COMMERCIAL LOAN AGREEMENT
Exhibit
10.2
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BORROWER’S
NAME AND ADDRESS:
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DESCRIPTION
OF LOAN:
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VeriChip
Corporation
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x Revolving
Line of Credit:
$8,500,000.00
- Working Capital
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0000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
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Xxxxxx
Xxxxx, Xxxxxxx 00000
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DATE
OF
THIS AGREEMENT:
December 27,
2005
REVIEW
DATE FOR REVOLVING LINE OF CREDIT: June 27, 2007
ANNUAL
REVIEW.
THIS
COMMERCIAL
LOAN AGREEMENT
(the
“Agreement”) is made as of the date set forth above, between the above-named
Borrower (the “Borrower”) and Applied Digital Solutions, Inc., a Missouri
corporation located at 0000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx Xxxxx,
Xxxxxxx 00000 (the “Lender”). The Lender has agreed to extend to Borrower, at
the Borrower’s request, the loan(s) described above (individually a “Loan” and
collectively the “Loans”). All of the Loans are, together with all other
interest, fees, or other obligations associated with the Loans now existing
or
hereafter arising, hereinafter sometimes referred to as the “Obligations”. Each
Loan is or shall be evidenced by a commercial promissory note (individually
a
“Note” and collectively the “Notes”) and each Loan and all of the other
obligations are secured pursuant to a Security Agreement between Borrower and
the Lender (the “Security Agreement”). In connection with the Loans, the
Borrower may execute certain other documents, certificates and agreements,
all
of which are, together with this Agreement, the Notes and the Security
Agreement, sometimes collectively referred to herein as the “Loan Documents”.
Each Loan, whether now existing or hereafter arising, is made upon and subject
to the terms and conditions set forth in the Note evidencing such Loan, the
Security Agreement, the other Loan Documents and this Agreement. The terms,
conditions, representations, warranties and covenants set forth in this
Agreement are in addition to, and not in limitation of, the terms, conditions,
representations, warranties and covenants set forth in all other Loan Documents.
IN
CONSIDERATION OF the Loans made or to be made by Lender to the Borrower, and
of
all other Obligations of the Borrower to the Lender, Borrower and Lender hereby
agree as follows:
I.
WORKING CAPITAL REVOLVING LINE OF CREDIT.
The
Working Capital Revolving Line of Credit Loan (the “Revolving Line”) made
available by the Lender to the Borrower shall be upon and subject to the terms
and conditions set forth in the Revolving Line of Credit Note evidencing such
Loan (hereafter, the “Revolving Line of Credit Note”), the other Loan Documents
and this Agreement.
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A.
Maximum
Available Amount.
The
maximum amount available to the Borrower under the Revolving Line shall be
the
amount set forth in the Revolving Line of Credit Note evidencing the Revolving
Line.
B.
Advances
and Repayment.
The
Revolving Line shall be disbursed, advanced, readvanced and repaid as provided
in the applicable Revolving Line of Credit Note and this Agreement. Borrower
may
make a Request for Advance (as defined below) from time to time in an amount
such that the aggregate amounts outstanding under the Revolving Line does not
exceed the maximum available amount as determined under Paragraph A of this
Section I above. Lender reserves the right to determine in its sole discretion
whether to make any particular advance or readvance requested by Borrower.
At
the time of each advance and readvance under the Revolving Line the Borrower
shall immediately become indebted to the Lender for the amount thereof. Each
such advance or readvance may be credited by the Lender to any deposit account
of Borrower with the Lender, be paid to the Borrower or applied to any
Obligation, as the Lender may in each instance reasonably elect. Borrower
authorizes the Lender to charge any account that the Borrower maintains with
the
Lender for any payments that the Borrower may or must make, or customarily
makes, to the Lender from time to time.
C.
Review.
The
Revolving Line shall be subject to review and, at the sole option of the Lender,
renewal on the Review Date set forth on the first page of this Agreement (the
“Review Date”) and, if renewed, upon each subsequent anniversary of the Review
Date. IF
SAID REVOLVING LINE OF CREDIT LOAN IS NOT RENEWED BY THE LENDER AS AFORESAID
ON
ANY SUCH DATE, THE ENTIRE AMOUNT OF PRINCIPAL AND ACCRUED INTEREST OUTSTANDING
THEREUNDER SHALL BE DUE AND PAYABLE BY BORROWER ON SUCH
DATE.
Any
other revolving line of credit loan outstanding shall be subject to review
by
the Lender and be renewed or repaid as aforesaid on the Review Date and each
annual anniversary thereof, unless another date is reasonably specified by
the
Lender.
D.
Revolving
Line of Credit Management.
Set
forth on Schedule A are additional terms and conditions relating to the
management of the Revolving Line.
III.
FEES. In
addition to such other fees as are provided in this Agreement and in the other
Loan Documents, Borrower agrees to pay the Lender the periodic fees set forth
on
Schedule A with respect to the maintenance of the Working Capital Revolving
Line
of Credit Loan.
IV.
PAYMENTS.
All
payments made by the Borrower of principal and interest on the Loans, and other
sums and charges payable under the Loan Documents, shall be made to the Lender
in accordance with the terms of the respective Loan Documents in immediately
available, lawful United States of America currency at its office set forth
above or by the debiting by the Lender of the Cash Management System account
with Citibank overseen by Lender in the name of the Borrower, or in writing
to
the Borrower, and in any event shall be made in immediately available funds.
The
Borrower authorizes the Lender to automatically debit the Borrower’s demand
deposit account as described above. Upon payment in full by Borrower of the
Obligations, the Loan Documents shall automatically terminate and all liens,
pledges, charges, security interests and other encumbrances created in favor
of
the Lender pursuant to the Loan Documents shall automatically terminate and
be
released. In connection therewith, the Lender
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hereby
(i) agrees to cause to be assigned, transferred and delivered to the
Borrower collateral under the Loan Documents held by the Lender under the Loan
Documents, (ii) agrees to execute and deliver to the Borrower such
instruments of satisfaction and other documents as shall be reasonably requested
by the Borrower to terminate of record such liens, pledges, charges, security
interests or other encumbrances and (iii) authorizes the Borrower to file
any applicable UCC termination statements or release statements to terminate
of
record such liens, pledges, charges, security interests or other encumbrances.
V.
SECURITY.
Each of
the Loans and all other Obligations of the Borrower to the Lender, whether
now
existing or hereafter arising, shall, at all times, be secured by first priority
perfected security interests, as required by this Agreement and the Security
Agreement, in the Collateral (as hereinafter defined), which security interests
shall continue until payment in full of all amounts outstanding under said
Loans
and the other Obligations. If this Agreement is executed below by a guarantor
or
guarantors (collectively the “Guarantors”), then the full and punctual payment
and performance of the Loans and all other Obligations of Borrower shall be
guaranteed by the Guarantors pursuant to one or more guaranty agreements
(collectively the “Guaranty”). The term “Collateral” as used herein shall be
deemed to include all property and assets of the Borrower and Guarantors
secured, mortgaged, pledged, assigned or otherwise encumbered or covered by
any
of the Loan Documents, including, but not limited to, the Security Agreement.
The Borrower and the Guarantor covenant and agree to take such further actions
and to execute such additional documents as may be reasonably necessary from
time to time to enable the Lender to obtain and maintain the security interests
and liens arising under the Loan Documents. If the Collateral includes accounts
and account receivables of Borrower, then, in addition to such other rights
and
remedies as are provided the Lender under the Loan Documents, the Borrower
agrees that Lender may communicate with account debtors in order to verify
the
existence, amount and terms of any such accounts and account receivables. Lender
may notify account debtors of the Lender’s security interest and require that
payments on accounts and account receivables be made directly to Lender, and
upon the request of Lender, Borrower shall notify account debtors and indicate
on all xxxxxxxx that payments and returns are to be made directly to Lender.
In
furtherance of the foregoing, Borrower hereby irrevocably appoints Lender as
attorney with full power to collect, compromise, endorse, sell or otherwise
deal
with the Borrower’s accounts and account receivables or proceeds thereof and to
perform the terms of any contract in order to create accounts and account
receivables in Lender’s name or in the name of Borrower.
VI.
SUBORDINATION AND STANDBY OF DEBT.
The
Borrower and Guarantors covenant and agree that all existing debt of Borrower
to
Guarantors and all future debt, if permitted hereunder from Borrower to
Guarantors, shall be and hereby is, without need for further writing, made
subject and subordinate to the prior payment and performance of all the Loans
and other Obligations of Borrower. The Guarantors further covenant and agree
that any claims against the Borrower (or against each other or any other
guarantor of the Loans), individually or jointly, to which the Guarantors may
become entitled (including, without limitation, claims by subrogation or
otherwise by reason of any payment or performance by the Guarantors,
individually or jointly, in satisfaction and discharge, in whole or in part,
of
his or their obligations under the Guaranty) shall be and hereby are, without
need for further writing, subject and subordinate to the payment and performance
in full of all of the Loans and other Obligations due the Lender. In furtherance
of the foregoing, the Borrower and Guarantors shall provide such subordinations,
certificates and other documents and shall xxxx its corporate books, records,
stock certificates and ledgers as the Lender may reasonably request from time
to
time, in form and substance satisfactory to Lender and Lender’s counsel,
evidencing the subordination of all debt of Borrower to Guarantors, whether
now
existing or hereafter arising, in accordance with the covenants of Borrower
and
Guarantors hereunder.
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VII.
CONTINUING REPRESENTATIONS AND WARRANTIES.
The
Borrower and the Guarantors, as the case may be, jointly and severally warrant
and represent to the Lender that so long as any of the Obligations are
outstanding:
A.
Good
Standing.
Borrower, if other than a natural person, is duly organized, validly existing
and in good standing under the laws of the State of Delaware. Borrower has
the
power to own its properties and to carry on its business as now being conducted.
B.
Authority.
Borrower and Guarantors have full power and authority to enter into this
Agreement and to borrow under the Loan Documents, to execute and deliver the
Loan Documents and to incur the obligations provided for herein and in the
Loan
Documents, all of which have been duly authorized by all proper and necessary
corporate or other action. The persons executing the Loan Documents on behalf
of
the Borrower and the Guarantors have been duly authorized to do so.
C.
Binding
Agreement.
This
Agreement and the Loan Documents constitute the valid and legally binding
obligations of the Borrower and Guarantors, enforceable in accordance with
their
terms.
D.
Litigation.
There
are no suits or proceedings of any kind or nature pending or, to the knowledge
of the Borrower and Guarantors, threatened against or affecting the Borrower
or
the Guarantors or their assets which, if adversely determined, would have a
material adverse effect on the financial condition or business of the Borrower
or the Guarantors and which have not been disclosed in writing to the Lender.
E.
Conflicting
Agreements; Consents.
There
is no charter, bylaw or preference stock of the Borrower or the Guarantors
and
no provision(s) of any existing mortgage, indenture, contract or agreement
binding on the Borrower or the Guarantors or affecting their property, which
would conflict with, have a material adverse effect upon, or in any way prevent
the execution, delivery or performance of the terms of this Agreement or the
Loan Documents. Neither the Borrower nor the Guarantors is required to obtain
any order, consent, approval, authorization of any person, entity or
governmental authority in connection with or as a condition to the execution,
delivery and performance of this Agreement or the Loan Documents or the granting
of the security interests and liens in the Collateral.
F.
Financial
Condition.
The
financial statements delivered to the Lender by the Borrower and the Guarantors
have been and shall be prepared in accordance with generally accepted accounting
principles, consistently applied, are and will be complete and correct, and
fairly present the financial condition and results of the Borrower and the
Guarantors. Other than those liabilities disclosed in writing to the Lender,
there are no liabilities, direct or indirect, fixed or contingent, of the
Borrower or the Guarantors which are not reflected in the financial statements
or in the notes thereto which would be required to be disclosed therein and
there has been no material adverse change in the financial condition or
operations of the Borrower or the Guarantors since the date of such financial
statements.
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G.
Taxes.
Borrower and Guarantors have filed all federal, state and local tax returns
required to be filed by them and have paid all taxes shown by such returns
to be
due and payable on or before the due dates thereof.
H.
Solvency.
The
present fair saleable value of the Borrower’s assets is greater than the amount
required to pay its total liabilities; the amount of the Borrower’s capital is
adequate in view of the type of business in which it is engaged.
I.
Full
Disclosure.
None of
the information with respect to the Borrower or the Guarantors which has been
furnished to the Lender in connection with the transactions contemplated hereby
is false or misleading with respect to any material fact, or omits to state
any
material fact necessary in order to make the statements therein not misleading.
J.
Employee
Benefit Plans.
The
Borrower has not incurred any material accumulated funding deficiency within
the
meaning of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), has not incurred any material liability to the Pension Benefit
Guaranty Corporation established under ERISA (or any successor thereto) in
connection with any profit sharing, group insurance, bonus, deferred
compensation, percentage compensation, stock option, severance pay, insurance,
pension or retirement plan or other oral or written agreement or commitment
relating to employment or fringe benefits or prerequisites for employees,
officers or directors of the Borrower (an “Employee Benefit Plan”), and no
Employee Benefit Plan which is subject to ERISA had, as of its latest valuation
date, accrued benefits (whether or not vested) the present value of which
exceeded the value of the assets of such Employee Benefit Plan, based upon
actuarial assumptions utilized for such Plan.
K.
Location
of Records.
All of
the books and records are true and complete copies thereof relating to the
accounts and contracts of the Borrower shall be kept at Borrower’s principal
place of business located at the address first set forth above (the “Premises”).
L.
Compliance
with Laws.
The
Borrower and the Guarantors, to the best of their knowledge and belief, are
in
compliance in all material respects with all laws and governmental rules and
regulations applicable to the Collateral and to their businesses, properties
and
assets.
M.
Hazardous
Waste.
No
Hazardous Waste (as hereinafter defined) has been generated, stored or treated
on the Premises except in compliance with all applicable laws. To the Borrower’s
knowledge, no Hazardous Waste has been, is being, is intended to be or is
threatened to be spilled, released, discharged, disposed, placed or otherwise
caused to be found in the soil or water in, under or upon the Premises. The
Borrower and the Guarantors agree to indemnify and hold the Lender harmless
from
and against any claims, damages, liabilities (whether joint or several), losses
and expenses (including, without limitation, reasonable attorneys’ fees)
incurred by the Lender as a result of the breach of these representations.
For
the purpose of this Agreement, the term “Hazardous Waste” means “hazardous
waste”, “hazardous material”, “hazardous substance” and “oil” as presently
defined in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Hazardous Material
Transportation Act, the Federal Water Pollution Control Act and corresponding
state and local statutes, ordinances and regulations, as such statutes,
ordinances and regulations may be amended, or as defined in any applicable
federal or state regulation adopted pursuant to such acts.
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N.
Title
to Collateral.
Borrower and the Guarantors have and will at all times have good and marketable
title to the Collateral, free and clear from any liens, security interests,
mortgages, encumbrances, pledges or other right, title or interest of any other
person or entity, except those arising under the Loan Documents or disclosed
to
the Lender in the Security Agreement (“Permitted Encumbrances”).
O.
Employees.
Borrower, to the best of its knowledge and belief, has complied with all laws
relating to the employment of labor, including any provisions thereof relating
to ERISA, wages, hours, the payment of social security and similar taxes, equal
employment opportunity, employment discrimination and occupational safety and
health and is not liable for any arrears of wages or any taxes or penalties
for
failure to comply with any of the foregoing.
VIII.
AFFIRMATIVE COVENANTS.
Until
payment in full of all indebtedness under the Loans and the other Obligations,
the Borrower and the Guarantors, as the case may be, jointly and severally
agree
that, unless the Lender shall otherwise reasonably consent in writing, they
will:
A.
Prompt
Payment.
Pay
promptly, subject to any applicable cure or grace period, when due all amounts
due and owing to the Lender.
B.
Use
of
Proceeds.
Use the
proceeds of the Loans only for business purposes and will furnish the Lender
with such evidence as it may reasonably require with respect to such use.
C.
Financial
Statements.
Furnish
the Lender with such financial statements of Borrower as are described on
Schedule A attached hereto. All such statements shall be prepared on a
consistent basis in a format reasonably acceptable to the Lender.
D.
Maintenance
of Existence.
Take
all necessary action to maintain Borrower’s legal existence.
E.
Maintenance
of Business.
Do or
cause to be done all things necessary to maintain and preserve Borrower’s
business.
F.
Maintenance
of Insurance.
Keep
all of Borrower’s properties (specifically including, but not limited to, the
Collateral) adequately insured against loss or damage by fire and such other
casualties and hazards as the Lender may specify from time to time; maintain
adequate Worker’s Compensation Insurance under applicable laws and Comprehensive
General Public Liability Insurance; and maintain adequate insurance covering
such other risks as the Lender may reasonably specify from time to time
hereafter. All insurance required hereunder shall be effected by valid and
enforceable policies issued by insurers of recognized responsibility authorized
to transact business within the state where the property is located and shall,
inter
alia,
(1) name the Lender as an additional insured and/or loss payee,
(2) provide that no action of the Borrower shall void any such policy as to
the Lender, and (3) provide that the Lender shall be notified in writing of
any proposed cancellation of such policy at least fifteen (15) days in
advance thereof and will have the opportunity to correct any deficiencies
justifying such proposed cancellation. For the purposes of this Paragraph,
an
insurance policy shall be deemed to be “adequate” if it provides coverage
against such risks and in such amounts as is customarily carried by owners
of
similar businesses and properties.
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G.
Inspection
by the Lender.
Upon
prior reasonable notice (other than in emergencies when no notice shall be
required) and during normal business hours, permit any person designated by
the
Lender to inspect any of its properties, including its books, records and
accounts (and including the making of copies thereof and extracts therefrom)
during normal business hours.
H.
Prompt
Payment of Taxes.
Accrue
its tax liability (including withholdings for employee taxes and social
security) in accordance with usual accounting practice and pay or discharge
(or
cause to be paid or discharged) as they become due all taxes, assessments and
government charges upon its property, operations, income and products (as well
as all claims for labor, materials or supplies), which, if unpaid, might become
a lien upon any of its property; provided that the Borrower shall, prior to
payment thereof, have the right to contest such taxes, assessments and charges
in good faith by appropriate proceedings so long as the Lender’s interests are
protected by bond, letter of credit, escrowed funds or other appropriate
security.
I.
Notification
of Default Under This and Other Loan or Financing Arrangements.
Promptly notify the Lender in writing of the occurrence of any Event of Default
under this Agreement or any other loan or financing arrangement.
J.
Notification
of Litigation.
Promptly notify the Lender in writing of any litigation that has been instituted
or is pending or threatened which might have a material adverse effect on its
continued operations or financial condition.
K.
Notification
of Governmental Action.
Promptly notify the Lender in writing of any governmental investigation or
proceeding that has been instituted or is pending or threatened, including,
without limitation, matters relating to the federal or state tax returns of
the
Borrower or the Guarantors, compliance with the Occupational Safety and Health
Act or proceedings by the Treasury Department, Labor Department or Pension
Benefit Guaranty Corporation with respect to matters affecting employee welfare,
benefit or retirement programs.
L.
Preservation
of the Collateral.
Take
all reasonably necessary steps to preserve, protect and defend the Collateral
and keep it in good operating condition and repair (reasonable wear and tear
excepted) and free of unpermitted liens and give Lender access to and permit
it
to inspect the Collateral during all business hours and other reasonable times.
M.
Maintenance
of Records.
Keep
adequate records and books of account, in which complete entries will be made
in
a manner reasonably acceptable to the Lender and consistently applied,
reflecting all financial transactions of the Borrower.
N.
Compliance
With Laws.
Comply
in all material respects with all applicable laws, rules, regulations and
orders, such compliance to include, without limitation, paying before the same
become delinquent all taxes, assessments and governmental charges imposed upon
it or upon its property; provided,
however,
that
Borrower shall be entitled to contest the same in good faith so long as such
action, in the Lender’s reasonable opinion, does not have an adverse effect upon
the Lender’s rights hereunder or the Collateral.
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O.
Accounts,
Deposits and Balances.
Borrower shall maintain its primary operating and deposit accounts with the
Lender.
P.
Notification
of Material Adverse Changes.
Promptly notify the Lender in writing of any conditions or circumstances which
might have a material adverse effect on Borrower’s continued operations or
financial condition.
Q.
Additional
Financial and Other Covenants.
Comply
with the additional financial and other covenants set forth on Schedule A
attached hereto.
IX.
NEGATIVE COVENANTS.
Until
payment in full of all indebtedness under the Loans and the other Obligations,
the Borrower and the Guarantors jointly and severally covenant that the Borrower
and the Guarantors will not, without the express prior written consent of the
Lender, which consent shall not be unreasonably delayed or denied:
A.
Nature
and Scope of Business.
Enter
into any type of business other than that in which it is presently engaged
or
otherwise significantly change the scope or nature of its business.
B.
Liens
and Mortgages.
Incur,
create, assume or suffer to exist any mortgage, pledge, lien, attachment, charge
or other encumbrance of any nature whatsoever on any of the Collateral, now
or
hereafter owned, other than: (1) the security interests or liens granted to
the Lender pursuant to the Loan Documents; (2) deposits under Worker’s
Compensation, Unemployment Insurance and Social Security laws; (3) liens
imposed by law, such as carriers, warehousemen’s or mechanic’s liens incurred in
good faith in the ordinary course of business and which do not, in the
aggregate, have a material adverse effect on the Borrower’s financial condition
or the Collateral; and, (4) the Permitted Encumbrances.
C.
Ownership;
Management.
Materially change the current management, ownership or capital structure of
Borrower.
D.
Places
of Business; Location of Collateral.
Maintain or relocate to, open or close, any other place of business or move
any
of the Collateral from the Premises, except upon thirty (30) days prior
written notice to the Lender.
X.
CONDITIONS PRECEDENT TO MAKING OF LOANS.
The
obligation of the Lender to make any Loan and make disbursements of the proceeds
of the same to the Borrower is subject to the satisfaction by the Borrower
or
its representatives of the following conditions precedent with respect to such
Loan: (1) the Borrower and the Guarantors have executed and delivered all
of the Loan Documents deemed appropriate and necessary by the Lender, in form
and substance satisfactory to the Lender; (2) the Borrower’s and
Guarantors’ warranties and representations as contained herein and in the Loan
Documents shall be accurate and complete and Lender has received satisfactory
evidence of the same, including, at Lender’s option, an opinion of Borrower’s
legal counsel to that effect; and, (3) the Borrower and Guarantors shall
not be in default under any of the covenants, warranties, representations,
terms
or conditions contained in this Agreement or in the Loan Documents as of the
date of entering into such Loan and as of the date of each disbursement
thereunder.
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Lender’s
obligations to extend any Loan to Borrower under this Agreement shall be subject
to the completion of a reasonable due diligence review, satisfactory to the
Lender in all respects, including inspection of the Borrower’s financial control
systems and management prepared financial statements, and the subordination
of
all debt of Borrower.
In
addition to the foregoing, any material adverse change in the financial
condition, operating status or general business prospects of the Borrower shall
void the Lender’s commitment to extend any Loan to the Borrower.
XI.
EVENTS OF DEFAULT; ACCELERATION.
The
occurrence of any one or more of the following events shall constitute a default
under this Agreement, each of the Loan Documents and the Obligations
(collectively “Events of Default”): (1) if any statement, representation or
warranty made by the Borrower or Guarantors in this Agreement or in any of
the
Loan Documents, or in connection with any of the same, or if any financial
statement, report, schedule or certificate furnished by the Borrower or
Guarantors or any of its officers or accountants to the Lender, shall prove
to
have been false or misleading when made, or subsequently becomes false or
misleading, in any material respect (as determined in the Lender’s reasonable
discretion); (2) default by the Borrower in payment on its due date of any
principal or interest called for under any of the Loans or the Loan Documents,
or of other amounts due under any other of the Obligations, or other event
of
default under the Loan Documents or the other Obligations, provided such default
is not cured within any applicable grace period thereunder; (3) default by
the Borrower in the performance or observance of any of the provisions, terms,
conditions, warranties or covenants of this Agreement, the Loan Documents or
any
other of the Obligations; (4) the dissolution, termination of existence,
merger or consolidation of the Borrower or a sale of Borrower’s business,
capital stock, or the Collateral not in the ordinary course of business;
(5) the Borrower or the Guarantors shall (a) apply for or consent to
the appointment of a receiver, trustee or liquidator of it or any of its
property, (b) make a general assignment for the benefit of creditors,
(c) be adjudicated as bankrupt or insolvent, (d) file a voluntary
petition in bankruptcy or a petition or an answer seeking reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation under
any law or statute or an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law or statute, or
(e) offer or enter into any composition, extension or arrangement seeking
relief or extension of its debts; (6) proceedings shall be commenced or an
order, judgment or decree shall be entered, without the application, approval
or
consent of the Borrower, in or by any court of competent jurisdiction, relating
to the bankruptcy, dissolution, liquidation, reorganization or the appointment
of a receiver, trustee or liquidator of the Borrower or Guarantors, or of all
or
a substantial part of its assets, and such proceedings, order, judgment or
decree shall continue undischarged or unstayed for a period of sixty
(60) days; (7) the Borrower’s inability to pay its debts as they
mature or other insolvency, however defined and determined by the Lender in
its
sole discretion; or (8) a judgment for the payment of money shall be
rendered against the Borrower that could have a material adverse effect upon
the
financial condition of Borrower and the same shall remain undischarged for
a
period of thirty (30) days, during which period execution shall not be
effectively stayed. Notwithstanding anything herein or in the other Loan
Documents to the contrary, an Event of Default shall not be deemed to be
occurring hereunder or under any Loan Documents during any period from
(X) the date the Borrower files a registration statement on form S-1 for
the purpose of an initial public offering until (Y) the earlier of
(i) two business days after the date such initial public offering is
consummated, and (ii) the date the Borrower withdraws such registration
statement (such period, the “IPO Preparation Period”); provided that the Company
is diligently pursuing an initial public offering during the IPO Preparation
Period.
Page
10
Upon
the
occurrence of any Event of Default, the Lender’s commitment to make further
Loans under the Loan Documents or any other agreement with the Borrower shall
immediately cease and terminate and, at the election of the Lender, all of
the
Obligations of the Borrower to the Lender, either under this Agreement, the
Loan
Documents, or otherwise, will immediately become due and payable without further
demand, notice or protest, all of which are hereby expressly waived. Thereafter,
the Lender may proceed to protect and enforce its rights, at law, in equity,
or
otherwise, against the Borrower, the Guarantors and any other endorser or
guarantor of the Borrower’s Obligations, either jointly or severally, and may
proceed to liquidate and realize upon any of its Collateral in accordance with
the rights of a secured party under the Uniform Commercial Code, under any
Loan
Documents, under any other agreement between the Borrower and the Lender, or
under any agreement between any guarantor or endorser of the Borrower’s
Obligations to the Lender, and to apply the proceeds thereof to payment of
the
Obligations of the Borrower to the Lender in such order and in such manner
as
the Lender, in its sole discretion, deems appropriate.
A.
Entire
Agreement; Waivers.
This
Agreement, the Schedules hereto, and the Loan Documents together constitute
the
entire agreement between the Borrower, the Guarantors and the Lender and no
covenant, term, condition or other provision thereof nor any default in
connection therewith may be waived except by an instrument in writing, signed
by
the Lender and delivered to the Borrower. The Lender’s failure to exercise or
enforce any of its rights, powers or privileges under this Agreement or the
Loan
Documents shall not operate as a waiver thereof. In the event of any conflict
between the terms, covenants, conditions and restrictions contained in the
Loan
Documents, the term, covenant, condition or restriction that confers the
greatest benefit upon the Lender shall control. The determination as to which
term, covenant, condition or restriction is more beneficial shall be reasonably
made by the Lender in its reasonable discretion.
B.
Remedies
Cumulative.
All
remedies provided under this Agreement and the Loan Documents or afforded by
law
shall be cumulative and available to the Lender until all of the Borrower’s
Obligations to the Lender have been paid in full.
C.
Survival
of Covenants.
All
covenants, agreements, representations and warranties made in this Agreement
and
in the Loan Documents shall be deemed to be material and to have been relied
on
by the Lender, notwithstanding any investigation made by the Lender or in its
behalf, and shall survive the execution and delivery of this Agreement and
the
Loan Documents. All such covenants, agreements, representations and warranties
shall bind and inure to the benefit of the Borrower’s, the Guarantor’s and the
Lender’s successors and assigns, whether so expressed or not.
D.
Governing
Law; Jurisdiction.
This
Agreement and the Loan Documents shall be construed and their provisions
interpreted under and in accordance with the laws of the State of New Hampshire.
The Borrower and the Guarantors, to the extent they may legally do so, hereby
consent to the jurisdiction of the courts of the State of New Hampshire and
the
United States District Court for the State of New Hampshire for the purpose
of
any suit, action or other proceeding arising out of any of their obligations
hereunder or with respect to the transactions contemplated hereby, and expressly
waive any and all objections they may have to venue in any such courts.
Page
11
E.
Assurance
of Execution and Delivery of Additional Instruments.
The
Borrower and Guarantors agree to execute and deliver, or to cause to be executed
and delivered, to the Lender all such further instruments, and to do or cause
to
be done all such further acts and things, as the Lender may reasonably request
or as may be reasonably necessary or desirable to effect further the purposes
of
this Agreement and the Loan Documents.
F.
Waivers
and Assents.
The
Borrower, the Guarantors and any other guarantor or endorser of the Borrower’s
Obligations to the Lender, hereby waive, to the fullest extent permitted by
law,
demand, notice, protest, notice of acceptance of this Agreement and the Loan
Documents, notice of Loans made, credit extended, Collateral received or
delivered or other action taken in reliance hereon and all other demands and
notices of any description with respect both to the Loan Documents and the
Collateral. The Borrower and Guarantors assent to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange
or
release of Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payments thereon
and the settlement, compromising or adjusting of any thereof, all in such manner
and at such time or times as the Lender may deem advisable. Any demand upon
or
notice to the Borrower or Guarantors that the Lender may be required or may
elect to give shall be mailed by registered or certified mail, return receipt
requested, postage prepaid and shall be effective on the date of the first
attempted delivery thereof by the U. S. Postal Service, as shown on the
registered or certified mail return receipt for such notice addressed to the
Borrower at its address set forth at the beginning of this Agreement or to
the
Guarantors at the address set forth hereinbelow.
G.
No
Duty of the Lender With Respect to the Collateral.
The
Lender shall have no duty as to the collection or protection of Collateral
or
any income thereon, nor as to the preservation of rights against prior parties,
nor as to the preservation of any rights pertaining thereto, beyond the safe
custody thereof.
H.
Election
of the Lender.
The
Lender may exercise its rights with respect to Collateral without resorting
or
regard to other collateral or sources of reimbursement for the Obligations
of
Borrower to the Lender.
I.
Person.
The
term “Person” shall mean an individual, corporation, partnership, joint venture,
association, estate, joint stock company, trust, organization, business, or
a
government or an agency or political subdivision thereof.
J.
Assignment.
If, at
any time, by assignment or otherwise, the Lender transfers its rights in any
of
the Borrower’s or Guarantors’ Obligations and its rights in Collateral therefor,
in whole or in part, such transfer shall carry with it the powers and rights
of
the Lender under this Agreement, the Loan Documents and the Collateral so
transferred and the transferee shall become vested with such powers and rights
whether or not they are specifically referred to in the instrument evidencing
the transfer. If, and to the extent that the Lender retains such rights and
Collateral, the Lender shall continue to have the rights and powers herein
set
forth with respect thereto. This Agreement and the Loan Documents shall be
binding upon and inure to the benefit of the Lender, the Borrower and the
Guarantors, their successors, assigns, heirs and personal representatives;
provided, however, the rights and obligations of the Borrower and the Guarantors
are not assignable, delegable or transferable without the consent of the Lender.
All of the rights of the Lender under this Agreement and the Loan Documents
shall inure to the benefit of any participating bank or banks and its or their
successors and assigns.
Page
12
K.
Expenses;
Proceeds of Collateral.
The
Borrower and the Guarantors covenant and agree that they shall pay to the
Lender, on demand, any and all reasonable out-of-pocket expenses, including
reasonable attorneys’ fees, court costs, sheriffs’ fees and other expenses
incurred or paid by the Lender in protecting and enforcing its rights under
this
Agreement, the Loan Documents, and the other Obligations, including the costs
of
preparation of this Agreement and the Loan Documents, and any amendments,
modifications, consents or waivers in respect thereof, and all filing, auditing,
accounting and appraisal fees, if any are required. After deducting all of
said
expenses and the reasonable expenses of retaking, holding, preparing for sale,
selling and the like, the residue of any proceeds of collections or sale of
Collateral shall be applied to the payment of principal of or interest on
Obligations of the Borrower to the Lender in such order or preference as the
Lender may determine and any excess shall be returned to the Borrower (subject
to the provisions of the Uniform Commercial Code) and the Borrower shall remain
liable for any deficiency.
L.
The
Lender’s Right of Offset.
The
Borrower and the Guarantors hereby grant the Lender a continuing security
interest in, and the right to set off against, any deposits or other sums at
any
time credited or due from the Lender to the Borrower or the Guarantors, and
any
securities or other property of the Borrower or Guarantors which at any time
are
in the possession of the Lender, for the payment of any Obligations due the
Lender. The Lender may apply or set off such deposits or other sums against
the
Borrower’s Obligations whether or not the Collateral is considered by the Lender
to be adequate. The Borrower and the Guarantors expressly grant to the Lender
the right to set off and apply such deposits and sums without having to resort
to recourse to any other Collateral in which the Lender has a security interest.
M.
Notices.
All
notices, requests, demands and other communications provided for hereunder
shall
be in writing (including telegraphic communication) and shall be either mailed
by certified mail, return receipt requested, or delivered by overnight courier
service, to the applicable party at the addresses set forth in this Agreement.
N.
Savings
Clause.
Any
provision of this Agreement or any of the Loan Documents that is prohibited
or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating
the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
O.
Term
of this Agreement.
This
Agreement shall remain in full force and effect until all of the Obligations
have been paid in full and all of the terms, conditions and covenants under
the
Loan Documents have been performed.
|
|
|
LENDER:
|
||
|
|
APPLIED
DIGITAL SOLUTIONS, INC.
|
|||
|
/s/
Xxxxx
Xxxxxx
|
|
By:
|
|
/s/
Xxxx
XxXxxxx
|
|
|
|
Name:
|
|
Xxxx
XxXxxxx
|
|
|
|
Title:
|
|
Senior
Vice President and Chief Financial
Officer
|
Page
13
|
|
|
BORROWER:
|
||
|
WITNESS:
|
|
VERICHIP
CORPORATION
|
||
|
/s/
Xxxxx
Xxxxxx
|
|
By:
|
|
/s/
Xxxxx
XxXxxxxxxx
|
|
|
|
Name:
|
|
Xxxxx
XxXxxxxxxx
|
|
|
|
Title:
|
|
Chief
Executive Officer
|
Page
14
SCHEDULE
A
Additional
Terms and Conditions
|
I.
|
Periodic
Fees Payable by Borrower
|
Working
Capital Revolving Line of Credit Loan: None
A.
Monthly management financial statements within ten (10) days after the end
of each quarter, including accountant compiled balance sheets and statements
of
income in each case, prepared in accordance with generally acceptable accounting
principles.
B.
Monthly accounts receivable summaries and inventory reports within ten
(10) days after the end of each quarter prepared in accordance with
generally acceptable accounting principals.
C.
Copies
of Borrower’s corporate tax returns to be delivered within ninety (90) days
of the end of each year to which they appertain.
D.
Yearly
accountant reviewed financial statements within sixty (60) days of the
Borrower’s fiscal year end.