InfoTech USA, Inc. Form 8-K Exhibit 10.1




 
COMMERCIAL LOAN
AGREEMENT  



	BORROWER'S NAME AND ADDRESS:  	DESCRIPTION OF LOAN:  



 
	Applied Digital Solutions, Inc.

400 Royal Palm Way Suite 410

Palm Beach, Florida 33480  	ý  	Term Loan:
$1,000,000.00  



 
	DATE OF THIS AGREEMENT:  	June 27, 2003  







THIS COMMERCIAL LOAN AGREEMENT
(the “Agreement”) is made as of the date set forth above, between the
above-named Borrower (the “Borrower”) and InfoTech USA, Inc. (f/k/a SysComm
International Corporation), a Delaware corporation, with offices located at 7 Kingsbridge
Road in Fairfield, New Jersey 07004 (the “Lender”). The Lender has agreed to
extend to Borrower, at the Borrower’s request, the loan(s) described above and may,
in its sole discretion and with no obligation, express or implied, to do so, from time to
time hereafter, extend other loans to Borrower (individually a “Loan” and
collectively the “Loans”). All of the Loans are, together with all other debts,
liabilities and obligations of Borrower to the Lender, direct or indirect, absolute or
contingent, 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 Pledge of Investment
Securities between Borrower and the Lender (the “Pledge”). 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 Pledge, 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 Pledge, 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 the other Loan Documents. In the
event of any conflict between the terms, conditions, representations, warranties and
covenants contained in the Loan Documents, the term, condition, representation, warranty
or covenant which confers the greatest benefit upon the Lender shall control. The
determination as to which term, condition, representation, warranty or covenant is more
beneficial shall be made by the Lender in its sole discretion and shall be binding upon
the Borrower. In the event the Loan Documents are modified in the future, the modified
terms, conditions, representations, warranties and covenants shall control in the event of
any conflict with any other terms, conditions, representations, warranties and covenants
in the 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.     
TERM LOAN.    The Term Loan (the “Term Loan”) made available by
the Lender to the Borrower shall be upon and subject to the terms and conditions
set forth in the Term Note evidencing such Loan (hereafter, the “Term
Note”), the other Loan Documents and this Agreement.  


 
II.     
FEES.    Borrower agrees to pay the Lender such fees as are provided in this
Agreement, if any.  


 
III.     
PAYMENTS.    All payments made by the Borrower of principal and interest on
the Loan, and other sums and charges payable under the Loan Documents, shall be
made to the Lender in accordance with the  

 

LOAN AGREEMENT
Page 2 


 
terms of the respective Loan Documents
in immediately available, lawful United States of America currency at its office
set forth above.  


 
IV.     
SECURITY.    The Loan and all other Obligations of the Borrower to the
Lender, whether now existing or hereafter arising, shall, at all times, be
secured by a first priority perfected security interest, as required by this
Agreement and the Pledge, in the Collateral (as hereinafter defined), which
security interest shall continue until payment in full of all amounts
outstanding under said Loan and the other Obligations. The term
“Collateral” as used herein shall be deemed to include all investment
securities of the Borrower secured, mortgaged, pledged, assigned or otherwise
encumbered or covered by any of the Loan Documents, including, but not limited
to, the Pledge. The Borrower covenants and agrees to take such further actions
and to execute such additional documents as may be necessary from time to time
to enable the Lender to obtain and maintain the security interests and liens
arising under the Loan Documents. In furtherance of the foregoing, Borrower
hereby appoints Lender as attorney irrevocable 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, such appointment to be effective upon default
by Borrower.  


 
V.     
CONTINUING REPRESENTATIONS AND WARRANTIES.    The Borrower hereby warrants
and represents 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
organization. Borrower has the power to own its properties and to carry on its
business as now being conducted.  


 
    
    B.       
Authority.    Borrower has 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 has 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 are 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, threatened against or affecting
the Borrower or its assets which, if adversely determined, would have a material
adverse effect on the financial condition or business of the Borrower and which
have not been disclosed in writing to the Lender.  


 
    
    E.       
Conflicting Agreements; Consents.    There is no charter, bylaw, preference
stock or trust provision of the Borrower and no provision(s) of any existing
mortgage, indenture, contract or agreement binding on the Borrower or affecting
its 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. The Borrower is not 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 


 
LOAN AGREEMENT
Page 3 


 
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 has 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. Other than those liabilities disclosed in writing to the Lender, there
are no liabilities, direct or indirect, fixed or contingent, of the Borrower
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 since
the date of such financial statements.  


 
    
    G.       
Taxes.    Borrower has 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.    Immediately following the funding of the Loan, the present fair
saleable value of the Borrower’s assets will be greater than the amount
required to pay its total liabilities and the amount of the Borrower’s
capital will be adequate in view of the type of business in which it is engaged.
.. Borrower has not applied for or consented to the appointment of a receiver,
trustee or liquidator of Borrower or any of its property; Aside from its
indebtedness to IBM Credit LLC: Borrower is not unable, and has not admitted in
writing an inability, to pay its debts as they fall due; Borrower has not made a
general assignment for the benefit of creditors; Borrower has not been
adjudicated a bankrupt or insolvent or filed a voluntary petition in bankruptcy
or a petition or answer seeking reorganization or an arrangement with creditors
or to take advantage of any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against Borrower in any proceeding
under any such law; and no action has been taken by Borrower for the purpose of
effecting any of the foregoing. No order, judgment or decree has been entered by
any court of competent jurisdiction approving a petition seeking reorganization
of Borrower for all or a substantial part of its respective assets, or
appointing a receiver, sequestrator, trustee or liquidator of Borrower or any of
its property.  


 
    
    I.       
Full Disclosure.    None of the information with respect to the Borrower
which has been or hereafter is 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  


 
LOAN AGREEMENT
Page 4 


 
(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 and shall
be kept at Borrower’s principal place of business located at the address
first set forth above (collectively the “Premises”).  


 
    
    L.       
Compliance with Laws.    The Borrower is in compliance in all material
respects with all laws and governmental rules and regulations applicable to the
Collateral and to its businesses, properties and assets.  


 
    
    M.       
Title to Collateral.    Contemporaneous with the closing of the Loan, and
except as provided herein, Borrower has 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 Pledge (“Permitted Encumbrances”).  


 
    
    N.       
Employees.    Borrower has complied with all laws relating to the employment
of labor, including any provisions thereof relating to ERISA, wages, hours,
collective bargaining, 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.  


 
    
    O.       
Name.    Borrower’s exact legal name is as set forth in the first page
of this Agreement. The chief executive office of the Borrower is located at the
office set forth on the first page of this Agreement.  


 
VI.    
AFFIRMATIVE COVENANTS.    Until payment in full of all indebtedness under
the Loan and the other Obligations, the Borrower agrees that, unless the Lender
shall otherwise 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 the payment of
the amount due to IBM Credit, LLC (“IBM”) on or before June 30, 2003,
and the receipt from IBM of a complete release of any further obligations under
the Third Amended and Restated Credit Agreement by and among IBM, Digital Angel
Trust and Borrower.  


 
    
    C.       
Maintenance of Existence.    Take all necessary action to maintain
Borrower’s legal existence.  


 
    
    D.       
Maintenance of Business.    Do or cause to be done all things necessary to
maintain and preserve Borrower’s business.  


 
LOAN AGREEMENT
Page 5 


 
    
    E.       
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 Workman’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 thirty (30) 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.  


 
    
    F.       
Inspection by the Lender.    Upon prior 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.  


 
    
    G.       
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.  


 
    
        H
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.  


 
    
    I.       
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 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.  


 
    
    J.       
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.  


 
    
    K.       
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 sole opinion, does not have
an adverse effect upon the Lender’s rights hereunder or the Collateral.  


 
LOAN AGREEMENT
Page 6 


 
    
    L.       
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.  


 
    
    M.       
Additional Financial and Other Covenants.    Borrower shall deliver to Bank
within 5 business days of the filing thereof, copies of any and all filings made
by the Borrower with the Securities and Exchange Commission (for purposes of
this section only, Borrower shall satisfy its “deliver” requirement by
sending such filings by electronic mail to the CFO of the Lender).  


 
VII.    
NEGATIVE COVENANTS.    Until payment in full of all indebtedness under the
Loan and the other Obligations, the Borrower covenants that the Borrower will
not, without the express prior written consent of the Lender:  


 
    
    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 Workmen’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.       
Change in Name, Location or Executive Office.    Change its name or relocate
its chief executive office without 30 days prior written notification to Lender.  


 
    
    D.       
Mergers or Acquisitions.    Merge or consolidate with or into any other
business organization, or acquire, all or substantially all of the capital stock
or property of another person or entity.  


 
    
    E.       
Distributions.    Pay any dividends or make any other distribution or payment
on account of or in redemption, retirement or purchase of any capital stock.  


 
    
    F.       
Transactions with Affiliates.    Directly or indirectly enter into or permit to
exist any material transaction with any affiliate of Borrower except for
transactions that are in the ordinary course of Borrower’s business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliate.  


 
VIII.    
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 has
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 warranties and representations as contained herein and in
the Loan Documents shall be accurate and 


 
LOAN AGREEMENT
Page 7 



 
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
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, and (4) the Borrower shall pay to IBM Credit the sum of $30 million
in full satisfaction and discharge of all obligations owing by the Borrower.  


 
        Lender’s
obligations to extend any Loan to Borrower under this Agreement shall be subject to the
completion of a due diligence review, satisfactory to the Lender in all respects,
including inspection of the Borrower’s financial control systems and management
prepared financial statements.  


 
        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.  


 
IX.    
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) default by the Borrower in payment on its due date of any principal or
interest called for under the Loan 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 15
days after the due date thereof ; (2) the dissolution, termination of existence,
merger or consolidation of the Borrower or a sale of Borrower’s business or
the Collateral ; (3) the Borrower 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;
or (4) 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 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.  


 
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 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  


 
LOAN AGREEMENT
Page 8 


 
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.  


 
X.    MISCELLANEOUS
PROVISIONS.  


 
    
    A.       
Entire Agreement; Waivers.    This Agreement, the Schedules hereto, and the
Loan Documents together constitute the entire agreement between the Borrower 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 which confers the greatest benefit upon the Lender shall control.
The determination as to which term, covenant, condition or restriction is more
beneficial shall be made by the Lender in its sole 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 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 Jersey. The Borrower to the extent they may legally do
so, hereby consent to the jurisdiction of the courts of the State of New Jersey
and the United States District Court for the State of New Jersey 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.  


 
    
    E.       
Assurance of Execution and Delivery of Additional Instruments.    The
Borrower agrees 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 necessary or desirable to effect further the purposes of this
Agreement and the Loan Documents.  


 
    
    F.       
Waivers and Assents.    The Borrower 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 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  


 
LOAN AGREEMENT
Page 9 


 
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 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 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 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, its successors, assigns, heirs and personal representatives; provided,
however, the rights and obligations of the Borrower is 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 lender or lenders and its or their successors and assigns.  


 
    
    K.       
Expenses; Proceeds of Collateral.    The Borrower covenants and agrees that
they shall pay to the Lender, on demand, any and all out-of-pocket expenses,
including 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. 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 hereby grants 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 

 
LOAN AGREEMENT
Page 10 


 
Lender to the
Borrower and any securities or other property of the Borrower 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 expressly grants 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 which 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
AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT
THAT IT MAY BE WAIVED. EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT, WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN
MODIFIED IN ANY RESPECT OR RELINQUISHED BY LENDER OR BORROWER, EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY EACH OF THEM.  


 
IN WITNESS WHEREOF, the Lender and
the Borrower have executed this Agreement as of the day and year first above written.  


	WITNESS:  	INFOTECH USA, INC.  





 
	   /s/ NINFA S. HERNANDEZ
  	By:  	    /s/ J. ROBERT PATTERSON 
  
			Name & Title:
Duly Authorized 




 
LOAN AGREEMENT
Page 11 







 
	WITNESS:  	APPLIED DIGITAL SOLUTIONS, INC.  





 
	   /s/ MICHAEL KRAWITZ
 	By:  	  /s/ SCOTT SILVERMAN 
 
			Name & Title:        Scott Silverman,

Duly Authorized     Chairman & CEO