claims or governmental proceedings are
pending or are threatened against Borrower or any Affiliate and no
judgment or order of any court or administrative agency is outstanding
against Borrower or any Affiliate.
(f) The transaction evidenced by this Agreement does not violate any
law pertaining to usury or the payment of interest on loans.
(g) The authorization, execution, delivery and performance of this
Agreement and the Security Documents are not and will not be subject to
the jurisdiction, approval or consent of, or to any requirement of
registration with or notification to, any federal, state or local
regulatory body or administrative agency.
(h) The conduct of its business by Borrower is not subject to
registration with, notification to, or regulation, licensing,
franchising, consent or approval by any state or federal governmental
authority or administrative agency, except general laws and regulations
which are not related or applicable particularly or uniquely to the
type of business conducted by Borrower, which do not materially
restrict or limit the business of Borrower, and with which Borrower is
in full compliance. All registrations and
- 11 -
12
notifications required to be made, and all licenses, franchises,
permits, operating certificates, approvals and consents required to be
issued, to enter into or conduct such business have been duly and
lawfully made or obtained and issued, and all terms and conditions set
forth therein or imposed thereby have been duly met and complied with.
(i) To the best knowledge of Borrower based upon reasonable inquiry,
no director, shareholder, officer, employee or agent of, or consultant
to, Borrower is prohibited by law, by regulation, by contract, or by
the terms of any license, franchise, permit, certificate, approval or
consent from participating in the business of Borrower as director,
shareholder, officer, employee or agent of, or as consultant to,
Borrower, or is the subject of any pending or, to Borrower's best
knowledge, threatened proceeding which, if determined adversely, would
or could result in such a prohibition.
(j) All assets of Borrower and any Affiliates are free and clear of
liens, security interests and encumbrances, except those permitted
under Paragraph 6(b).
(k) Borrower and all Affiliates have filed all federal and state tax
returns which are required to be filed, and all taxes shown as due
thereon have been paid. Borrower and all Affiliates have paid or caused
to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by them.
(l) Borrower has furnished to Lender the financial statements
described below for the periods described below:
March 31, 1997
-------------------------
March 31, 1998
-------------------------
December 31, 1998
-------------------------
These statements were prepared in accordance with generally accepted
accounting principles consistently maintained, present fairly the
financial condition of Borrower as at the dates thereof, and disclose
fully all liabilities of Borrower, whether or not contingent, with
respect to any pension plan. Since the date of the most recent
financial statement, there has been no material adverse change in the
financial condition of Borrower.
(m) Each qualified retirement plan of Borrower presently conforms to
and is administered in a manner consistent with the Employee Retirement
Income Security Act of 1974.
- 12 -
13
(n) Borrower will not request or maintain any credit for the purpose
of purchasing or carrying any security, within the meaning of
Regulations G or U of the Board of Governors of the Federal Reserve
System.
5. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that it will:
(a) Use the proceeds of any and all loans made by Lender solely for
lawful and proper corporate purposes of the Borrower.
(b) Pay all taxes, assessments and governmental charges prior to the
time when any penalties or interest accrue, unless contested in good
faith with an adequate reserve for payment; and pay to the proper
authorities when due all federal, state and local taxes required to be
withheld by it.
(c) Continue the conduct of its business; maintain its corporate
existence; maintain all rights, licenses and franchises; and comply
with all applicable laws and regulations.
(d) Maintain its property in good working order and condition and
make all needful and proper repairs, replacements, additions and
improvements thereto.
(e) Deliver to Lender:
(1) Within 90 days after the end of each fiscal year, a
statement of Borrower's financial condition as at the end of such
fiscal year and a statement of earnings and retained earnings of
Borrower for such fiscal year, with comparative figures for the
preceding fiscal year, prepared, if Lender so requests, on a
consolidating and consolidated basis to include any Affiliated
Corporation, certified without qualification by independent
certified public accountants acceptable to Lender.
(2) Within 20 days after the end of each fiscal month, a
statement of Borrower's financial condition and an operating
statement and statement of earnings and retained earnings of
Borrower for such month, in each case with comparative figures for
the same month in the preceding fiscal year, prepared on the same
basis as the most recent annual statement provided pursuant to
clause (1) above, certified by an officer of Borrower.
(3) Within 20 days after the end of each month, an aging of
Borrower's accounts receivable as at the end of such month.
- 13 -
14
(4) Within 20 days after the end of each month, an aging of
Borrower's accounts payable as at the end of such month.
(5) From time to time, any and all receivables, schedules,
collection reports, equipment schedules, copies of invoices to
account debtors and shipment documents and delivery receipts for
goods sold, and other material, reports, records or information
required by Lender.
(f) Permit any officer, employee, attorney or accountant for Lender
to audit, review, make extracts from, or copy any and all corporate and
financial books, records and properties of Borrower at all times during
ordinary business hours, to send and discuss with account debtors and
other obligors' requests for verification of amounts owed to Borrower,
and to discuss the affairs of Borrower with any of its directors,
officers, employees, agents.
(g) Maintain property, liability, business interruption, xxxxxxx'x
compensation and other forms of insurance in reasonable amounts
designated at any time or from time to time by Lender.
(h) At all times maintain the book net worth of Borrower at amounts
in excess of $3,000,000 and maintain Borrower's tangible net worth
(excluding all intangible assets designated by Lender) at amounts in
excess of $2,000,000.
(i) Notify Lender promptly of (i) any disputes or claims by
customers of Borrower; (ii) any goods returned to or recovered by
Borrower; (iii) any change in the persons constituting the officers and
directors of Borrower; and (iv) the occurrence of any breach, default
or event of default by or attributable to Borrower under this Agreement
or any of the Security Documents.
(j) Maintain insurance on the life of Xxxxxx X. Xxxxx in the amount
of $500,000 with companies and terms reasonable acceptable to Lender
and assign such life insurance policies to Lender on forms of
assignment acceptable to Lender.
6. NEGATIVE COVENANTS. Borrower covenants and agrees that it will not,
except with the prior written approval of Lender:
(a) Become or remain liable in any manner in respect of any
indebtedness or contractual liability (including, without limitation,
notes, bonds, debentures, loans, guaranties, obligations of
partnerships, and pension liabilities, in each case whether or not
contingent and whether or not subordinated), except:
(1) Indebtedness arising under this Agreement;
- 14 -
15
(2) Unsecured indebtedness, other than for money borrowed or
for the purchase of a capital asset, incurred in the ordinary course
of its business, which becomes due and must be fully satisfied
within twelve months after the date on which it is incurred;
(3) Unsecured indebtedness, in an amount not exceeding
$25,000.00 at any one time outstanding, which is fully subordinated
in right of payment to all indebtedness owed to Lender pursuant to a
subordination agreement accepted or approved in writing by the
Lender.
(4) Indebtedness arising out of the lease or purchase of goods
constituting equipment and either unsecured or secured only by a
purchase money security interest securing purchase money
indebtedness, but in any event only if such equipment is acquired in
compliance with Paragraph 6(c).
(5) Presently outstanding unsecured borrowings, if any,
disclosed in the financial statements referred to in Paragraph 4(m),
but not including any extensions or renewals thereof.
(b) Create, incur or cause to exist any mortgage, security interest,
encumbrance, lien or other charge of any kind upon any of its property
or assets, whether now owned or hereafter acquired, except:
(1) The interests created by this Agreement and the Security
Documents;
(2) Liens for taxes or assessments not yet due or contested in
good faith by appropriate proceedings;
(3) A purchase money security interest or lessor's interest
securing indebtedness permitted to be outstanding or incurred under
Paragraph 6(a)(4);
(4) Security interests approved by Lender in writing; and
(5) Other liens, charges and encumbrances incidental to the
conduct of its business or the ownership of its property which were
not incurred in connection with the borrowing of money or the
purchase of property on credit and which do not in the aggregate
materially detract from the value of its property or materially
impair the use thereof in its business.
(c) Expend or contract to expend, in any one calendar year, more
than $125,000.00 in the aggregate or more than $750,000.00 in any one
transaction for the
- 15 -
16
lease, purchase or other acquisition of any capital asset, or for the
lease of any other asset, whether payable currently or in the future.
(d) Sell, lease, or otherwise dispose of all or any substantial part
of its property, except as expressly permitted hereunder or under the
Security Documents.
(e) Consolidate or merge with any other corporation; or acquire any
business; or acquire stock of any corporation; or enter into any
partnership or joint venture, without written approval of Lender, such
approval not unreasonablly withheld.
(f) Substantially alter the nature of the business in which it is
engaged.
(g) Declare or pay any dividends (except dividends payable solely in
its capital stock), or purchase or redeem any of its capital stock, or
otherwise distribute any property on account of its capital stock; or
enter into any agreement therefor; provided, however, Borrower may
declare and pay dividends in an amount equal to income tax assessed
against the shareholders of Borrower as a result of the income of
Borrower being directly charged to such shareholders upon Lender's
receipt of evidence of such assessment satisfactory to Lender.
(h) Purchase stock or securities of, extend credit to or make
investments in, become liable as surety for, or guarantee or endorse
any obligation of, any person, firm or corporation, except investments
in direct obligations of the United States and commercial bank deposits
and extensions of credit reflected by trade accounts receivable arising
for goods sold by Borrower in the ordinary course of its business.
(i) After notice from Lender, grant any discount, credit or
allowance to any customer of Borrower or accept any return of goods
sold.
(j) In any manner transfer any property without prior or present
receipt of full and adequate consideration.
(k) Permit more than $0 in the aggregate to be owing to Borrower by
the officers, directors or shareholders of Borrower or any Affiliated
Corporation, or members of their families, on account of any loan,
travel advance, credit sale or other transaction or event.
(l) Pay excessive or unreasonable salaries, bonuses, commissions,
consultant fees, or other compensation; or increase the salary, bonus,
commissions, consultant fees or other compensation of any director,
officer, or consultant, or any member of their families, by more than
10% in any one year, either individually or for all such persons in
- 16 -
17
the aggregate, or pay any such increase, without written approval of
Lender, from any source other than profits earned in the year of
payment.
(m) Permit any breach, default or event of default to occur under
any note, loan agreement, indenture, lease, mortgage, contract for
deed, security agreement or other contractual obligation binding upon
Borrower.
7. EVENT OF DEFAULT. Any breach of any representation, warranty or
agreement of Borrower set forth herein or in the Security Documents or in any
other instrument or agreement securing any of the Obligations shall constitute
an Event of Default hereunder and under the Security Documents.
8. REMEDIES UPON DEFAULT. Upon the occurrence of any Event of Default,
and at any time thereafter unless and until such Event of Default is waived in
writing by Lender, Lender may exercise one or several or all of the following
rights and remedies:
(a) Lender may terminate this Agreement with immediate effectiveness
and without notice or lapse of time. Notwithstanding such termination,
all claims, rights and security interests of Lender and all debts,
liabilities, obligations and duties of Borrower shall remain in full
force and effect.
(b) Lender may exercise and enforce any and all rights and remedies
available upon default to a secured party under the Uniform Commercial
Code, including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process (without a prior hearing or notice thereof, which Borrower
hereby expressly waives) and the right to sell, lease or otherwise
dispose of any or all of the Collateral, and in connection therewith
Borrower will on demand assemble the Collateral and make it available
to Lender at a place to be designated by Lender which is reasonably
convenient to all parties. If notice to Borrower of any intended
disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Paragraph 13(a) at
least ten calendar days prior to the date of intended disposition or
other action. For the purpose of enabling Lender to exercise such
rights and remedies:
(1) Borrower hereby grants Lender (in addition to Lender's
security interest in general intangibles) a non-exclusive license to
use, sell or otherwise exploit in any manner any and all trade
names, trademarks, patents, copyrights, licenses and other
intangible properties necessary, appropriate or useful in the
enforcement of the Security Interests; and
- 17 -
18
(2) Borrower hereby grants Lender the right to possess and hold
all premises owned, leased or held by Borrower upon which any
Collateral is or may be located (the "Premises"), subject to the
following terms and conditions:
A. Lender may take possession of the Premises only upon
the occurrence of an Event of Default.
B. Lender may use the Premises only to hold, process,
manufacture and sell or otherwise dispose of goods which are
inventory, or to provide services under contracts for
receivables, or to use, operate, store, liquidate or realize
upon goods which are equipment or any other Collateral granted
under this Agreement and for other purposes which Lender may in
good xxxxx xxxx to be related or incidental purposes.
C. The right of Lender to hold the Premises shall cease
and terminate upon the earlier of (i) payment in full and
discharge of all Obligations; (ii) final sale or disposition of
all goods constituting Collateral (including both inventory and
equipment) and delivery of all such goods to purchasers.
D. Lender shall not be obligated to pay or account for
any rent or other compensation for this grant or for the
possession, occupancy or use of any of the Premises.
E. Borrower acknowledges and agrees that the breach of
this grant is not fully compensable by money damages, and that,
accordingly, this grant may be enforced by an action for
specific performance.
(c) Lender may exercise or enforce any and all other rights or
remedies available by law or agreement against the Collateral, against
Borrower, or against any other person or property.
9. ACCELERATION UPON BANKRUPTCY. All of the Obligations shall be
immediately and automatically due and payable, without further act or condition,
if any case under the United States Bankruptcy Code is commenced voluntarily by
Borrower or involuntarily against Borrower.
10. SETOFF. Borrower agrees that Lender may at any time or from time to
time, at its sole discretion and without demand and without notice to anyone,
set off any deposit or other liability owed to Borrower by Lender, whether or
not due, against any indebtedness owed to Lender by Borrower (for loans under
this Agreement or for any other transaction or event), whether or not due. In
addition, each person holding a participating interest in any loans made to
- 18 -
19
Borrower by Lender shall have the right to appropriate or set off any deposit or
other liability then owed by such person to Borrower, whether or not due, and
apply the same to the payment of said participating interest, as fully as if
such person had lent directly to Borrower the amount of such participating
interest.
11. TERMINATION BY BORROWER. So long as Lender, in its sole discretion,
is willing to make loans to Borrower for ordinary working capital purposes
subject to the availability of Collateral deemed eligible by Lender, Borrower
may terminate this Agreement and (subject to payment and performance of all
outstanding secured obligations) may obtain any release or termination of the
Security Documents to which Borrower is otherwise entitled by law, effective
only on the anniversary date of this Agreement, and then only if Lender receives
at least 60 days' prior written notice of Borrower's intent to terminate this
Agreement effective on such anniversary date. Upon any such termination, all
obligations of Borrower under this Agreement and the Security Documents shall
remain in full force and effect until all indebtedness arising under this
Agreement and all other debts, liabilities and obligations of Borrower secured
hereby, or by the Security Documents or any other collateral security have been
fully paid and satisfied.
12. RESERVATION OF RIGHT TO MAKE DEMAND AND TO REFUSE TO LEND.
Notwithstanding any other provisions contained herein, Borrower acknowledges
that Lender reserves the right to demand immediate payment of any or all loans
and the interest thereon and of all other obligations of Borrower payable on
demand, and the right to refuse to make any loans hereunder, whether or not (a)
an Event of Default has occurred hereunder, (b) Borrower has failed to comply
with the terms of this Agreement or the Security Documents, (c) Borrower's
financial or other condition has changed, (d) Lender has at that time or in
connection with any previous demand or refusal to lend given notice of its
intention to make demand or to refuse to lend or (e) such demand or refusal to
lend shall not cause any loss or damage to the Borrower.
13. MISCELLANEOUS. Borrower agrees that:
(a) This Agreement can be waived, amended, terminated or discharged,
and the Security Interests can be released, only explicitly in a
writing signed by Lender. A waiver so signed shall be effective only in
the specific instance and for the specific purpose given. Mere delay or
failure to act shall not preclude the exercise or enforcement of any
rights and remedies available to Lender. All rights and remedies of
Lender shall be cumulative and may be exercised singularly in any order
or sequence, or concurrently, at Lender's option, and the exercise or
enforcement of any such right or remedy shall neither be a condition to
nor bar the exercise of enforcement of any other. All notices to be
given to Borrower shall be deemed sufficiently given if actually
received by any officer of Borrower or if delivered or mailed by
registered, certified or ordinary mail, postage prepaid, to Borrower at
its address set forth below or at its most recent address shown on
Lender's records.
- 19 -
20
(b) Borrower will furnish to Lender, prior to the first advance
hereunder, (i) a certified copy of resolutions of the directors and, if
required, the shareholders of Borrower, authorizing the execution,
delivery and performance of this Agreement and the Security Documents;
(ii) a certificate of an officer of Borrower confirming, in his
personal capacity, the representations and warranties set forth in
Paragraphs 3 and 4; (iii) a written opinion of Borrower's independent
legal counsel, addressed to Lender, confirming to the satisfaction of
Lender the representations and warranties set forth in clause (b)(14)
of Paragraph 3 and clauses (a) through (h) of Paragraph 4; and (iv)
currently certified copies of the Articles of Incorporation and Bylaws
of Borrower and a Certificate of Good Standing issued as to Borrower by
the Secretary of State of the state of its incorporation; and (v) all
certificates of insurance and insurance endorsements required hereunder
and under the Security Documents; and (vi) all collateral schedules,
security interest subordination agreements, searches, abstracts,
releases and termination statements which Lender may request adequately
to assure and confirm the creation, perfection and priority of the
security interests created hereunder or under the Security Documents.
(c) On demand, Borrower will pay or reimburse Lender for all
expenses, including all reasonable fees and disbursements of legal
counsel, incurred by Lender in connection with the preparation,
negotiation, execution, performance or enforcement of this Agreement or
the Security Documents, or any document contemplated thereby, or the
perfection, protection, enforcement or foreclosure of the security
interests created hereby or by the Security Documents, or in connection
with the protection or enforcement of the interests and collateral
security of Lender in any litigation or bankruptcy or insolvency
proceeding or the prosecution or defense or any action or proceeding
relating in any way to the transactions contemplated by this Agreement.
(d) Lender and its participants, if any, are not partners or joint
venturers, and Lender shall have no liability or responsibility for any
obligation, act or omission of its participants under or as to this
Agreement.
(e) This Agreement shall be binding upon Borrower and its successors
and assigns and shall inure to the benefit of Lender and its
participants, successors and assigns. This Agreement shall be effective
when executed by Borrower and delivered to Lender, whether or not this
Agreement is executed by Lender. All rights and powers specifically
conferred upon Lender may be transferred or delegated by Lender to any
of its participants, successors or assigns. Except to the extent
otherwise required by law, this Agreement and the transactions
evidenced hereby shall be governed by the substantive laws of the State
in which this Agreement is accepted by Lender. If any provision or
application of this Agreement is held unlawful or unenforceable in any
respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect, and this
Agreement shall be construed as if the unlawful or
- 20 -
21
unenforceable provision or application had never been contained herein
or prescribed hereby. All representations and warranties contained in
this Agreement or in any other agreement between Borrower and Lender
shall survive the execution, delivery and performance of this Agreement
and the creation and payment of any indebtedness to Lender. Borrower
waives notice of the acceptance of this Agreement by Lender.
14. Nothing herein contained nor any transaction related hereto shall
be construed or shall operate so as to require the Borrower or any person liable
for repayment of loans made hereunder to pay interest in an amount or at a rate
greater than the maximum allowed, from time to time, by applicable laws, if any.
Should any interest or other charges, including any property, tangible or
intangible, or other items of value received by the Lender, imposed against or
paid by the Borrower or any party liable for the payment of such loans, result
in a computation of earning of interest in excess of the maximum legal rate of
interest permitted under applicable law in effect while such interest is being
earned, then any and all of that excess shall be waived by the Lender, and all
of that excess shall be automatically credited against and in reduction of the
principal balance of such loans, without premium, with the same force and effect
as though the Borrower had specifically designated such extra sums to be so
applied to principal and the Lender to accept such extra payment(s) as a
premium-free prepayment, and any portion of the excess that exceeds the
principal balance of loans made hereunder shall be paid by the Lender to the
Borrower or to any party liable for the payment of such loans, applicable, it
being the intent of the parties hereto that under no circumstances shall the
Borrower or any party liable for the payment of the indebtedness evidenced
hereby be required to pay interest in excess of the maximum rate allowed by any
applicable laws. The provisions of this Agreement are hereby modified to the
extent necessary to conform with the limitations and provisions of this
paragraph, and this paragraph shall govern over all other provisions in any
document or agreement now or hereafter existing. This paragraph shall never be
superseded or waived unless there is a written document executed by the Lender
and the Borrower, expressly declaring the usury limitation of this Agreement to
be null and void, and no other method or language shall be effective to
supersede or waive this paragraph.
15. ENVIRONMENTAL LAWS. Borrower is and will continue to be throughout
the term of this Agreement in full and complete compliance with all federal,
state and local laws, rules and regulations governing hazardous and toxic
substances, waste or materials, any pollutants or contaminants or any other
similar substances, or pertaining to environmental regulations, contamination or
cleanup, including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act, as amended, the Minnesota Petroleum Tank Release
Cleanup Act, as amended, or any other state lien or state super lien or
environmental cleanup statute (all such laws, rules and regulations being
referred to collectively as "Environmental Laws").
Borrower indemnifies, defends and holds Lender and its officers,
directors, employees and agents, harmless from and against any liability, laws,
claims, damages or expense (including
- 21 -
22
attorneys' fees and disbursements) arising out of or based upon any violation or
claim of violation of Environmental Laws by any Borrower or with respect to any
assets owned or used by any Borrower or any properties leased or occupied by any
properties of any Borrower by Lender. This indemnity shall be continuing and
remain in full force and effect and shall survive this Agreement and the
Security Documents or any exercise of any remedy by Lender even if all
indebtedness and other obligations to Lender have been satisfied in full.
16. WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH HEREBY WAIVE ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT, THE SECURITY DOCUMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS
BETWEEN THE BORROWER AND LENDER.
- 22 -
23
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the proper officers thereunto duly authorized on the day and year first above
written.
IntraNet Solutions, Inc.
By /s/ Xxxxxx X. Xxxxx
-----------------------
President
By /s/ Xxxxxxx X. Siobeck
--------------------------
Secretary
TRADE NAMES OF BORROWER: ADDRESS OF CHIEF EXECUTIVE
OFFICES:
---------------------------- 0000 Xxxxxxx Xxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000
----------------------------
COLLATERAL LOCATIONS: OTHER LOCATIONS:
0000 Xxxxxxx Xxxx Xxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Accepted at Minneapolis, Minnesota
on April 1, 1999
DIVERSIFIED BUSINESS CREDIT, INC.
By /s/ Xxxxxx X. Xxxxxxxx
--------------------------
Vice President
- 23 -
