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EXHIBIT 10.13
INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
This Indemnification and Hold Harmless Agreement is entered into on the
27 day of February, 1996, by and between Neural Applications Corporation, a
Delaware corporation with offices located at 0000 Xxxxxxxxx Xxxx, Xxxxxxxxxx,
Xxxx (hereinafter "Neural") and Xxxxxx X. Xxxxx of Coralville, Iowa (hereinafter
"Guarantor").
RECITALS
1. On or about February 27, 1996, Neural will be granted a $2,000,000
Line of Credit from The Northern Trust of Chicago, Illinois, through an
agreement arranged by Iowa State Bank & Trust Company of Iowa City, Iowa ("Line
of Credit").
2. The Line of Credit to be granted to Neural will be unsecured by
Neural but will be given in consideration of Guarantor's personal guarantee
("Guarantee") and Guarantor's pledge of personal assets to secure the Line of
Credit.
3. Neural, in consideration of and as an inducement to Guarantor to
guarantee and secure Neural's obligations under the Line of Credit to The
Northern Trust, has agreed to:
A Give to Guarantor an Indemnification and Hold Harmless
for any principal, interest, damages, costs, attorney fees, or other expenses
that Guarantor may pay or incur as a result of Neural's failure to pay any
obligation under the Line of Credit to The Northern Trust.
B. Pledge business assets to Guarantor, subject to certain
previously existing security agreements, as security for Neural's obligation to
indemnify and hold Guarantor harmless.
X. Xxxxx to Guarantor a Warrant for 400,000 shares of
common stock in Neural.
4. Neural and Guarantor wish to specify the terms and conditions of
Neural's agreement to indemnify and hold Guarantor harmless.
TERMS AND CONDITIONS
In consideration of the foregoing recitals, of the following terms and
conditions, and other good and valuable consideration it is agreed as follows:
1. Guarantor shall personally guarantee and pledge collateral to
secure Neural's obligations under the Line of Credit from The Northern Trust.
2. Neural agrees to indemnify and hold Guarantor harmless from any
and all amounts that Guarantor may pay to The Northern Trust under the terms and
conditions of Guarantor's Guarantee of Neural's $2,000,000 Line of Credit.
Neural's obligation to indemnify and hold Guarantor harmless includes, but is
not limited to, all principal, interest, costs, expenses, attorney fees, court
costs, damages or any other amounts paid by Guarantor or realized from any
collateral pledged by Guarantor to secure the Guarantee. Guarantor shall have no
obligation whatsoever to defend or to resist any request, demand or claim of The
Northern Trust to make payment arising from Neural's default or failure to pay
and Guarantor may rely upon the representations of The Northern Trust as to any
and all amounts claimed to be due under the guarantee as a result of Neural's
default of and/or failure to pay its obligations under the Line of Credit.
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3. Neural shall at all times comply with all of the terms and
conditions of the Line of Credit and shall pay all principal, interest and other
obligations to The Northern Trust when due and before default.
4. Neural shall pay all obligations due under The Northern Trust Line
of Credit upon the earlier to occur of April 1, 1997 or the completion by Neural
of its next public financing of equity.
5. This Indemnification and Hold Harmless is secured by Neural's
assets as set forth in the Security Agreement of even date herewith. Iowa State
Bank & Trust Company, the Iowa Department of Economic Development and Kirkwood
Community College have claimed senior security interest in the assets of the
company. In the event of default and foreclosure, the secured debt owed to such
prior secured parties by Neural shall be paid from the collateral or otherwise
before payment is made to Guarantor under this Indemnification and Hold Harmless
Agreement or the Security Agreement.
6. Neural represents and Guarantor acknowledges that Neural currently
has the following outstanding debts:
A. Iowa State Bank & Trust Company as evidenced by notes
dated October 26, 1995 and December 29, 1995 in the aggregate principal amount
of $3,500,000. Upon the obtaining of the Line of Credit, $500,000 of this debt
is to be repaid.
B. Iowa Department of Economic Development and the City of
Coralville, Iowa, as evidenced by promissory notes dated May 20, 1993 in the
aggregate principal amount of $250,000.
X. Xxxxxxxx Community College under the Industrial New Job
Training Agreement dated June 30, 1994 in the aggregate principal amount not to
exceed $200,000.
Guarantor acknowledges that he will receive payments from Neural under this
Indemnification and Hold Harmless Agreement only to the extent that Neural is
current on the described obligations to Iowa State Bank & Trust Company, Iowa
Department of Economic Development and the City of Coralville, and Kirkwood
Community College. Provided, however, that this priority of payment shall not
otherwise limit or impair Neural's obligations to Guarantor hereunder or
Guarantor's security interests in Neural's business assets.
7. Guarantor and Xxxx Xxxxxxxxx have previously guaranteed certain of
the outstanding debts and obligations of Neural. The relative priority of the
Guarantor and such other guarantor in receiving payments from Neural and the
priority of their security interests in Neural's assets shall be established by
an Intercreditor Agreement between Guarantor and such other guarantor.
8. No act or omission or commission of the Guarantor, including
specifically any failure to exercise any right, remedy or recourse, shall be
deemed a waiver or release of the same, such waiver or release to be effective
only as set forth in a written document executed by the Guarantor and only to
the extent specifically recited therein. A waiver or release with reference to
one event shall not be construed as continuing as a bar to or a waiver or
release of any subsequent right, remedy or recourse as to any subsequent event.
9. Any and all amounts due to Guarantor from Neural under this
Indemnification and Hold Harmless Agreement shall become immediately due and
payable upon Guarantor's written demand to Neural specifying the amounts paid or
incurred under Guarantor's guarantee of Neural's indebtedness to The Northern
Trust. If any amount due under this Indemnification and Hold Harmless Agreement
is not paid when due, or is collected or attempted to be collected by the
initiation or prosecution of any suit
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before any Bankruptcy Court or any other judicial proceeding, or is placed in
the hands of an attorney for collection, then the Guarantor shall be entitled to
collect, in addition to all other amounts owing him hereunder, all court costs
and reasonable attorney fees incurred by the Guarantor. Neural further agrees to
pay Guarantor interest at the rate of 18% per annum on all amounts, damages,
expenses or costs paid or incurred by Guarantor as a result of Neural's default
of and/or failure to pay its obligations under the Line of Credit.
10. Neural hereby waives demand, presentment for payment, notice of
non-payment, protest and all other notice, filing of suit and diligence in
collecting under this Indemnification and Hold Harmless Agreement other than the
written demand for payment specified in paragraph 9. Neural consents to any
extension, rearrangement, renewal or postponement of the time for payment under
this Indemnification and Hold Harmless and to any other indulgence with respect
thereto without notice, consent or consideration to any of them.
11. This Indemnification and Hold Harmless Agreement shall be binding
upon the successors and assigns of the parties.
12. This Indemnification and Hold Harmless Agreement shall be governed
by and construed in all respects according to the laws of the state of Iowa.
IN WITNESS WHEREOF each party, intending to be legally bound hereby,
does duly execute this Indemnification and Hold Harmless.
NEURAL APPLICATIONS CORPORATION
By /s/ Xxxxxx X. Xxxxxxx
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Its President
GUARANTOR
/s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
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