EXHIBIT 10.20
[IBM Credit Corporation letterhead]
August 20, 2002
Applied Digital Solutions, Inc.
000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Senior Vice President and Chief Operating
Officer
Re: Credit Agreement
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Dear Xx. Xxxxxxxxxx:
Reference is made to the Third Amended and Restated Term Credit
Agreement, dated as of March 1, 2002 (as amended, supplemented or otherwise
modified through the date hereof, the ("Credit Agreement"), by and among IBM
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Credit Corporation ("IBM Credit"), as lender and Digital Angel Share Trust,
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as Tranche A Borrower, Applied Digital Solutions, Inc. ("ADS"), as Tranche B
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Borrower, and certain Subsidiaries of ADS, as Loan Parties. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to them in the Credit Agreement.
ADS hereby acknowledges that Defaults exist as a result of the
occurrence of each of (i) the failure of Tranche B Borrower to cause the
Caledonian Subsidiaries to become parties to the Credit Agreement in
compliance with Section 6.25 of the Credit Agreement, (ii) the proceedings
initiated by the directors of Caledonian Venture Holdings Limited to
liquidate the Caledonian Subsidiaries ((i) and (ii) collectively, the
"Caledonian Defaults") and (iii) the failure of each of Tranche B Borrower
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and MAS to comply with Section 7.1(B)(i) and (ii), respectively, of the
Credit Agreement, for the quarter ended June 30, 2002 (such Defaults,
together with the Caledonian Defaults, the "Current Defaults").
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ADS has requested that IBM Credit consent to (i) the permanent
reduction to $4,000,000 of the outstanding principal amount of the Pledged
Note issued to ADS by C&H Pier and pledged to IBM Credit (the "C&H Pier
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Note"), (ii) the retention by ADS of any Net Cash Proceeds of the C&H Pier
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Note without further application to the Tranche B Loan so long as no Default
or Event of Default exists or is continuing (which has not been waived by
IBM Credit) at the time of such payment and (iii) the retention of
$1,383,800 of a $2,767,600 payment expected to be made by SysComm (the
"SysComm Payment") in respect of the Account owing from SysComm to Tranche B
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Borrower arising from the acquisition by SysComm of Info Tech Services, Inc.
(the "SysComm Account") so long as no Default or Event of Default exists or
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is continuing (which
has not been waived by IBM Credit) at the time of such payment ((i), (ii)
and (iii), collectively, the "Repayment Transactions").
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IBM Credit hereby agrees to waive the Current Defaults and to consent
to the Repayment Transactions in consideration of (i) ADS's agreement to
waive the 15-Business Day grace period set forth in Section 8.1(B) of the
Credit Agreement in respect of the Caledonian Defaults; (ii) the immediate
application to the Tranche B Loan of $1,383,800 of the SysComm Payment upon
receipt by ADS; (iii) the issuance to IBM Credit by ADS of additional
warrants pursuant to the warrant agreement (the "Additional ADS Warrant
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Agreement") entered into by ADS and IBM Credit on the date hereof, and (iv)
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the issuance to IBM Credit by VeriChip Corp. of warrants pursuant to the
warrant agreement (the "VeriChip Warrant Agreement") entered into by
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VeriChip and IBM Credit on the date hereof. The Additional ADS Warrant
Agreement provides, among other things, that IBM Credit may purchase
2,894,714 shares of common stock of ADS at a purchase price of $0.15 per
share and contains substantially the same terms as the warrant agreement,
dated as of April 10, 2001, between IBM Credit and ADS, as amended. The
VeriChip Warrant Agreement provides, among other things, that IBM Credit may
purchase 1,849,000 shares of common stock of VeriChip Corp. at a purchase
price of $0.05 per share and contains substantially the same terms as the
warrant agreement, dated as of April 10, 2001, between IBM Credit and ADS,
as amended.
Except as expressly waived or consented to hereby, all of the terms and
provisions of the Credit Agreement are and shall remain in full force and
effect. The waivers and consents provided for herein are limited to the
specific Sections of the Credit Agreement and matters specified herein and
shall not constitute an amendment or waiver of, or consent to, or an
indication of the Lender's willingness to amend, or waive or consent to, any
other provisions of the Credit Agreement or the same Sections for any other
date or time period (whether or not such other provisions or compliance with
such Sections for another date or time period are affected by the
circumstances addressed in this Letter Agreement).
This Letter Agreement and the waiver and consent set forth herein shall
become effective as of the date hereof upon receipt by IBM Credit of a
counterpart of each of (i) this Letter Agreement, duly executed by ADS, (ii)
the Additional ADS Warrant Agreement, duly executed by ADS, and (iii) the
VeriChip Warrant Agreement, duly executed by VeriChip.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
This Letter Agreement may be executed in two or more counterparts, each
of which shall constitute an original, but all of which, when taken together,
shall constitute but one instrument.
Sincerely,
IBM CREDIT CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Program Manager,
Global Special Handling Group
ACKNOWLEDGED AND ACCEPTED:
APPLIED DIGITAL SOLUTIONS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
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Name: Xxxxxx X. Xxxxxxxxxx
Title: Chief Operating Officer
