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Exhibit
10.6
SECURITY
AGREEMENT
SECURITY AGREEMENT (the
“Agreement”) made December 27, 2005 by and between
VeriChip Corporation, a Delaware corporation with a principal place
of business at 1690 South Congress Avenue, Suite 200, Delray Beach,
Florida 33445 (the “Debtor”), and Applied Digital
Solutions, Inc., a Missouri corporation located at 1690 South
Congress Avenue, Suite 200, Delray Beach, Florida 33445 (the
“Secured Party”).
WITNESSETH:
WHEREAS, pursuant to a Commercial Loan
Agreement of even date (the “Loan Agreement”), Secured
Party has granted to Debtor Eight Million Five Hundred Thousand
Dollars ($8,500,000.00) in a Working Capital Revolving Line of
Credit (the “Loan”); and
WHEREAS, the obligation of the Secured
Party to make the Loan to the Debtor is subject to the condition,
among others, that the Debtor shall execute and deliver this
Agreement and grant the security interests hereinafter described.
Terms not otherwise defined herein shall have the meanings ascribed
to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the
willingness of the Secured Party to make the Loan to the Debtor and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Security Interest . As
security for the Secured Obligations described in Section 2 hereof,
the Debtor hereby grants to the Secured Party a first priority
security interest in and lien on all of the property described
below (hereinafter referred to collectively as the
“Collateral”):
a. All equipment, including
machinery, motor vehicles, office equipment, furniture, fixtures,
along with all other parts, tools, trade-ins, repairs, accessories,
accessions, modifications and replacements, whether now owned or
subsequently acquired, constructed or attached or added to or
placed in, the foregoing (collectively, the
“Equipment”);
b. All inventory, wherever
located, including goods, merchandise and other personal property,
held for sale or lease or furnished or to be furnished under a
contract of service, or constituting raw materials, work in process
or materials used or consumed in the Debtor’s business, or
consigned to others or held by others for return to the Debtor,
whether now owned or subsequently acquired or manufactured and
wherever located (collectively, the
“Inventory”);
c. All accounts receivable,
including, without limitation, accounts, contracts, contract
rights, chattel paper, instruments, rents, deposits, general
intangibles and any other obligations of any kind, whether now
existing or hereafter arising out of or in connection, with the
sale or lease of goods or the rendering of services and all rights
now or hereafter existing in and to all security agreements, notes,
leases, licenses, franchises, supply agreements and other contracts
securing or otherwise relating to any such accounts, contracts,
contract rights, chattel paper, instruments, rents, deposits,
general intangibles or obligations (any and all such accounts,
contracts, contract rights, chattel paper, instruments, rents,
deposits, general intangibles and obligations being the
“Receivables” and any and all such security agreements,
notes, leases, licenses, franchises, supply agreements and other
contracts being the “Related Contracts”);
VERICHIP SECURITY
AGREEMENT
Page 2
d. All general intangibles,
including, but not limited to, corporate names, trade names,
trademarks, trade secrets, books and records, customer lists, blue
prints and plans, computer programs, tapes and related electronic
data, processing software and all corporate ledgers;
e. Any and all additions,
accessions, substitutions or replacements to or for any of the
foregoing;
f. Any and all products and
proceeds of any or all of the foregoing, including, without
limitation, cash, cash equivalents, tax refunds and the proceeds of
insurance policies providing coverage against the loss or
destruction of or damage to any of the Collateral, or any
indemnity, warranty or guarantee payable by reason of loss or
damage to or otherwise with respect to any of the Collateral
(whether or not the Secured Party is the loss payee
thereof);
g. All of the Debtor’s
after-acquired property of the kinds and types described in
paragraphs (a) - (f) herein;
h. All records and data
relating to any of the property described above, whether in the
form of a writing, photograph, microfilm, microfiche or electronic
media, together with all of the Debtor’s right, title and
interest in and to all computer software required to utilize,
create, maintain and process any of such records or data or
electronic media; and also in (i) all checks, money, securities,
bank accounts, deposit accounts and other accounts in the
possession of or held by the Secured Party whether in the name of
the Debtor or in the name of the Secured Party, and (ii) all other
property given by the Debtor to the Secured Party pursuant to this
agreement. The property described in (i) and (ii) above are held in
the possession of the Secured Party by agreement of Debtor and
Secured Party. All of the said Collateral (which throughout this
Agreement includes after-acquired Collateral) is to secure the
payment and performance of all of the Secured
Obligations.
2. Secured Obligations . The
security interest hereby granted shall secure the following (the
“Secured Obligations”):
a. The Debtor’s
repayment of the principal amount of the Loan, together with
interest, late charges and any other applicable charges to the
Secured Party pursuant to the Loan;
b. The Debtor’s payment
or performance of its obligations under the Loan Agreement and
under the other Loan Documents (as defined, described and
identified in the Loan Agreement, hereinafter the “Loan
Documents”), as the same may be amended, modified, extended,
renewed, replaced or restated; and
c. The payment of all other
sums with interest and charges thereon advanced in accordance
herewith to protect the validity, security and priority of this
Agreement, the Loan Agreement or the Loan Documents.
VERICHIP SECURITY
AGREEMENT
Page 3
3. Warranties and Representations of
the Debtor . Debtor hereby makes the following representations
and warranties that shall survive the execution and delivery of
this Agreement and shall be continuing representations and
warranties as long as any Secured Obligations remains
outstanding:
a. All representations and
warranties made in the Loan Agreement and the Loan Documents
relating to the Debtor and the Collateral are true, accurate and
complete in all material respects;
b. The Debtor’s
principal place of business is located at 1690 South Congress
Avenue, Suite 200, Delray Beach, Florida; the Debtor’s
executive offices and the office where its books and records are
kept and are to be kept concerning the Receivables, Related
Contracts, and other Collateral are at the aforesaid address; and
the Debtor has no other places of business except those set forth
on Schedule I hereto;
c. The Debtor conducts
business only under and through the business and trade name
“VeriChip Corporation.”
d. No material authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or other person is required either (i) for
the grant by the Debtor of the security interests granted hereby or
for the execution, delivery or performance of this Agreement by the
Debtor, or (ii) for the perfection of or the remedies hereunder,
except the filing of financing statements;
e. The Debtor has good and
marketable title to all of the Collateral pledged by it hereunder,
free and clear of any liens, security interests, encumbrances or
interests or claims of any other person or entity, except those set
forth on Schedule II hereto and there are no sums owed with respect
to the Collateral.
f. Upon the filing of UCC-1
financing statements being delivered at or prior to the execution
hereof, the Secured Party will have a valid, perfected first
security interest in all of the Collateral;
g. The Debtor has not
performed any acts which might prevent the Secured Party from
enforcing any of the material terms and conditions of this
Agreement or which would limit any of them in any such
enforcement;
h. Schedule III attached
hereto sets forth the description and location of all Collateral
not located at the Debtor’s principal place of business,
together with a list of the record owners of and record holders of
liens against the real estate on which such Collateral is located;
and
i. No effective financing
statements or other similar instrument in effect covering all or
any part of the Collateral is on file in any recording office,
except as may have been filed in favor of Secured Party relating to
this Agreement.
VERICHIP SECURITY
AGREEMENT
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4. Affirmative Covenants of the
Debtor .
a. The Debtor shall promptly
notify and provide the Secured Party with a complete description of
the opening of any new places of business, the closing of any
existing places of business, the conduct of business under any
names or through any entities other than those set forth herein,
the relocation of any of the Collateral to any new place of
business or any other act which would affect the financing
statements filed by the Secured Party;
b. The Debtor shall
continuously take all steps that are necessary or prudent to
protect the security interests of the Secured Party in the
Collateral;
c. The Debtor shall defend
the Collateral against the claims and demands of all
persons;
d. The Debtor shall deliver
and pledge to the Secured Party, endorsed or accompanied by
instruments of assignment or transfer satisfactory to the Secured
Party, any Instruments, documents and chattel paper which the
Secured Party may reasonably specify;
e. The Debtor shall comply,
in all material respects, with all governmental regulations
applicable to the Collateral or any part thereof or to the
operation of the Debtor’s business; provided, however, that
the Debtor may contest any governmental regulation in any
reasonable manner which shall not, in the reasonable opinion of the
Secured Party, adversely affect the Secured Party’s rights or
the first priority of its security interest in the
Collateral;
f. The Debtor shall pay
promptly when due, all taxes, assessments and governmental charges
or levies imposed upon the Collateral or in respect of its income
or profits therefrom, as well as all claims of any kind, except
that no such charge need be paid if (i) the validity thereof is
being contested in good faith by appropriate proceedings, (ii) such
proceedings do not involve any danger of the sale, forfeiture or
loss of any of the Collateral or any interest therein; and (iii)
such charge is adequately reserved against in accordance with the
generally accepted accounting principles;
g. The Debtor shall cause the
Equipment to be maintained and preserved in the same condition,
repair and working order as when new and shall make all repairs,
replacements, additions and other improvements necessary to
maintain the Equipment in such good condition;
h. The Debtor shall maintain
Inventory sufficient to meet the needs of its business;
i. The Debtor shall preserve
all beneficial Related Contracts;
j. The Debtor shall take all
commercially reasonable steps necessary to collect the
Receivables;
k. The Debtor shall assure
that (i) no Receivable is or shall be subject to any defense,
offset, counterclaim, discount or allowance, (ii) no agreement
under which any deduction, discount, credit or allowance of any
kind may be granted or allowed shall have been or shall thereafter
be made by Debtor with any account party without the consent of
Secured Party, (iii) all statements
VERICHIP SECURITY
AGREEMENT
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made and all unpaid balances appearing
in the invoices, documents and agreements relating to each
Receivable are and shall be true, genuine, and correct in all
respects, and (iv) no Receivable shall be converted to a note or
other instrument unless the same shall be delivered to the
possession of the Secured Party within ten (10) days of the date of
execution of such note or instrument;
l. The Debtor shall, with
respect to any Collateral which consists of trucks, automobiles or
other motor vehicles, or any other Collateral required to be
titled, deliver all titles thereto to the Secured Party to be held
by the Secured Party and shall make, execute and deliver any and
all applications, and take such other action to assure that the
Secured Party is listed of record as a lienholder on all title
certificates;
m. Debtor shall keep accurate
and complete records listing and describing the Collateral and,
when requested by Secured Party, Debtor shall give Secured Party a
certificate listing and describing the Collateral and setting forth
the total value of the Inventory, the total value of the Equipment,
the amount of the Receivables designating how many dates the
Receivables are from the date of invoice, the face value of any
instruments, and any other information Secured Party may request.
Upon reasonable notice, Secured Party shall have the right at any
time to inspect the Collateral and to audit and make copies of any
records or other writings that relate to the Collateral or the
general financial condition of Debtor. Bank shall use its best
efforts to commence such inspections during reasonable business
hours. Secured Party may remove such records and writings for the
purpose of having copies made thereof;
n. The Debtor shall advise
the Secured Party promptly, in reasonable detail, (i) of any lien,
security interest, encumbrance or claim made or asserted against
any of the Collateral, (ii) of any material change, substantial
loss or depreciation in the composition of the Collateral, and
(iii) of the occurrence of any other material adverse effect on the
aggregate value, enforceability or collectibility of the Collateral
or on the security interests created hereunder;
o. The Debtor shall give,
execute, deliver and file or record in the proper governmental
offices any instrument, pap
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