EXHIBIT 10.4
LOCKBOX AND COLLECTION ACCOUNT AGREEMENT
This LOCKBOX AND COLLECTION ACCOUNT AGREEMENT ("Agreement"), dated as of October
30, 2002, among DIGITAL ANGEL CORPORATION, a Delaware corporation ("Borrower"),
WELLS FARGO BUSINESS CREDIT, INC. ("Lender"), REGULUS WEST LLC ("Regulus") and
WELLS FARGO BANK MINNEAPOLIS, NATIONAL ASSOCIATION ("Wells Fargo") sets out (i)
the terms and conditions under which Regulus and Wells Fargo, who have entered
into an alliance to provide lockbox services to customers, will provide their
lockbox service ("Lockbox Service") to Borrower and Lender with respect to the
post office lockbox of Borrower at Regulus (the "Lockbox"), (ii) the terms and
conditions under which Wells Fargo will provide its collection account service
(the "Collection Account Service") to Borrower and Lender with respect to
Lender's wholesale demand deposit account specified at the end of this document
(the "Lender Account"), and (iii) the rights of Borrower and Lender, and the
obligations of Wells Fargo and Regulus to Borrower and Lender, with respect to
the Lockbox and the Lender Account.
1.
ORIGIN OF LENDER'S INTEREST IN THE LOCKBOX REMITTANCES.
BORROWER
HAS ENTERED INTO A FINANCING AGREEMENT WITH LENDER IN WHICH BORROWER HAS GRANTED
TO LENDER A SECURITY INTEREST IN BORROWER'S PRESENT AND FUTURE ACCOUNTS
RECEIVABLE AND ALL PROCEEDS THEREOF, AND BORROWER HAS AGREED THAT ALL
COLLECTIONS AND PROCEEDS OF SUCH ACCOUNTS RECEIVABLE SHALL BE REMITTED IN KIND
TO LENDER.
ACCOUNTS RECEIVABLE WILL BE SENT BY ACCOUNT DEBTORS OF BORROWER TO
THE LOCKBOX FOR DEPOSIT BY REGULUS INTO THE LENDER ACCOUNT.
(WHEN SUCH ACCOUNTS
RECEIVABLE HAVE BEEN RECEIVED IN THE LOCKBOX THEY WILL BE REFERRED TO IN THIS
AGREEMENT AS THE "REMITTANCES" AND WHEN THE REMITTANCES HAVE BEEN DEPOSITED INTO
THE LENDER ACCOUNT AS PROVIDED IN THIS AGREEMENT THEY WILL BE REFERRED TO IN
THIS AGREEMENT, TOGETHER WITH ALL OTHER PROCEEDS OF THE COLLATERAL SECURITY
GRANTED TO LENDER THAT ARE DEPOSITED IN THE LENDER ACCOUNT, AS THE "ACCOUNT
FUNDS").
LENDER AND BORROWER WOULD LIKE TO USE THE COLLECTION ACCOUNT SERVICE
TO BLOCK BORROWER'S ACCESS TO THE LENDER ACCOUNT AND TO PROVIDE DAILY TRANSFERS
OF LEDGER BALANCES IN THE LENDER ACCOUNT TO LENDER'S ACCOUNT WITH WELLS FARGO
BANK MINNESOTA, NATIONAL ASSOCIATION.
2.
COMMENCEMENT OF LOCKBOX SERVICE.
THE LOCKBOX SERVICE WILL START
ON THE DATE ARRANGED BY WELLS FARGO AND REGULUS WITH LENDER IF THE FOLLOWING
EVENTS HAVE OCCURRED BEFORE SUCH DATE:
(A)
REGULUS HAS ASSIGNED THE LOCKBOX TO BORROWER WITH THE NUMBER AND
AT THE ADDRESS SPECIFIED BY REGULUS TO WELLS FARGO, LENDER AND BORROWER;
(B)
THE LENDER ACCOUNT HAS BEEN OPENED AND IS IN GOOD STANDING;
(C)
LENDER HAS DESIGNATED TO REGULUS IN EXHIBIT "A" THE ACCEPTABLE
NAMES OR DESIGNATIONS OF PAYEES ON CHECKS DEPOSITED THROUGH THE LOCKBOX SERVICE,
THE PROCEDURES FOR HANDLING RETURNED CHECKS AND RESTRICTIVE NOTATIONS ON CHECKS,
AND THE PROCESSING OPTIONS SELECTED BY LENDER FOR THE LOCKBOX SERVICE; AND
(D)
BORROWER AND LENDER HAVE PROVIDED TO REGULUS AND WELLS FARGO SUCH
OTHER INFORMATION AND DOCU­MENTS AS REGULUS OR WELLS FARGO REQUEST TO ENABLE
REGULUS AND WELLS FARGO TO COMMENCE AND OPERATE