Exhibit 10.27
EXECUTION COPY
FORBEARANCE AGREEMENT, CONSENT AND AMENDMENT
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FORBEARANCE AGREEMENT, CONSENT AND AMENDMENT, dated as of
April 2, 2003 (this "Forbearance Agreement") with respect to the Third
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Amended and Restated Credit Agreement, dated as of March 1, 2002 and amended
as of September 30, 2002 and November 1, 2002 (as amended, supplemented,
restated or otherwise modified through the date hereof, the "Credit
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Agreement"), among IBM Credit LLC, a Delaware limited liability company,
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formerly IBM Credit Corporation ("IBM Credit"), Applied Digital Solutions,
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Inc., a Missouri corporation ("ADS" or the "Tranche B Borrower"), Digital
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Angel Share Trust, a Delaware statutory business trust (in such capacity,
the "Trust"; in its capacity as a Borrower, the "Tranche A Borrower"; and
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together with the Tranche B Borrower, the "Borrowers") and the other Loan
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Parties party thereto.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, IBM Credit has
made Loans to the Borrowers which remain outstanding;
WHEREAS, certain Events of Default have occurred and are
continuing;
WHEREAS, in the Notice of Default, dated March 6, 2003,
from IBM Credit to the Loan Parties, IBM Credit notified the Borrowers and
the other Loan Parties (i) of the occurrence and continuance of a payment
Event of Default described in clause (a) of the definition of "Specified
Events of Default" set forth in Section 1.1 hereof and (ii) that all
Obligations (including, without limitation, the Loans) are immediately due
and payable in accordance with Section 8.2 of the Credit Agreement;
WHEREAS, IBM Credit enforced its security interests in the
Deposit Accounts in accordance with the terms of the applicable Deposit
Account Control Agreements and has made available Collateral consisting of
cash in such Deposit Accounts in accordance with a letter agreement, dated
March 13, 2003;
WHEREAS, notwithstanding the existence of such payment
Events of Default and the other Specified Events of Default (as defined
below), so as to provide the Borrowers a stable environment in which to
operate and to facilitate the repayment of the Loans and satisfaction of the
other Obligations, the Borrowers and each other Loan Party have requested
that IBM Credit, and IBM Credit is willing to, forbear from taking other
remedial action under the Credit Agreement and the other Restructuring
Documents, but only on the terms and conditions set forth herein; and
WHEREAS, ADS has requested that IBM Credit, and IBM Credit
is willing to, consent to the buyout of the respective Employment Agreements
of each Employee with ADS common stock, but only on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. Unless otherwise defined
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herein, capitalized terms used herein have the meanings assigned in the
Credit Agreement, and the following terms shall have the following meanings:
"Budget": as defined in Section 7.1.
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"Cash Collateral": as defined in Section 7.2(b).
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"Computer Equity": Computer Equity Corporation, a Delaware
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corporation.
"Digital Angel": MAS.
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"Digital Angel Share Sale": as defined in Section 6.1.
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"Digital Angel Shares": the MAS Stock owned by the
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Tranche A Borrower.
"Effective Date": the first date on which the conditions
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precedent specified in Article IX have been satisfied or the
satisfaction thereof has been waived in accordance with the terms
of the Forbearance Agreement, such date to occur no later than
April 1, 2003.
"Forbearance Period": the period beginning on the Effective
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Date and ending on the Termination Date.
"IBM": IBM Corporation, a New York corporation.
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"Indemnified Persons": as defined in Section 11.5.
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"Investment Bank": as defined in Section 6.1(a).
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"Lawsuit": as defined in Section 9.1(h).
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"Losses": as defined in Section 11.5.
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"Maximum Adjustment Amount": as defined in Section 7.3.
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"Releasing Party": as defined in Section 9.1(b).
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"Specified Events of Default": (a) the Event of Default
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occurring and continuing under Section 8.1(A) of the Credit
Agreement as a result of the Borrowers' failure to pay to IBM
Credit in immediately available funds the amounts due and payable
in accordance with Section 2.3(B) and 2.4(B), respectively, of the
Credit Agreement or, alternatively, forty percent (40%) of the
original principal amount of the Loans and interest and expenses
($46,228,415.89) due and payable since February 28, 2003, in
accordance with Section 2.8 of the Credit Agreement and IBM
Credit's letter to the Borrowers, dated ▇▇▇▇▇ ▇, ▇▇▇▇, (▇) any
Events of Default existing on the date hereof which IBM Credit is
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aware of (including the Events of Default resulting from the
failure to comply with the financial conditions covenants set forth
in Section 7.1 of the Credit Agreement for the applicable period
ending December 31, 2002) and (c) any Events of Default resulting
from any breach of the representations and warranties set forth in
Sections 5.4 and 5.27 of the Credit Agreement on or prior to the
date hereof.
"Termination Date": the earlier to occur of (a) the date
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on which the Loans and other Obligations are repaid in full or
otherwise satisfied under Article V hereof or (b) a Termination
Event.
"Termination Event": the occurrence of any of the events
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set forth in Section 3.1(a) through (f), inclusive.
"Tranche A Deficiency Amount": as defined in Section 5.1(a).
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ARTICLE II
FORBEARANCE
Section 2.1 Forbearance. Notwithstanding the occurrence
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and continuance of the Specified Events of Default, subject to the terms and
conditions of this Forbearance Agreement, IBM Credit hereby agrees to
forbear, during the Forbearance Period, from the exercise of any or all
rights and remedies under the Credit Agreement, the other applicable
Restructuring Documents and applicable law solely in respect of the
Specified Events of Default (other than its rights and remedies in respect
of (x) the Deposit Accounts and Cash Collateral in respect of which IBM
Credit has exercised its rights prior to the date hereof, subject to the
terms set forth in Article VII, and (y) the Digital Angel Shares in
accordance with the Trust Agreement, subject to the terms set forth in
Article VI); it being understood that the foregoing is not and shall not be
construed as an amendment, waiver or modification of the Credit Agreement
except as expressly provided in this Forbearance Agreement.
ARTICLE III
FORBEARANCE EVENTS OF TERMINATION
Section 3.1 Termination Events. Upon the occurrence of any
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of the following events:
(a) failure of ADS to be cash flow positive on a
consolidated operational basis (excluding Digital Angel and SysComm) at all
times on and after the 30-day anniversary of the Effective Date (provided
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that up to $100,000 in the aggregate in respect of severance payments for
employees other than the Employees shall be excluded from this calculation);
or
(b) failure to deliver the Budget to IBM Credit within one
(1) Business Day of the date when due in form and substance satisfactory to
IBM Credit; or
(c) the filing of any ADS or Digital Angel shareholder
lawsuit deemed to be material, as determined by IBM Credit in its sole and
absolute discretion, or any lawsuit by or on behalf of ADS or Digital Angel
or any other Loan Party against the Tranche A Borrower, IBM Credit, IBM or
any Affiliate thereof; or
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(d) the occurrence of (i) an Event of Default other than a
Specified Event of Default after the date hereof, subject to such notice or
right to cure provisions as provided in the Credit Agreement, or (ii) an
Event of Default existing on or prior to the date hereof and continuing
after the date hereof which IBM Credit is not aware of on the date hereof;
or
(e) failure to repay any Loan when due as set forth under
Article V (subject to the exercise of purchase rights set forth under
Section 5.2); or
(f) breach or failure to satisfy any other condition,
covenant or agreement set forth in this Forbearance Agreement and the
Restructuring Documents
then, and in any such event, the provisions of Section 2.1 shall immediately
and automatically terminate and thereafter such Section 2.1 shall have no
force or effect.
Section 3.2 Events of Default. The occurrence of a
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Termination Event shall be deemed to be an Event of Default under the Credit
Agreement.
ARTICLE IV
CONSENT AND AMENDMENT
Section 4.1 Consent. Notwithstanding any provisions to the
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contrary in the Credit Agreement, IBM Credit hereby consents to the buyout
by ADS of the respective Employment Agreements of each respective Employee
with ADS common stock with a current market value not to exceed the required
buyout amount under each applicable Employment Agreement.
Section 4.2 Amendments to Credit Agreement. The Credit
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Agreement is hereby amended as follows:
(a) Attachment H (Intellectual Property) to the Credit
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Agreement is hereby amended by deleting such Attachment H in its entirety
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and substituting therefor the Attachment H attached hereto as Schedule 1.
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(b) Attachment K (Organization; Subsidiaries; Affiliates
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and Locations of Offices, Records and Inventory) to the Credit Agreement is
hereby amended by deleting such Attachment K in its entirety and
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substituting therefor the Attachment K attached hereto as Schedule 2.
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(c) Attachment U (Overdue Taxes and Tax Liens) to the
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Credit Agreement is hereby amended by deleting such Attachment U in its
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entirety and substituting therefor the Attachment U attached hereto as
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Schedule 3.
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(d) Attachment W (Judgments or Litigation) to the Credit
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Agreement is hereby amended by deleting such Attachment W in its entirety
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and substituting therefor the Attachment W attached hereto as Schedule 4.
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(e) Attachment X (Defaults) is hereby amended by deleting
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such Attachment X in its entirety and substituting therefor the Attachment X
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attached hereto as Schedule 5.
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ARTICLE V
LOAN PAYMENT PROVISIONS
Section 5.1 Repayment During Forbearance Period.
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(a) Notwithstanding anything to the contrary in the Credit
Agreement, so long as the Forbearance Period is effective, the Tranche A
Loan must be repaid in full no later than September 30, 2003; provided that
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all but $3 million of the Tranche A Loan (the "Tranche A Deficiency Amount")
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will be deemed to be paid in full on such date if less than the full amount
of the Tranche A Loan is repaid but all of the net cash proceeds of the
Digital Angel Share Sale on terms satisfactory to IBM Credit are applied to
the repayment of the Tranche A Loan. The Tranche A Deficiency Amount (if
any) must be repaid no later than March 31, 2004.
(b) Notwithstanding anything to the contrary in the Credit
Agreement, so long as the Forbearance Period is effective,
(i) the Tranche B Loan and all remaining
Obligations (other than the Tranche A Loan) must be repaid or
otherwise satisfied in full no later than March 31, 2004;
(ii) all legal fees incurred by IBM Credit as set
forth in Section 11.4 will be capitalized as additional principal
under the Tranche B Loan; and
(iii) from and after the Effective Date, (x) the
Tranche A Loan will continue to bear interest at the rate set forth
in Section 2.3(A)(iii) of the Credit Agreement and (y) the Tranche
B Loan will bear interest at seven percent (7%) per annum.
Section 5.2 Purchase Rights During Forbearance Period.
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Notwithstanding anything to the contrary in the Credit Agreement, so long as
the Forbearance Period is effective, the Loans may be purchased by or on
behalf of the Borrowers as follows:
(a) the Loans and all the other Obligations may be
purchased on or before June 30, 2003 for $30 million cash; or
(b) the Loans and all the other Obligations may be
purchased on or before September 30, 2003 for $50 million cash; or
(c) notwithstanding anything to the contrary in this
Article V, the Tranche A Loan may be purchased on or before September 30,
2003 for $40 million cash with an additional $10 million cash payment in
respect of (i) the Tranche A Deficiency Amount, (ii) the Tranche B Loan and
(iii) all remaining Obligations due on or before December 31, 2003. Payment
of $50 million in aggregate by December 31, 2003 shall constitute
satisfaction of the Obligations.
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ARTICLE VI
DIGITAL ANGEL SHARE SALE
Section 6.1 Overriding Conditions to the Digital Angel
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Share Sale. Notwithstanding anything to the contrary in the Restructuring
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Documents or Article V herein and as a condition to IBM Credit's continued
forbearance, the following conditions must be satisfied in respect of the
sale under the Trust Agreement of the Digital Angel Shares held by the Trust
(the "Digital Angel Share Sale"):
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(a) Promptly, and in any event within 30 days of the
Effective Date, the Trust will engage an investment bank (the "Investment
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Bank"), reasonably acceptable to IBM Credit, to conduct the Digital Angel
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Share Sale. Such engagement will include provision of a fairness opinion, if
requested by the Trust.
(b) The Investment Bank fee structure will be on customary
terms and based upon the success of the Digital Angel Share Sale, such fees
to be reasonably acceptable to IBM Credit. IBM Credit will not be required
to indemnify the Investment Bank in any respect.
(c) Within 30 days of the Effective Date, the Investment
Bank will have prepared and delivered to IBM Credit, the Trust and ADS a
report, in form and substance satisfactory to IBM Credit in its reasonable
discretion, in respect of the Digital Angel Share Sale process (including,
without limitation, a timetable to conduct such sale, the persons
responsible for managing such process, the parameters of the expected
transaction terms and the Investment Bank's expected range of proceeds). The
Digital Angel Share Sale must be consummated without any indemnification
claims or contingencies against the proceeds thereof.
(d) Unanimous written consent of the Advisory Board
Members (as defined in the Trust Agreement) approving pursuit of the Digital
Angel Share Sale on the terms proposed by the Investment Bank under Section
6.1(c) will have been delivered to IBM Credit. Upon such approval, the Trust
will diligently and expeditiously pursue the Digital Angel Share Sale
consistent with its obligations under the Trust Agreement.
(e) Other required consents to the Digital Angel Share
Sale (including any consents required under the Digital Angel/▇▇▇▇▇ Fargo
Credit Agreement, dated as of October 30, 2002) will have been obtained.
(f) Digital Angel will cooperate (including, without
limitation, assisting and preparation of road show materials and making
senior management of Digital Angel available to participate in meetings with
any prospective investors in a road show) with the Investment Bank and the
Trust to facilitate the Digital Angel Share Sale.
(g) All proceeds of the Digital Angel Share Sale will be
applied to the Loans and other Obligations to the extent required under
Section 5.1.
Section 6.2 Acknowledgement. Each of Digital Angel and the
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Trust, on behalf of the Advisory Board (as defined in the Trust Agreement),
hereby agrees that IBM Credit is an intended beneficiary of the Digital
Angel Share Sale process.
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ARTICLE VII
CASH COLLATERAL
Section 7.1 Budget. On and after the Effective Date, on a
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weekly basis on each Thursday, IBM Credit will receive a detailed budget
(the "Budget") in respect of each operating company of ADS (including
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Digital Angel, SysComm and Computer Equity) on both a consolidated and an
entity-by-entity basis. The Budget will be provided to IBM Credit on a
rolling 13-week basis itemizing all revenues projected to be received and
all expenses proposed to be made in the ordinary course of business of such
entities, such as expenses incurred or payable in respect of vendors,
materialmen and payroll (it being expressly understood by the parties hereto
that any legal and other professional fees (including, without limitation,
retainers and expenses incurred or paid) in connection with a defense of any
shareholder suit or the prosecution of any lawsuit by or on behalf of any
Loan Party against IBM or IBM Credit are not ordinary course business
expenses) during such periods and other cash flow and financial projections,
all in form and substance satisfactory to IBM Credit in its reasonable
discretion. A copy of the initial 13-week Budget is attached hereto as
Exhibit A.
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Section 7.2 Deposit Accounts. (a) The Borrowers and the
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other Loan Parties shall continue to transfer all revenues from operations
into the Deposit Accounts subject to Deposit Account Control Agreements
required to be maintained by the Borrowers and the other Loan Parties with
the Banks pursuant to the terms of the Credit Agreement.
(b) Collateral consisting of collected funds deposited
(whether directly or transmitted from lockboxes) in Deposit Accounts shall
remain subject to the control of IBM Credit in accordance with the
Contingent Blocked Account Agreement or the other Deposit Account Control
Agreements, as applicable (including, without limitation, any Deposit
Account and related Deposit Account Control Agreement replacing or in
substitution of the Contingent Blocked Account Agreement and the Deposit
Accounts thereunder) (such Collateral, the "Cash Collateral").
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(c) Prior to the date of termination of the Contingent
Blocked Account Agreement, (i) Deposit Accounts at KeyBank, N.A. shall have
been transferred to a bank satisfactory to IBM Credit and (ii) the
applicable Loan Parties and such depository institution shall have entered
into a Deposit Account Control Agreement satisfactory to IBM Credit in
respect of such Deposit Accounts.
Section 7.3 Usage. On a weekly basis on each Monday
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following the receipt of the Budget set forth in Section 7.1, IBM Credit
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will make available Cash Collateral from the Deposit Accounts subject to
Deposit Account Control Agreements (including, without limitation, the
Contingent Blocked Account Agreement) to ADS to pay expenditures of ADS and
its Subsidiaries (excluding Digital Angel and SysComm) in accordance with
the Budget. The variance of actual expenditures from budgeted expenditures on
a week-to-week basis shall not exceed an amount equal to 10% of permitted
expenditures (the "Maximum Adjustment Amount") provided that no single line
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item for permitted expenditures in the Budget may be adjusted on a
week-to-week basis by an amount in excess of 20% of the Maximum Adjustment
Amount.
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ARTICLE VIII
OTHER COLLATERAL
Section 8.1 Tranche A Facility. The Borrowers and the
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other Loan Parties hereby confirm and reaffirm that the Tranche A Facility
and the Obligations will continue to be secured by a perfected first
priority security interest in the Digital Angel shares held by the Trust for
the benefit of IBM Credit.
Section 8.2 Tranche B Facility. The Borrowers and the
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other Loan Parties hereby confirm and reaffirm that the Tranche B Facility
and the Obligations will continue to be secured by a perfected, first
priority security interest in (a) substantially all the assets of the
Tranche B Borrower and its Subsidiaries, excluding the assets of Digital
Angel or its Subsidiaries, (b) all Capital Stock in Subsidiaries and other
investments held by the Tranche B Borrower, and (c) any notes or other
securities held by the Tranche B Borrower in connection with the sale of the
Tranche B Borrower's assets or investments; provided that the parties hereto
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hereby agree that nothing herein shall be deem to modify the maximum
liability of SysComm under the Stock Pledge Agreement or the SysComm
Guaranty.
Section 8.3 Continuation of Perfected Security Interest.
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The Borrowers and the other Loan Parties hereby confirm and reaffirm that
they will take all necessary or reasonably desirable actions to maintain and
preserve IBM Credit's prior perfected security interest in the Collateral
(including, without limitation, in respect of any Collateral consisting of
Deposit Accounts and proceeds therein pursuant to any replacement or
substitute cash management system or arrangement).
ARTICLE IX
EFFECTIVE DATE
Section 9.1 Conditions Precedent to The Forbearance
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Agreement. This Forbearance Agreement will be effective on the date on which
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all of the following conditions are satisfied (such date to occur no later
than April 1, 2003):
(a) IBM Credit shall have received a copy of this
Forbearance Agreement, duly executed by the parties hereto.
(b) IBM and IBM Credit shall have received releases from
each of ADS (on behalf of itself and its officers and directors), Digital
Angel, the other Loan Parties, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (in all capacities relating
to the Restructuring Documents), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and the
Advisory Board Members (as defined in the Trust Agreement) (collectively,
the "Releasing Parties"), satisfactory to IBM and IBM Credit, forever
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releasing and discharging IBM and IBM Credit or any Affiliate thereof,
together with their past and present officers, directors, stockholders,
employees, subsidiaries, affiliates, related companies, predecessors,
successors, assigns, agents, trustees, attorneys, or other representatives
and each of them from all actions, causes of action, proceedings, charges,
complaints, claims, demands, damages, costs, liabilities, agreements, and
obligations of every kind, which they have ever had, now have or may have in
the future in respect of any matter under, arising out of or relating to the
Restructuring Documents, this Forbearance Agreement and the Lawsuit. Such
releases shall contain covenants
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not to ▇▇▇ IBM Credit, IBM or any affiliate thereof in respect of any matter
under, arising out of or relating to the Restructuring Documents, this
Forbearance Agreement and the Lawsuit. Such releases shall be duly
authorized by all organizational action (including Board resolutions) as
applicable, executed and delivered by each of the Releasing Parties.
(c) The Advisory Board Members (as defined in the Trust
Agreement) shall be satisfactory to IBM Credit and duly authorized by all
applicable organizational action of the Trust (including applicable
resolutions).
(d) The Advisory Board (as defined in the Trust Agreement)
and Digital Angel shall have agreed in writing that IBM Credit is a third
party beneficiary in the Digital Angel Share Sale process.
(e) Each of ADS, Digital Angel, the Advisory Board (as
defined in the Trust Agreement), the Trust and the other Loan Parties shall
have taken all necessary organizational action (including applicable Board
resolutions) authorizing the transactions contemplated by this Forbearance
Agreement (including, without limitation, any releases and the Digital Angel
Share Sale).
(f) ADS shall have delivered to IBM Credit an initial
Budget, in form and substance satisfactory to IBM Credit in its reasonable
discretion.
(g) ADS shall have dismissed the lawsuit, initially filed
on March 7, 2003, as ▇▇▇▇ ▇▇. ▇▇ ▇▇-▇▇▇▇▇▇▇ in the Fifteenth Judicial
Circuit in and for Palm Beach County, Florida and removed to the Southern
District of Florida, Case No. 03-80186-CIV-▇▇▇▇▇ on March 12, 2003 (the
"Lawsuit"), with prejudice within one (1) Business Day of execution of the
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Forbearance Agreement Term Sheet, dated as of March 24, 2003, executed by
the parties hereto and setting forth the material terms of this Forbearance
Agreement.
ARTICLE X
INTERPRETATION
Section 10.1 Continuing Effect of the Credit Agreement.
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The Borrowers and each other Loan Party hereby acknowledge and agree that
the Credit Agreement shall continue to be and shall remain unchanged and in
full force and effect in accordance with its terms, except as expressly
modified by this Forbearance Agreement.
Section 10.2 No Limitation on Remedies after Forbearance
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Period. The Borrowers and each Loan Party hereby acknowledge and agree that,
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at the end of the Forbearance Period, the provisions of this Forbearance
Agreement shall become of no force and effect and IBM Credit shall be free,
in accordance with the Credit Agreement and the other Restructuring
Documents, to exercise and enforce, or to take steps to exercise and
enforce, all rights, powers, privileges and remedies available to them under
the Credit Agreement, any other Restructuring Document or applicable law on
account of the Specified Events of Default (or any other Default or Event of
Default) as if this Forbearance Agreement had not been entered into by the
parties hereto.
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Section 10.3 Waiver; Other Defaults or Events of Default.
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(a) Nothing contained in this Forbearance Agreement shall be construed or
interpreted or is intended as a waiver of any rights, powers, privileges or
remedies that IBM Credit has or may have under the Credit Agreement or any
other Restructuring Document on account of the Specified Events of Default,
except as expressly provided herein.
(b) Nothing contained in this Forbearance Agreement shall
be construed or interpreted or is intended as a waiver of or limitation on
any rights, powers, privileges or remedies that IBM Credit has under the
Credit Agreement or any other Restructuring Document on account of any
Default or Event of Default other than the Specified Events of Default.
(c) All the Loans and other Obligations remain outstanding
and continue to be due and payable pursuant to the Credit Agreement and the
terms of this Forbearance Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Representations and Warranties. The Loan
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Parties hereby represent and warrant as of the date hereof that, after
giving effect to this Forbearance Agreement, (a) no Default or Event of
Default has occurred and is continuing, except the Specified Events of
Default, and (b) all representations and warranties of the Loan Parties
contained in the Restructuring Documents (with such term being deemed to
include this Forbearance Agreement) are true and correct in all material
respects with the same effect as if made on and as of such date, except for
the representations and warranties set forth in Sections 5.4 and 5.27 of the
Credit Agreement.
Section 11.2 Press Releases. ADS and the other applicable
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Loan Parties will deliver to IBM Credit prior to the issuance thereof, any
press releases relating to the transactions contemplated hereby (including,
without limitation, the Digital Angel Share Sale). IBM Credit will review
such press releases solely for accuracy of the transactions contemplated
hereby. ADS and other Loan Parties will have sole liability in respect of
any such press releases.
Section 11.3 Assignments. IBM Credit may assign its Loans
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and other Obligations to any Affiliate or any other Person; provided that
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such Person agrees to be bound by the terms of this Forbearance Agreement.
Section 11.4 Payment of Expenses. Each Borrower and each
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other Loan Party, jointly and severally, agrees to pay and reimburse IBM
Credit for all its reasonable costs and expenses incurred in connection with
the Digital Angel Share Sale and the preparation and delivery of this
Forbearance Agreement, including, without limitation, the reasonable fees
and disbursements of ▇▇▇▇▇ Day, counsel to IBM Credit, and the reasonable
fees and costs and expenses of the Investment Bank. Each Borrower and each
other Loan Party, jointly and severally, further agree to pay all reasonable
costs and expenses incurred in connection with the Digital Angel Share Sale
(including, without limitation, the reasonable fees and disbursements of the
Investment Bank and ▇▇▇▇▇ Day, counsel to IBM Credit) regardless of any
purchase of the Loans and other Obligations under Article V hereof. Legal
fees will be payable in accordance with the provisions of Section
5.1(b)(ii).
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Section 11.5 Indemnification. Each of each Borrower and
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each other Loan Party, jointly and severally, hereby agrees to indemnify and
hold harmless IBM, IBM Credit and their respective officers, directors,
consultants, advisors, agents and assigns (collectively, the "Indemnified
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Persons") against all losses, claims, damages, liabilities or other expenses
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(including reasonable attorneys' fees and court costs now or hereinafter
arising from the enforcement of this Forbearance Agreement and the
documentation relating hereto, the "Losses") to which any of them may become
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subject insofar as such Losses arise out of or are based upon any event,
circumstance or condition (a) occurring or existing on or before the date of
this Forbearance Agreement relating to any financing arrangements IBM Credit
may from time to time have with (i) such Loan Party, (ii) any Person that
shall be acquired by such Loan Party or (iii) any Person that such Loan
Party may acquire all or substantially all of the assets of, or (b) directly
or indirectly relating to the execution, delivery or performance of this
Forbearance Agreement or the consummation of the transactions contemplated
hereby or thereby or to any of the Collateral or to any act or omission of
any Loan Party in connection therewith. Such indemnification includes any
Losses arising out of or relating to any press releases as described under
Section 11.2. Notwithstanding the foregoing, no Loan Party shall be
obligated to indemnify IBM or IBM Credit for any Losses incurred by IBM or
IBM Credit which are a result of IBM's or IBM Credit's gross negligence or
willful misconduct. The indemnity provided herein shall survive the
termination of this Forbearance Agreement and shall be in addition to the
indemnity provisions set forth in Section 9.2 of the Credit Agreement.
Section 11.6 RELEASE OF CLAIMS. TO INDUCE IBM CREDIT TO
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ENTER INTO THIS FORBEARANCE AGREEMENT, EACH RELEASING PARTY HEREBY RELEASES,
ACQUITS AND FOREVER DISCHARGES IBM AND IBM CREDIT OR ANY AFFILIATE THEREOF,
TOGETHER WITH THEIR PAST AND PRESENT OFFICERS, DIRECTORS, STOCKHOLDERS,
EMPLOYEES, SUBSIDIARIES, AFFILIATES, RELATED COMPANIES, PREDECESSORS,
SUCCESSORS, ASSIGNS, AGENTS, TRUSTEES, ATTORNEYS, OR OTHER REPRESENTATIVES
AND EACH OF THEM FROM ALL ACTIONS, CAUSES OF ACTION, PROCEEDINGS, CHARGES,
COMPLAINTS, CLAIMS, DEMANDS, DAMAGES, COSTS, LIABILITIES, AGREEMENTS, AND
OBLIGATIONS OF EVERY KIND, WHICH THEY HAVE EVER HAD, NOW HAVE OR MAY HAVE IN
THE FUTURE IN RESPECT OF ANY MATTER UNDER, ARISING OUT OF OR RELATING TO THE
RESTRUCTURING DOCUMENTS, THIS FORBEARANCE AGREEMENT AND THE LAWSUIT. IN
ADDITION, EACH RELEASING PARTY HEREBY COVENANTS THAT SUCH RELEASING PARTY
SHALL NOT ▇▇▇ IBM CREDIT, IBM OR ANY AFFILIATE THEREOF IN RESPECT OF ANY
MATTER UNDER, ARISING OUT OF OR RELATING TO THE RESTRUCTURING DOCUMENTS,
THIS FORBEARANCE AGREEMENT OR THE LAWSUIT. EACH RELEASING PARTY HEREBY
REPRESENTS AND WARRANTS THAT SUCH RELEASES HAVE BEEN DULY AUTHORIZED BY ALL
ORGANIZATIONAL ACTION (INCLUDING BOARD RESOLUTIONS) AS APPLICABLE, AND DULY
EXECUTED AND DELIVERED BY EACH SUCH RELEASING PARTY.
Section 11.7 Counterparts. This Forbearance Agreement may
------------
be executed by one or more of the parties to this Forbearance Agreement on
any number of separate counterparts (including by telecopy), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Forbearance Agreement signed by the
parties hereto shall be delivered to each Borrower and IBM Credit.
11
Section 11.8 GOVERNING LAW. THIS FORBEARANCE AGREEMENT AND
-------------
THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS FORBEARANCE AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW.
Section 11.9 Reservation of Rights. Notwithstanding
---------------------
anything contained in this Forbearance Agreement to the contrary, the
Borrowers and each other Loan Party acknowledge that IBM Credit does not
waive, and expressly reserves, the right to exercise, at any time during the
Forbearance Period, any and all of its rights and remedies under (a) the
Credit Agreement, any other Restructuring Document and applicable law in
respect of the Specified Events of Default against any Person other than the
Borrowers or any such Loan Party and (b) the Credit Agreement, any other
Restructuring Document and applicable law in respect of any Default or Event
of Default other than the Specified Events of Default.
Section 11.10 Consent of Guarantors. Each Guarantor, as a
---------------------
guarantor under the Credit Agreement and the Collateralized Guaranty,
respectively, hereby (i) consents to the transactions contemplated hereby
and (ii) acknowledges and agrees that the guarantees (and all security
therefor) contained in the Credit Agreement and the Collateralized Guaranty,
respectively, are, and shall remain, in full force and effect after giving
effect to this Forbearance Agreement and all other prior modifications to
the Credit Agreement and the Collateralized Guaranty, respectively.
Section 11.11 Limitation of Trustee Liability. It is
-------------------------------
expressly understood and agreed by the parties hereto that (a) this
Forbearance Agreement is executed and delivered by Wilmington Trust Company,
not individually or personally, but solely as Trustee, in the exercise of
the powers and authority conferred and vested in it, pursuant to the Trust
Agreement, (b) each of the representations, undertakings and agreements
herein made on the part of the Trust is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but
is made and intended for the purpose for binding only the Trust, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company, individually or personally, to perform any covenant either
expressed or implied herein, all such liability, if any, being expressly
waived by the parties hereto and by any person claiming by, through or under
the parties hereto, and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses
of the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under
this Forbearance Agreement or any other related documents.
[Remainder of This Page Left Intentionally Blank]
12
IN WITNESS WHEREOF, each of IBM Credit, each Borrower,
each Guarantor and each other Loan Party hereto has read this entire
Forbearance Agreement, and has caused their respective authorized
representatives to execute this Forbearance Agreement and has caused its
corporate seal, if any, to be affixed hereto as of the date first written
above.
IBM CREDIT LLC, APPLIED DIGITAL SOLUTIONS, INC.,
as Lender as Tranche B Borrower and Tranche A Guarantor
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇, ▇▇. Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President, General Counsel Title: CEO
and Secretary
DIGITAL ANGEL SHARE TRUST, ADVANCED POWER SOLUTIONS, INC.
as Tranche A Borrower and Tranche B Guarantor
By: Wilmington Trust Company, not in its By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
individual capacity but solely as Trustee ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
By: Title: Treasurer
----------------------------------------------------
Name: Wilmington Trust Company
Title: Trustee
THE AMERICOM GROUP, INC. APPLIED DIGITAL SOLUTIONS FINANCIAL CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Treasurer Title: Treasurer
13
BALVA FINANCIAL CORPORATION COMPUTER EQUITY CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
DIGITAL ANGEL CORPORATION DIGITAL ANGEL HOLDINGS, LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CEO & President Title: CEO/President
FEDERAL SERVICES, INC. GOVERNMENT TELECOMMUNICATIONS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Secretary Title: Senior Vice President
INFORMATION TECHNOLOGY SERVICES, INC. INFOTECH USA, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Assistant Treasurer
14
PDS ACQUISITION CORP. PERIMETER ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Treasurer Title: Assistant Treasurer
PRECISION POINT CORPORATION SYSCOMM INTERNATIONAL CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer Title: President
U.S. ELECTRICAL PRODUCTS CORP. VERICHIP CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
WEBNET SERVICES, INC. ACT COMMUNICATIONS INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Treasurer Title: Treasurer
ACT-GFX CANADA, INC. ADS BAY AREA, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Treasurer Title: Treasurer
15
ADSI TELECOMM SERVICES, INC. ADSI TELECOMM SERVICES OF MARYLAND, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
ADVANCED TELECOMM OF MARYLAND, INC. ADVANCED TELECOMM OF PITTSBURGH
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
ADVANCED TELECOMMUNICATIONS, INC. APPLIED DIGITAL ORACLE PRACTICE, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
ARJANG, INC. BLUE STAR ELECTRONICS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
16
BOSTEK, INC. CYBERTECH STATION, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
ELITE COMPUTER SERVICES, INC. INDEPENDENT ACQUISITION, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
INTELLESALE, INC. MICRO COMPONENTS INTERNATIONAL INCORPORATED
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
NEIRBOD CORP. NORCOM RESOURCES INCORPORATED
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
▇▇▇▇▇▇▇ RE-MARKETING, INC. SERVICE TRANSPORT COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
17
TELEDATA CONCEPTS, INC. WYR, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------------- ----------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary Title: Secretary
18
Acknowledged and agreed:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
19
Acknowledged and agreed:
/s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------------
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
as an Advisory Board Member
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
as an Advisory Board Member
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
as an Advisory Board Member
20
