Document:

ex10-92.htm

Exhibit 10.92

 

INTERCREDITOR and NON-DISTURBANCE AGREEMENT

 

 

INTERCREDITOR AND NON-DISTURBANCE AGREEMENT (this “Agreement”) dated as of March 18, 2013, by and between, Debtors, Obligors, the First Lien Holder and the Second Lien Holder (each as defined below).

RECITALS:

 

WHEREAS, PositiveID Corporation, a Delaware corporation (“PSID”), and MicroFluidic Systems, a California corporation (each, together with its successors and assigns, including any receiver, trustee or debtor-in-possession, a “Debtor,” and collectively, the “Debtors”) and the First Lien Holder, are parties to (i) that certain Sole and Exclusive License Agreement dated as of December 20, 2012 (the “First Lien Holder License”) (ii) that certain Security Agreement dated as of December 20, 2012 (the “First Lien Holder Security Agreement”) and (iii) that certain Teaming Agreement by and between PSID, MicroFluidic Systems and the First Lien Holder, effective January 2, 2013 (together with any “Subcontracts” (as defined therein), proposals and other agreements arising thereunder or into which the parties thereto may from time to time enter, the “Teaming Agreement”), all of which relate to the MBAND Technology; the Teaming Agreement, collectively, with the First Lien Holder License and the First Lien Holder Security Agreement, are referred to herein as the “First Lien Holder Agreements”;

 

WHEREAS, PSID and the Second Lien Holder, are parties to that certain Securities Purchase Agreement, dated as of December 31, 2012 but made effective as of January 16, 2013 (the “Second Lien Securities Purchase Agreement”) pursuant to which the Second Lien Holder has agreed to purchase Debentures from PSID;

 

WHEREAS, the Debtors have granted to the First Lien Holder a Lien (as defined below) on their assets and properties described in Exhibit “A” attached hereto (collectively, the “Boeing Collateral”);

 

WHEREAS, the Debtors have granted to the Second Lien Holder a Lien on their assets and properties described in Exhibit “B” attached hereto (the “TCA Collateral”);

 

WHEREAS, the Second Lien Holder and the First Lien Holder wish to set forth their agreement as to certain of their respective rights and obligations with respect to the Boeing Collateral and the TCA Collateral and their understanding relative to their respective positions in the Boeing Collateral and the TCA Collateral; and

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

 

  

  

  

 

	
Section 1.

	
Definitions.

 

1.1           General Terms.  As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and the plural forms of the terms defined:

 

“Agreement” shall have the meaning set forth in the preamble hereof.

 

“Bankruptcy Code” means the provisions of Title 11 of the United States Code, 11 U.S.C. §§101 et seq.

 

“Bankruptcy Law” means the Bankruptcy Code and any other federal, state or foreign bankruptcy, insolvency, receivership or similar law.

 

“Boeing Collateral” shall have the meaning set forth in the Recitals hereto.

 

“Business Day” means any day of the year that is not a Saturday, a Sunday or a day on which banks are required or authorized to close in New York City, New York or Los Angeles, California.

 

“Collateral” means all assets and properties of any kind whatsoever, real or personal, tangible or intangible and wherever located, of any Obligor, whether now owned or hereafter acquired, upon which a Lien (including, without limitation, any Liens granted in any Insolvency Proceeding) is now or hereafter granted or purported to be granted by such Person in favor of a Secured Creditor, as security for all or any part of the Obligations.

 

“Debentures” means the Initial Second Lien Debenture and all Subsequent Second Lien Debentures.

 

“Debt Enforcement Action” means the filing of a lawsuit by a Secured Creditor to collect any or all of the Obligations owing to such Secured Creditor in respect of any Collateral.

 

“Debtor” and “Debtors” shall have the meaning set forth in the recitals hereof.

 

“Disposition” means any sale, lease, exchange, transfer or other disposition, and “Dispose” and “Disposed of” shall have correlative meanings.

 

“Distribution” means, with respect to any indebtedness or obligation relating to indebtedness, (a) any payment or distribution by any Person of cash, securities or other property, by setoff or otherwise, on account of such indebtedness or obligation or (b) any redemption, purchase or other acquisition of such indebtedness or obligation by any Person.

 

“Documents” means the First Lien Documents and the Second Lien Documents, or any of them.

 

“Event of Default” means each and any default, breach, “Event of Default” or similar event under any First Lien Document or any Second Lien Document.

 

“First Lien Avoidance” shall have the meaning set forth in Section 7.4.

 

  

  

  

 

“First Lien Collateral” means all of the Boeing Collateral.

 

“First Lien Documents” means the First Lien Holder Agreements, this Agreement, and all other agreements, documents and instruments at any time executed by any Obligor or any other Person with, or in favor of, the First Lien Holder in connection therewith or related thereto, in each case, as amended, amended and restated, supplemented, modified, replaced, substituted or renewed from time to time.

 

“First Lien Holder” means The Boeing Company and its successors and assigns and, acting on behalf of the First Lien Holder, its agents.

 

“First Lien Holder Agreements” shall have the meaning set forth in the recitals hereto.

 

“First Lien Holder License” shall have the meaning set forth in the recitals hereto.

 

“First Lien Holder Security Agreement” shall have the meaning set forth in the recitals hereto.

 

“First Lien Obligations” means all obligations, liabilities and indebtedness of every kind, nature and description owing by one or more of the Obligors to one or more of the First Lien Holder evidenced by or arising under one or more of the First Lien Documents, whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, including principal, interest, charges, fees, costs, indemnities and reasonable expenses, however evidenced, and whether as principal, surety, endorser, guarantor or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of any First Lien Document and whether arising before, during or after the commencement of any Insolvency Proceeding with respect to one or more of the Obligors (and including the payment of any principal, interest, fees, costs, expenses and other amounts (including default rate interest) which would accrue and become due but for the commencement of such Insolvency Proceeding whether or not such amounts are allowed or allowable in whole or in part in any such Insolvency Proceeding).

 

“Initial Second Lien Debenture” means that certain Senior Secured, Convertible, Redeemable Debenture, dated as of December 31, 2012 and effectively issued as of January 16, 2013, by and between PSID and the Second Lien Holder.

 

“Insolvency Proceeding” means, as to any Obligor, any of the following:  (a) any case or proceeding with respect to such Person under the Bankruptcy Code or any other federal or state bankruptcy, insolvency, reorganization or other law affecting creditors’ rights or any other or similar proceedings seeking any stay, reorganization, arrangement, composition or readjustment of the obligations and indebtedness of such Obligor, (b) any proceeding seeking the appointment of any trustee, receiver, liquidator, custodian or other insolvency official with similar powers with respect to such Obligor or any of its assets, (c) any proceeding for liquidation, dissolution or other winding up of the business of such Obligor or (d) any general assignment for the benefit of creditors or any marshalling of assets of such Obligor.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or otherwise) or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the UCC or any comparable law).

 

  

  

  

 

“Lien Enforcement Action” means (a) any action by any Secured Creditor to foreclose on the Lien of such Person in any Collateral, (b) any action by any Secured Creditor to take possession of, or sell or otherwise realize upon, or to exercise any other rights or remedies with respect to, any Collateral, including any Disposition after the occurrence of an Event of Default of any Collateral by an Obligor with the consent of, or at the direction of, a Secured Creditor or which proceeds are paid to such Secured Creditor, (c) the taking of any other actions by a Secured Creditor against any Collateral, including the taking of control or possession of, or the exercise of any right of setoff with respect to, any Collateral and/or (d) the commencement by any Secured Creditor of any legal proceedings or actions against or with respect to any Obligor or any of such Obligor’s property or assets or any Collateral to facilitate any of the actions described in clauses (a), (b) and (c) above, including the commencement of any Insolvency Proceeding; provided that this definition shall not include any Debt Enforcement Action.

 

“MBAND Technology” means all Licensed Products and Intellectual Property Rights, each as defined in the First Lien Holder License.

 

“Obligations” means the First Lien Obligations and the Second Lien Obligations, or any of them.

 

“Obligor” means each Debtor and each other Person liable on or in respect of any of the Obligations or that has granted a Lien on any property or assets as Collateral, together with such Person’s successors and assigns, including a receiver, trustee or debtor-in-possession on behalf of such Person.

 

“Permitted Collateral Sale” means any Disposition of First Lien Collateral by the First Lien Holder.  The term Permitted Collateral Sale shall not include any Disposition occurring or effected under any circumstance or condition described in the definition of “Release Event.”

 

“Person” means an individual, partnership, corporation (including a business trust and a public benefit corporation), joint stock company, estate, association, firm, enterprise, trust, limited liability company, unincorporated association, joint venture, governmental authority or any other entity or regulatory body.

 

“PSID” shall have the meaning set forth in the recitals hereto.

 

“PSID Security Agreement” means that certain Security Agreement, made as of December 31, 2012 but made effective as of January 16, 2013, by and between PSID and the Second Lien Holder.

 

“Release Documents” shall have the meaning set forth in Section 3.5.

 

“Release Event” means the taking of any Lien Enforcement Action by the First Lien Holder against all or any portion of the First Lien Collateral (including a Disposition conducted by any Obligor with the consent of the First Lien Holder) or, after the occurrence and during the continuance of an Insolvency Proceeding by or against any Obligor, the entry of an order of the Bankruptcy Court pursuant to Section 363 of the Bankruptcy Code authorizing the sale of all or any portion of the Collateral.

 

  

  

  

 

“Satisfied in Full” or “Satisfaction in Full” means, with respect to any First Lien Obligations, that: (a) all of such Obligations have been paid, performed or discharged in full (with all such Obligations consisting of monetary or payment obligations having been Satisfied In Full in cash), (b) no Person has any further right to obtain, use, exploit or enjoy any rights, licenses, loans, letters of credit, bankers’ acceptances, or other extensions of credit under the documents relating to such Obligations and (c) any and all letters of credit, bankers’ acceptances or similar instruments issued under such documents have been cancelled and returned (or backed by stand-by guarantees or cash collateralized) in accordance with the terms of such documents.

 

“Second Lien Collateral” shall mean all of the TCA Collateral less and except for any of the First Lien Collateral.  For clarity, it is the intent of the parties hereto that no Collateral that comprises any First Lien Collateral shall also comprise any Second Lien Collateral and the Second Lien Holder shall not directly or indirectly assert or take any position to the contrary.  For further clarity, in no event shall any part of the “Second Lien Collateral” contain any MBAND Technology.  The parties hereto acknowledge, however, that the TCA Collateral includes the MBAND Technology, and the Second Lien Holder has a second-position Lien on the MBAND Technology, which is subordinate to the First Lien Holder’s Liens thereon.

 

“Second Lien Documents” means (i) the Second Lien Security Purchase Agreement, (ii) the Initial Second Lien Debenture and, if any should be issued, the Subsequent Second Lien Debentures, (iii) that certain Guaranty Agreement, dated as of December 31, 2012 but made effective as of January 16, 2013, by and among Steel Vault Security, LLC, MicroFluidic Systems, VeriGreen Energy Corporation, Steel Vault Corporation, IFTH NY Sub, Inc., IFTH NJ Sub, Inc. and the Second Lien Holder; (iv) the PSID Security Agreement; (v) the Sub Security Agreement; and (vi) that certain Validity Guarantee, dated December 31, 2012, but made effective as of January 16, 2013 by William J. Caragol, Jr. for the benefit of the Second Lien Holder, this Agreement, and all other agreements, documents and instruments at any time executed by any Obligor or any other Person with, or in favor of, the Second Lien Holder in connection therewith or related thereto, including such documents evidencing the purchase of Subsequent Second Lien Debentures pursuant to the Second Lien Security Purchase Agreement, in each case, as amended, amended and restated, supplemented, modified, replaced, substituted or renewed from time to time in accordance with the terms of this Agreement.

 

“Second Lien Holder” means TCA Global Credit Master Fund LP and its successors and assigns and, acting on behalf of the Second Lien Holder, its agents.

 

“Second Lien Holder Agreements” means the agreements identified in clauses (i) through (vi) in the definition of “Second Lien Documents” above.

 

“Second Lien Obligations” means all obligations, liabilities and indebtedness of every kind, nature and description owing by one or more Obligors to the Second Lien Holder, whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, including principal, interest, charges, fees, costs, indemnities and reasonable expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether now existing or hereafter arising, whether arising before, during or after the term of the Second Lien Securities Purchase Agreement, under any Debenture, and whether arising before, during or after the commencement of any Insolvency Proceeding with respect to one or more of the Obligors (and including the payment of any principal, interest, fees, costs and expenses and other amounts (including default rate interest) which would accrue and become due but for the commencement of such Insolvency Proceeding, whether or not such amounts are allowed or allowable in whole or in part in any such Insolvency Proceeding).

 

  

  

  

 

“Second Lien Securities Purchase Agreement” shall have the meaning set forth in the recitals hereto.

 

“Secured Creditors” means the First Lien Holder and the Second Lien Holder, or any of them.

 

“Sub Security Agreement” means that certain Security Agreement, made as of December 31, 2012 but made effective as of January 16, 2013, by and among Steel Vault Security, LLC, MicroFluidic Systems, VeriGreen Energy Corporation, Steel Vault Corporation, IFTH NY Sub, Inc., IFTH NJ Sub, Inc. and the Second Lien Holder.

 

“Subsequent Second Lien Debentures” means all “Debentures” (as defined in the Second Lien Securities Purchase Agreement) issued in accordance with the Second Lien Securities Purchase Agreement and this Agreement other than the Initial Second Lien Debenture.

 

“Teaming Agreement” shall have the meaning set forth in the Recitals hereto.

 

“TCA Collateral” shall have the meaning set forth in the Recitals hereto.

 

“UCC” means the Uniform Commercial Code of any applicable jurisdiction and, if the applicable jurisdiction shall not have any Uniform Commercial Code, the Uniform Commercial Code as in effect in the State of Delaware.

 

“UCC Notice” shall have the meaning set forth in Section 4.1.

 

1.2           Certain Matters of Construction.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement and section references are to this Agreement unless otherwise specified.  For purposes of this Agreement, the following additional rules of construction shall apply: (a) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter, (b) the term “including” shall not be limiting or exclusive, unless specifically indicated to the contrary, (c) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations and (d) unless otherwise specified, all references to any instruments or agreements, including references to any of this Agreement and the Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof, in each case, made in accordance with the terms hereof.

 

	
Section 2.

	
Standstill Provision.

 

2.1           Until such time as all First Lien Obligations have been Satisfied in Full and subject to the other terms and conditions of this Agreement (including without limitation Section 4.1), the Second Lien Holder shall not take any Lien Enforcement Action or Debt Enforcement Action with respect to the First Lien Collateral. For clarity, as set forth in Section 3.11 below, the First Lien Holder acknowledges and agrees that it shall not directly or indirectly assert against the Second Lien Holder that the First Lien Holder has any Lien on any of the Second Lien Collateral.  The First Lien Holder acknowledges that the Second Lien Holder may, subject to its compliance with the terms and conditions of this Agreement, enforce its rights against Second Lien Collateral under the Second Lien Documents.

 

  

  

  

 

	
Section 3.

	
Security Interests; Priorities.

 

3.1           Priorities.  The Liens of the First Lien Holder on the First Lien Collateral are and shall be senior and prior in right and all other respects to the Liens of the Second Lien Holder on the First Lien Collateral, and such Liens of the Second Lien Holder on the First Lien Collateral are and shall be junior and subordinate in all respects to the Liens of the First Lien Holder on the First Lien Collateral.  Without limitation of the First Lien Holder’s right or remedies hereunder, the priorities of the Liens provided in this Section 3.1 shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal, restatement, replacement or refinancing of any of the Obligations, including issuance of any Subsequent Second Lien Debentures, nor by any action or inaction which any of the Secured Creditors may take or fail to take in respect of the First Lien Collateral.  Notwithstanding the Lien priorities set forth in this Section 3.1, all proceeds of the First Lien Collateral received by the First Lien Holder or Second Lien Holder in connection with any Lien Enforcement Action shall be applied to the Obligations as set forth in Section 3.4.  For clarity, as set forth in Section 4.4(a) below, to the extent the Collateral that the First Lien Holder takes possession of, or has “control” over, as contemplated by this Section 4.4(a), comprises Second Lien Collateral, the First Lien Holder shall promptly deliver possession or “control” of such Second Lien Collateral or proceeds thereof to the Second Lien Holder. Notwithstanding anything to the contrary herein or elsewhere, the priority of the Liens of the First Lien Holder securing First Lien Obligations and the rights and obligations of the parties hereto will remain in full force and effect irrespective of (i) how a Lien was acquired (whether by grant, possession, statute, operation of law, subrogation, or otherwise), (ii) the time, manner, or order of the grant, attachment, or perfection of a Lien, (iii) any conflicting provision of the UCC or other applicable law, (iv) any defect in, or non-perfection, setting aside, or avoidance of, a Lien or any Document, (v) the modification of any First Lien Obligation or Second Lien Obligation, (vi) the modification of a First Lien Document or Second Lien Document (but without limitation of the other provisions in this Agreement prohibiting such modifications without the prior consent of the First Lien Holder), (vii) the exchange of a security interest in any Collateral for a security interest in other Collateral, (viii) the commencement of an Insolvency Proceeding, or (ix) any other circumstance whatsoever, including a circumstance that might be a defense available to, or a discharge of, an Obligor in respect of a First Lien Obligation or a Second Lien Obligation or holder of such Obligation.

 

3.2           No Alteration of Priority.  The priorities set forth in this Agreement are applicable irrespective of the order or time of attachment, or the order, time or manner of perfection, or the order or time of filing or recordation of any document or instrument, or other method of perfecting a Lien in favor of each Secured Creditor in any Collateral, and notwithstanding any conflicting terms or conditions which may be contained in any of the Documents.

 

3.3           Perfection; Contesting Liens.  Each Secured Creditor shall be solely responsible for perfecting and maintaining the perfection of its Lien in the Collateral in which such Secured Creditor has been granted a Lien.  The foregoing provisions of this Section 3 are intended solely to govern the respective Lien priorities as among the Secured Creditors and shall not impose on any Secured Creditor any obligations in respect of the Disposition of proceeds of any Collateral that would conflict with prior perfected claims therein in favor of any other Person or any order or decree of any court or governmental authority or any applicable law.  Each Secured Creditor agrees that it will not institute or join in any contest of the validity, perfection, priority or enforceability of the Liens of the other Secured Creditor in the Collateral or the enforceability of the First Lien Obligations or the Second Lien Obligations; provided that, nothing in this Agreement shall be construed to prevent or impair the rights of the First Lien Holder or the Second Lien Holder to enforce this Agreement, including the provisions hereof relating to Lien priority.

 

  

  

  

 

3.4           Proceeds of Collateral.  Until the First Lien Obligations are Satisfied In Full, any First Lien Collateral or proceeds thereof received by the Second Lien Holder with respect to the Second Lien Obligations including, without limitation, any such Collateral constituting proceeds or any payment that may be received by the Second Lien Holder (a) in connection with the exercise of any right or remedy (including any right of setoff) with respect to the First Lien Collateral, (b) in connection with any insurance policy claim or any condemnation award (or deed in lieu of condemnation) relating to any First Lien Collateral, (c) from the collection or other Disposition of, or realization on, the First Lien Collateral, whether or not pursuant to an Insolvency Proceeding or (d) in violation of this Agreement, shall be segregated and held in trust and promptly paid over to the First Lien Holder, in the same form as received, with any necessary endorsements, and the Second Lien Holder hereby authorizes the First Lien Holder to make any such endorsements as agent for the Second Lien Holder (which authorization, being coupled with an interest, is irrevocable).  Unless otherwise required by law or court order, following the exercise by any Secured Creditor of a Lien Enforcement Action, all First Lien Collateral and proceeds thereof received by the First Lien Holder prior to the date the First Lien Obligations are Satisfied In Full shall be applied to the First Lien Obligations, and all such Collateral and proceeds thereof received by the First Lien Holder after such date shall be forthwith paid over, in the kind or funds and currency received, to the Second Lien Holder for application to the Second Lien Obligations.  For clarity, as set forth in Section 4.4(a) below, to the extent the Collateral that the First Lien Holder takes possession of, or has “control” over, as contemplated by Section 4.4(a), comprises Second Lien Collateral, the First Lien Holder shall promptly deliver possession or “control” of such Second Lien Collateral or proceeds thereof to the Second Lien Holder.

 

3.5           Release of Collateral Upon Permitted Collateral Sale.  The Second Lien Holder shall at any time in connection with any Permitted Collateral Sale:  (a) upon the written request of the First Lien Holder with respect to the First Lien Collateral subject to such Permitted Collateral Sale (which written request shall specify the proposed closing date), release or otherwise terminate its Liens on such First Lien Collateral, (b) promptly deliver such terminations of financing statements, partial lien releases, mortgage satisfactions and discharges, endorsements, assignments or other instruments of transfer, termination or release (collectively, “Release Documents”) and take such further actions as the First Lien Holder shall reasonably require in order to release and/or terminate the Second Lien Holder’s Liens on the First Lien Collateral subject to such Permitted Collateral Sale; provided that, for the avoidance of doubt, no such Release Documents shall be filed or become effective until the closing of such Permitted Collateral Sale; and (c) be deemed to have consented under the Second Lien Documents to such Permitted Collateral Sale free and clear of such Second Lien Holder’s security interest (it being understood that the Second Lien Holder shall still, subject to the terms of this Agreement, have a security interest with respect to the proceeds of such Collateral) and to have waived the provisions of the Second Lien Documents to the extent necessary to permit such transaction; and further, provided, that, in accordance with Section 3.4 above, after the First Lien Obligations are Satisfied In Full, proceeds thereof received by the First Lien Holder after such date shall be forthwith paid over, in the kind or funds and currency received, to the Second Lien Holder for application to the Second Lien Obligations.

 

  

  

  

 

3.6           Release of Collateral Upon Release Event.  The Second Lien Holder shall, at any time in connection with a Release Event with respect to any First Lien Collateral:  (a) upon the written request of the First Lien Holder with respect to the such Collateral subject to a Release Event consisting of a Disposition of Collateral (which request will specify, to the extent known, the principal proposed terms of the sale, the type and amount of consideration expected to be received in connection therewith and the proposed closing date), release or otherwise terminate its Liens on such Collateral, to the extent such Disposition is either by (i) the First Lien Holder or its agents or representatives or (ii) any Obligor with the consent of the First Lien Holder, (b) be deemed to have consented under the Second Lien Documents to such Disposition free and clear of the Second Lien Holder’s Liens (it being understood that the Second Lien Holder shall still, subject to the terms of this Agreement, have a security interest with respect to the proceeds of such Collateral) and to have waived the provisions of the Second Lien Documents to the extent necessary to permit such transaction and (c) deliver such Release Documents and take such further actions as First Lien Holder may reasonably require in connection therewith; provided that, (i) such release by the Second Lien Holder shall not extend to or otherwise affect any of the rights of the Second Lien Holder to the proceeds from any such Disposition of Collateral, (ii) no such Release Documents shall be delivered to any Obligor and (iii) no such Release Documents shall be filed or become effective until the closing of such Disposition; and (iii) any proceeds of Collateral subject to such Release Event shall be applied to satisfy (and to the extent applicable, to permanently reduce the lending commitments with respect to) the First Lien Obligations and/or the Second Lien Obligations in accordance with Section 3.4 hereof.

 

3.7           Power of Attorney.  The Second Lien Holder hereby irrevocably constitutes and appoints the First Lien Holder with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Second Lien Holder and in the name of the Second Lien Holder or in the First Lien Holder’s own name, from time to time in the First Lien Holder’s discretion, solely for the purpose of carrying out the terms of Sections 3.5 and 3.6 hereof, to take any and all action and to execute any and all documents and instruments, in each case, which may be necessary or commercially reasonable and appropriate to accomplish the purposes of such Sections, including any Release Documents, such power of attorney being coupled with an interest and irrevocable.  The Second Lien Holder hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in this Section 3.7.  No Person to whom this power of attorney is presented, as authority for the First Lien Holder to take any action or actions contemplated hereby, shall be required to inquire into or seek confirmation from any Second Lien Holder as to the authority of the First Lien Holder to take any action described herein, or as to the existence of or fulfillment of any condition to this power of attorney, which is intended to grant to the First Lien Holder the authority to take and perform the actions contemplated herein.  Notwithstanding anything contained in this Section 3.7 to the contrary, the powers granted under this Section 3.7 shall only be effective on the first business day following notice from the First Lien Holder to the Second Lien Holder of the First Lien Holder’s intention to exercise such powers.  For clarity, the powers granted by the Second Lien Holder to the First Lien Holder pursuant to this Section shall terminate and be of no further force or effect upon termination of this Agreement in accordance with Section 8.1 below, but all exercises by the First Lien Holder prior to such termination date shall continue unaffected.

 

3.8           Waiver.  The First Lien Holder and the Second Lien Holder each (a) waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations under the Documents and notice of or proof of reliance by the Secured Creditors upon this Agreement and protest, demand for payment or notice except to the extent otherwise specified herein and (b) acknowledges and agrees that the other Secured Creditors have relied upon the Lien priority and other provisions hereof in entering into the Documents and in making funds available to the Debtors thereunder.

 

  

  

  

 

3.9           Notice of Interest In Collateral.  This Agreement is intended, in part, to constitute an authenticated notification of a claim by each Secured Creditor to the other Secured Creditors of an interest in the Collateral in accordance with the provisions of Sections 9-611 and 9-621 of the UCC.

 

3.10         New Liens.  So long as the First Lien Obligations have not been Satisfied In Full, the parties hereto agree that no additional Liens shall be granted or permitted on any asset of any Debtor or any other Obligor related to the MBAND Technology to secure any Second Lien Obligation unless, subject to the terms of this Agreement, immediately after giving effect to such grant or concurrently therewith, a senior and prior Lien shall be granted on such asset to secure the First Lien Obligations, which Lien, with respect to the First Lien Obligations shall be senior and prior to any such Liens granted to secure any Second Lien Obligations; it being acknowledged that all such assets shall automatically be deemed to be “Boeing Collateral” for all purposes under this Agreement.  For clarity, the First Lien Holder and the Second Lien Holder agree that any Liens against assets of Debtor or any Obligor that may arise under the First Lien Documents or the Second Lien Documents shall be subject to the rights, priorities and other terms and provisions of this Agreement; provided, that any and all such assets that are related to the MBAND Technology shall (i) constitute “Boeing Collateral” hereunder and (ii) not comprise any part of the “Second Lien Collateral” hereunder.  To the extent that the foregoing provisions are not complied with for any reason, without limiting any other rights and remedies available to the First Lien Holder, the Second Lien Holder agrees that any amounts received by or distributed to any of them pursuant to or as a result of Liens granted in contravention of this Section 3.10 shall be subject to the terms of this Agreement.  So long as the provisions of this Section 3.10 are complied with, the First Lien Holder shall not object to any such additional Liens also being granted on any asset of any Debtor or any other Obligor to secure any Second Lien Obligation.  The Second Lien Holder and the Debtors agree that, to the extent there is additional Collateral relating to the MBAND Technology or otherwise arising under Section 2.04 of the First Lien Holder Security Agreement, the Second Lien Holder and the Obligors shall cooperate to include such additional assets and property as Collateral subject to the First Lien Holder’s Liens with all the priorities and benefits set forth herein with respect to all other Collateral of the First Lien Holder.  For purposes of clarity, the Debtors may grant additional Liens on any of their assets not related to the MBAND Technology, and the First Lien Holder agrees that it shall not assert that it has any Lien on such assets.

 

3.11         Acknowledgement Regarding Second Lien Collateral.  The First Lien Holder acknowledges and agrees that it shall not directly or indirectly assert against the Second Lien Holder that the First Lien Holder has any Lien on any of the Second Lien Collateral.  If in the future, under any theory of law or recovery, the First Lien Holder is deemed to have any Lien rights on any of the Second Lien Collateral (or proceeds thereof), the First Lien Holder shall disclaim all such rights in favor of the Second Lien Holder and shall not take any Lien Enforcement Action or Debt Enforcement Action adverse to the Second Lien Holder with respect to the Second Lien Collateral and shall promptly deliver to the Second Lien Holder such Release Documents and take such further actions as the Second Lien Holder shall reasonably require in order to release and/or terminate any such Liens on the Second Lien Collateral.

 

  

  

  

 

	
Section 4. 

	
Enforcement of Security.

 

4.1           Management of Collateral.  Subject to the other terms and conditions of this Agreement, the First Lien Holder shall have the sole and exclusive right to manage, perform and enforce the terms of the First Lien Documents (other than this Agreement) with respect to the First Lien Collateral, to exercise and enforce all privileges and rights thereunder according to its sole discretion and the exercise of its sole business judgment, including the sole and exclusive right to take or retake control or possession of the First Lien Collateral and to hold, prepare for sale, process, Dispose of, or liquidate the First Lien Collateral and to incur expenses in connection with such Disposition and to exercise all the rights and remedies of a secured lender under the UCC of any applicable jurisdiction.  In conducting any public or private sale under the UCC, the First Lien Holder shall give the Second Lien Holder such notice (a “UCC Notice”) of such sale as may be required by the applicable UCC; provided, however, that 5 days’ notice shall be deemed to be commercially reasonable notice.

 

4.2           Notices of Default. The First Lien Holder and the Second Lien Holder shall each give to the other concurrently with the giving thereof to any Obligor (a) a copy of any written notice by any Secured Creditor of an Event of Default under any of its Documents or a written notice of demand for payment from any Obligor and (b) a copy of any written notice sent by such Secured Creditor to any Obligor stating such Secured Creditor’s intention to exercise any material enforcement rights or remedies against such Obligor, including written notice pertaining to any foreclosure on all or any material part of the Collateral (or, in the case of the Second Lien Holder, on all or any material part of the Collateral securing the Second Lien Obligations) or other judicial or non-judicial remedy in respect thereof, and any legal process served or filed in connection therewith, and, without limitation of any of the Second Lien Holder’s obligations under this Agreement, the First Lien Holder and the Second Lien Holder shall each give to the other notice of the commencement of a Lien Enforcement Action; provided that, any Secured Creditor’s failure to give such required notice shall not result in any liability to such Secured Creditor or affect the enforceability of any provision of this Agreement, including the relative priorities of the Liens of the Secured Creditors as provided herein, and shall not affect the validity or effectiveness of any such notice as against any Obligor.  Each Obligor, by its acknowledgment hereto, hereby consents and agrees to each Secured Creditor providing any such information to the other Secured Creditor and to such actions by the Secured Creditors.

 

4.3           Permitted Actions.  Section 4.1 shall not be construed to limit or impair in any way the right of any Secured Creditor to (a) bid for or purchase Collateral at any private or judicial foreclosure upon such Collateral initiated by any Secured Creditor, (b) so long as it does not delay or interfere with the exercise by another Secured Creditor of its rights under this Agreement, the Documents and under applicable law and so long as such action is not prohibited by Section 7 herein and in each case not inconsistent with the terms of this Agreement, (i) join (but not control) any foreclosure or other judicial lien enforcement proceeding with respect to the Collateral initiated by another Secured Creditor for the sole purpose of protecting such Secured Creditor’s Lien on the Collateral, (ii) file a claim or statement of interest in any Insolvency Proceeding, (iii) take any action (not adverse to the Liens on the Collateral securing the First Lien Obligations or the Second Lien Obligations as the case may be, or the rights of the other Secured Creditors to exercise remedies in respect thereof) in order to preserve or protect such Secured Creditor’s Liens, (iv) file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of such Secured Creditors, including without limitation any claims secured by the Collateral, if any, (v) in any Insolvency Proceeding, file any pleadings, objections, motions or agreements which assert rights or interests available to unsecured creditors of the Obligors under applicable law, and (vi) vote on any plan of reorganization, and (c) receive any proceeds of Collateral in connection with any Lien Enforcement Action, which proceeds shall be applied in accordance with Section 3.4 of this Agreement.

 

  

  

  

 

4.4           Collateral In Possession.

 

(a)           In the event that the First Lien Holder takes possession of or has “control” (as such term is used in the UCC as in effect in each applicable jurisdiction) over any Collateral for purposes of perfecting its Lien therein, the First Lien Holder shall be deemed to be holding such Collateral as representative for the Secured Creditors, including the Second Lien Holder, solely for purposes of perfection of its Lien under the UCC; provided that the First Lien Holder shall not have any duty or liability to protect or preserve any rights pertaining to any of the Collateral for the Second Lien Holder; and further provided, however, that to the extent the Collateral that the First Lien Holder takes possession of or has “control” over, as contemplated by this Section 4.4(a), comprises Second Lien Collateral, the First Lien Holder shall promptly deliver possession or “control” of such Second Lien Collateral to the Second Lien Holder.

 

(b)           Without limitation of any other provision of this Agreement, in the event that the Second Lien Holder takes possession of or has “control” (as such term is used in the UCC as in effect in each applicable jurisdiction) over any Collateral for purposes of perfecting its Lien therein, the Second Lien Holder shall be deemed to be holding such Collateral as representative for the Secured Creditors, including the First Lien Holder, solely for purposes of perfection of its Lien under the UCC; provided that the Second Lien Holder shall not have any duty or liability to protect or preserve any rights pertaining to any of the Collateral for the First Lien Holder.

 

(c)           It is understood and agreed that this Section 4.4 is intended solely to assure continuous perfection of the Liens granted under the applicable Documents, and nothing in this Section 4.4 shall be deemed or construed as altering the priorities or obligations set forth elsewhere in this Agreement.  The duties of each party under this Section 4.4 shall be mechanical and administrative in nature, and no party shall have, or be deemed to have, by reason of this Agreement or otherwise a fiduciary relationship in respect of the other party.  Without limitation of the foregoing, the First Lien Holder and the Second Lien Holder each hereby waives and releases the other from all claims and liabilities arising out of such Secured Creditor’s role under this Section 4.4 as bailee and/or agent with respect to the Collateral.  Moreover, no Secured Creditor will have by reason of this Agreement or any other document or law a fiduciary relationship with the other Second Creditor, it being acknowledged that, subject at all times to complying with this Agreement, the interests of the Secured Creditors may differ, and each Secured Creditor may act on its own interest without taking into account the interests of the other Secured Creditor.

 

4.5           Waiver of Marshalling and Similar Rights.  Each Secured Creditor, to the fullest extent permitted by applicable law, waives as to each other Secured Creditor any requirement regarding, and agrees not to demand, request, plead or otherwise claim the benefit of, any marshalling, appraisement, valuation or other similar right that may otherwise be available under applicable law.

 

4.6           Insurance and Condemnation Awards.  The First Lien Holder shall have the sole and exclusive right, subject to the rights of the Obligors under the First Lien Documents, to settle and adjust claims in respect of First Lien Collateral under policies of insurance and to approve any award granted in any condemnation or similar proceeding, or any deed in lieu of condemnation, in respect of the First Lien Collateral. The Second Lien Holder shall have the sole and exclusive right, subject at all times to complying with this Agreement and the rights of the Obligors under the Second Lien Documents, to settle and adjust claims in respect of Second Lien Collateral under policies of insurance and to approve any award granted in any condemnation or similar proceeding, or any deed in lieu of condemnation, in respect of the Second Lien Collateral.

 

  

  

  

 

	
Section 5.

	
Covenants.

 

5.1           Amendment of First Lien Documents.  The First Lien Holder may at any time and from time to time and without consent of or notice to the Second Lien Holder, without incurring any liability to the Second Lien Holder and without impairing or releasing any rights or obligations hereunder or otherwise, amend, restate, supplement, modify, substitute, renew or replace any or all of the First Lien Documents (other than this Agreement) except to the extent any such amendment, restatement, supplement, modification, substitution, renewal or replacement affects any of the Second Lien Collateral.

 

5.2           Amendments to Second Lien Documents.  The Second Lien Holder may at any time and from time to time and without consent of or notice to the First Lien Holder, without incurring any liability to the First Lien Holder and without impairing or releasing any rights or obligations hereunder or otherwise, amend, restate, supplement, modify, substitute, renew or replace any or all of the Second Lien Documents (other than this Agreement) except to the extent any such amendment, restatement, supplement, modification, substitution, renewal or replacement affects any of the First Lien Collateral or any of the First Lien Holder’s interests, licenses, rights, privileges, or remedies under any of the First Lien Documents.

 

To the extent any consent is required under the terms of Sections 5.1 or 5.2 above, such consent shall not be unreasonably withheld.

 

5.3           Additional Representations, Warranties and Covenants of Second Lien Holder and Debtors.

 

(a)           The Second Lien Holder and the Debtors hereby represent and warrant to the First Lien Holder that there is no contract, agreement or understanding, whether oral or written, by or between any Obligor, on the one hand, and the Second Lien Holder or any of its affiliates, on the other hand, other than the Second Lien Holder Agreements, correct and complete copies of which have been provided to the First Lien Holder prior to the date hereof.  The First Lien Holder and the Debtors hereby represent and warrant to the Second Lien Holder that there is no contract, agreement or understanding, whether oral or written, by or between any Obligor, on the one hand, and the First Lien Holder or any of its affiliates, on the other hand, other than the First Lien Holder Agreements, that certain side letter between Debtors and First Lien Holder of even date hereof, and ancillary agreements related thereto, correct and complete copies of which have been provided to the First Lien Holder prior to the date hereof.  The Debtors hereby represent and warrant to the First Lien Holder that (i) none of the Debtors, Obligors or any of their respective affiliates own, control or otherwise have rights in or to any asset or property relating to the MBAND Technology that is not included within the First Lien Collateral and (ii) all right, title and interest in and to the First Lien Collateral is and will continue during the term of the First Lien Holder Security Agreement to be owned by PSID and/or MicroFluidic Systems.

 

(b)           The Debtors hereby acknowledge and agree that breach by any Obligor of any Second Lien Document shall constitute a default under the First Lien Documents. The foregoing is expressly intended to amend the terms of the First Lien Holder Agreements, and except as set forth in the foregoing clause, the First Lien Holder Agreements remain unamended and in full force and effect.

 

  

  

  

 

(c)           For purposes of clarity, nothing in this Agreement shall be deemed to limit, alter, waive or otherwise deprive the First Lien Holder of any rights it may have under any of the First Lien Documents or under applicable law, including, without limitation, those relating to prior consent, first refusal and last offer.

 

(d)           The Debtors and Second Lien Holder shall cause the Second Lien Documents to include the following language (or language of similar effect approved by the First Lien Holder) and any other language that the First Lien Holder reasonably requests to reflect the subordination of the Second Lien Holder’s Liens:

 

“Notwithstanding anything herein to the contrary, the Lien and security interest granted to the Second Lien Holder pursuant to this Agreement and the exercise of any right or remedy by the Second Lien Holder hereunder are subject to the provisions of the Intercreditor and Non-Disturbance Agreement dated March 18, 2013 (as amended, restated, supplemented, or otherwise modified from time to time, the “ICA”) by and among TCA Global Credit Master Fund, LP, The Boeing Company, PositiveID Corporation and MicroFluidic Systems.  If there is any conflict between the terms of this Agreement and the ICA, the terms of the ICA shall control.”

 

	
Section 6. 

	
Subordination, Non-Disturbance and Attornment.

 

6.1           The Second Lien Holder shall not (i) interfere in any way with the interests, licenses, rights, privileges, or remedies of the First Lien Holder (or the First Lien Holder’s agents or licensees) to the extent related to the MBAND Technology or (ii) to the extent related to the MBAND Technology, exercise any of its rights or remedies under any agreement, instrument, or other document (including, without limitation, under any Second Lien Document), or otherwise under any law, treaty, rule or regulation, in any manner that could (x) abrogate, interfere with, disturb, diminish or terminate any of the First Lien Holder’s (or its agents or licensees’) interests, licenses, rights, privileges, or remedies to the extent related to the MBAND Technology or (y) to the extent related to the MBAND Technology, limit the First Lien Holder’s ability to expand, extend or increase such interests, licenses, rights, privileges and remedies.  Without limitation of the foregoing, the Second Lien Holder shall not directly or indirectly (a) challenge the validity or enforceability in any territory of the patents, patent applications or other intellectual property rights included in the First Lien Collateral; or (b) to the extent related to the MBAND Technology, exercise any consent, approval or other rights it might otherwise have under any Second Lien Document (including, without limitation, under Section 3(b) of the PSID Security Agreement and Section 3(b) of the Sub Security Agreement) with respect to any First Lien Collateral.  For further clarity, the Second Lien Holder expressly agrees that an Event of Default under the First Lien Documents shall not, in and of itself, constitute an Event of Default under any Second Lien Document.  If any exercise of the First Lien Holder’s rights under this Agreement or any First Lien Document would result in a default under the Second Lien Documents or would also give rise to any consent, notice or approval rights under the Second Lien Document, the Second Lien Holder hereby agrees not to exercise such rights and waives such rights for so long as the First Lien Obligations are outstanding (including, without limitation, the rights set forth in Sections 4 and 5 of the PSID Security Agreement and Sections 4 and 5 of the Sub Security Agreement).  In the event of any conflict between the Second Lien Documents and this Agreement, this Agreement shall control.

 

  

  

  

 

6.2           The Second Lien Holder shall not exercise its rights or remedies under the Second Lien Documents in such a way that could interfere with any of the interests, licenses, rights, privileges or remedies of the First Lien Holder (or the First Lien Holder’s agents or licensees) under any of the First Lien Documents to the extent related to the MBAND Technology.  In the event that, for any reason, but without limitation of the Second Lien Holder’s obligations under this Agreement (or the First Lien Holder’s rights and remedies), the Second Lien Holder becomes an owner of any of the First Lien Collateral or any of Debtor’s interest therein or under the First Lien Documents, the Second Lien Holder shall attorn to and recognize the First Lien Holder as the sole and exclusive licensee and first priority secured party under and in accordance with the First Lien Documents.

 

6.3           Without limitation of any other provision of this Agreement, the Second Lien Holder shall not have any right to require its prior consent to the First Lien Holder’s exercise of any of its interests, licenses, rights, privileges, or remedies under any First Lien Document or otherwise limit the First Lien Holder’s ability to increase, extend, or add to any of its agreements, interests, licenses, rights or remedies in any manner, or the indebtedness underlying same except to the extent any such exercise affects any of the Second Lien Collateral.

 

6.4           Without limitation of Section 4.2, concurrently with the delivery of any notice, approval, waiver or other communication under any of the Second Lien Documents, the Second Lien Holder and each Obligor agrees to the deliver the same to the First Lien Holder.

 

	
Section 7.

	
Bankruptcy Matters.

 

7.1           Bankruptcy.  This Agreement shall be applicable both before and after the filing of any petition by or against any Obligor under the Bankruptcy Code or any other Insolvency Proceeding and all converted or succeeding cases in respect thereof, and all references herein to any Obligor shall be deemed to apply to the trustee for such Obligor and such Obligor as a debtor-in-possession.  The relative rights of the First Lien Holder and the Second Lien Holder in respect of any Collateral or proceeds thereof shall continue after the filing of such petition on the same basis as prior to the date of such filing, subject to any court order approving the financing of, or use of cash collateral by, any Obligor.  This Agreement shall constitute a “subordination agreement” for the purposes of Section 510(a) of the Bankruptcy Code and shall be enforceable in any Insolvency Proceeding in accordance with its terms.

 

7.2           Sale of Collateral; Waivers.  The Second Lien Holder agrees that it will not object to or oppose and will be deemed to have consented to a Disposition of any First Lien Collateral (or any portion thereof) free and clear of Liens or other claims under Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy Code, if the First Lien Holder has consented to such or Disposition of such assets, as long as all proceeds of such Disposition received by the First Lien Holder on account of the First Lien Obligations will be applied to permanently reduce the First Lien Obligations (and all remaining proceeds shall be applied as set forth in Section 3.4).  The Second Lien Holder waives (a) any claim it may now or hereafter have arising out of the First Lien Holder’s election in any proceeding instituted under Chapter 11 of the Bankruptcy Code of the application of Section 1111(b)(2) of the Bankruptcy Code and (b) any right to assert or enforce any claim under Section 506(c) or 552 of the Bankruptcy Code as against First Lien Holder or any of the First Lien Collateral.  The Second Lien Holder agrees not to initiate or prosecute or join with any other Person to initiate or prosecute any claim, action or other proceeding (i) challenging the enforceability of the First Lien Holder’s claims as fully secured claims with respect to all or part of the First Lien Obligations or for allowance of any First Lien Obligations (including those consisting of post-petition interest, fees or expenses) or opposing any action by the First Lien Holder to enforce its rights or remedies arising under the First Lien Documents, (ii) challenging the enforceability, validity, priority (without limiting the application of proceeds set forth in Section 3.4) or perfected status of any Liens on the First Lien Collateral, (iii) asserting in its capacity as creditor any claims which the Obligors may hold with respect to the First Lien Holder, (iv) seeking to lift the automatic stay to the extent that such action is opposed by the First Lien Holder or (v) opposing a motion by the First Lien Holder to lift the automatic stay.

 

  

  

  

 

7.3           Invalidated Payments.  To the extent that the First Lien Holder receive payments on the First Lien Obligations or proceeds of Collateral for application to the First Lien Obligations which are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any Bankruptcy Law, common law, equitable cause or otherwise (and whether as a result of any demand, settlement, litigation or otherwise) (each a “First Lien Avoidance”), then to the extent of such payment or proceeds received, such Obligations, or part thereof, intended to be satisfied by such payment or proceeds shall be revived and continue in full force and effect as if such payments or proceeds had not been received by the First Lien Holder, and this Agreement, if theretofore terminated, shall be reinstated in full force and effect as of the date of such First Lien Avoidance, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the Lien priorities and the relative rights and obligations of the First Lien Holder and the Second Lien Holder provided for herein with respect to any event occurring on or after the date of such First Lien Avoidance.  The Second Lien Holder agrees that it shall not be entitled to benefit from any First Lien Avoidance, whether by preference or otherwise, it being understood and agreed that the benefit of such First Lien Avoidance otherwise allocable to them shall instead be allocated and turned over for application in accordance with the priorities set forth in this Agreement.

 

7.4           Payments.  In the event of any Insolvency Proceeding involving one or more Obligors, all amounts received by a Secured Creditor in respect of Obligations shall be paid or delivered directly to the applicable Secured Creditor entitled to such amounts in accordance with the terms of this Agreement and subject to the application of proceeds set forth in Section 3.4 hereof.

 

7.5           Separate Grants of Security and Separate Classification.  The Second Lien Holder acknowledges and agrees that (a) the grants of Liens pursuant to the First Lien Documents and the Second Lien Documents constitute two separate and distinct grants of Liens and (b) because of their differing rights in the Collateral, the Second Lien Obligations are fundamentally different from the First Lien Obligations and must be separately classified in any plan of reorganization proposed or adopted in an Insolvency Proceeding.  The Second Lien Holder shall not seek in any Insolvency Proceeding to be treated as part of the same class of creditors as the First Lien Holder and shall not oppose any pleading or motion by the First Lien Holder that the First Lien Holder and the Second Lien Holder be treated as separate classes of creditors.  Notwithstanding the foregoing, if it is held that the claims of the First Lien Holder and Second Lien Holder in respect of the Collateral constitute only one claim (rather than separate classes of senior and junior claims), then the Second Lien Holder acknowledges and agrees that all distributions shall be made as if there were separate classes of senior and junior claims against the Obligors in respect of the Collateral, with the effect being that, to the extent that the aggregate value of the Collateral exceeds the amount of the First Lien Obligations, the First Lien Holder shall be entitled to receive, in addition to amounts distributed to it in respect of principal, pre-petition interest and other claims, all amounts owing in respect of post-petition interest, and fees, costs and charges incurred subsequent to the commencement of the applicable Insolvency Proceeding before any distribution is made in respect of any of the claims held by the Second Lien Holder.  The Second Lien Holder agrees to turn over to the First Lien Holder all amounts otherwise received or receivable by or on behalf of it to the extent necessary to effectuate the intent of the preceding sentence, even if such turnover has the effect of reducing the claim or recovery of the Second Lien Holder.

 

  

  

  

 

7.6           Rights as Unsecured Lenders.  In any Insolvency Proceeding, to the extent not prohibited by this Agreement, the Second Lien Holder may take any action, file any pleading, appear in any proceeding and exercise rights and remedies whether as an unsecured lender or otherwise.  In any Insolvency Proceeding, to the extent not prohibited by this Agreement, the First Lien Holder may take any action, file any pleading, appear in any proceeding and exercise rights and remedies whether as an unsecured lender or otherwise.

 

	
Section 8.

	
Miscellaneous.

 

8.1           Termination.  This Agreement shall terminate and be of no further force and effect upon the first to occur of the Satisfaction In Full of (a) the First Lien Obligations or (b) the Second Lien Obligations.

 

8.2           Successors and Assigns; No Third Party Beneficiaries.

 

(a)           This Agreement shall be binding upon each Secured Creditor and its respective successors and assigns and shall inure to the benefit of each Secured Creditor and its respective successors, participants and assigns.  No other Person shall have or be entitled to assert rights or benefits hereunder.

 

(b)           Except as otherwise set forth in the second proviso below, each Secured Creditor reserves the right to grant participations in, or otherwise sell, assign, transfer or negotiate all or any part of, or any interest in, its respective Obligations; provided that, no Secured Creditor shall be obligated to give any notices to or otherwise in any manner deal directly with any participant in the Obligations and no participant shall be entitled to any rights or benefits under this Agreement, except through the Secured Creditor with which it is a participant; provided further, at any time that a Event of Default has occurred and is continuing under the First Lien Documents, the Second Lien Holder shall not have any right to grant participations in, or otherwise sell, assign, transfer or negotiate all or any part of, any interest in, its respective Second Lien Obligations and all such purported participations shall be void ab initio.

 

(c)           In connection with any participation or other transfer or assignment, a Secured Creditor (i) may, subject to its respective Documents, disclose to such assignee, participant or other transferee or assignee all documents and information which such Secured Creditor now or hereafter may have relating to any Obligor or the Collateral and (ii) shall disclose to such participant or other transferee or assignee the existence and terms and conditions of this Agreement.

 

  

  

  

 

8.3           Notices.  All notices and other communications provided for hereunder shall be in writing and shall be sent by a reputable overnight courier with tracking capability, facsimile or hand-delivered, as follows:

 

	 	
(a) 

	
if to First Lien Holder, to it at the following address:

 

	
  

	
The Boeing Company

	
  

	
7700 Boston Blvd.

	
  

	
Springfield. VA 22153

	
  

	
Mail Code: 7920-1001

	
  

	
Attention: Robert C. Mason

	
  

	
Telephone: 703-270-6786

	
  

	
Facsimile:  562-668-9271

	
  

	
E-mail:  Robert.c.mason@boeing.com

	
  

	
(b )

	
if to Second Lien Holder, to it at the following address:

TCA Global Credit Master Fund, LP

1404 Rodman Street

Hollywood, Florida 33020

Attention: Robert Press, Director

Telephone: (786) 323-1650

Facsimile: (786) 323-1651

E-Mail: rpress@tcaglobalfund.com

 

With a Copy to:

David Kahan, P.A.

6420 Congress Ave., Suite 1800

Boca Raton, Florida 33487

Telephone: (561) 672-8330

Facsimile: (561) 672-8310

E-Mail: david@dkpalaw.com

	 	
(c) 

	
if to an Obligor or Obligors, to it or them at the following address:

PositiveID Corporation

1690 S. Congress Ave., Suite 201

Delray Beach, FL 33445

Attention: Bill Caragol

Telephone: 561-805-8009

Facsimile: 561-805-8001

E-mail: bcaragol@positiveidcorp.com

 

or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties complying as to delivery with the terms of this Section 8.3.  All such notices and other communications shall be effective upon receipt or (i) if sent by facsimile, when transmitted and a receipt confirmation is received, provided the same is on a Business Day and, if not, on the next Business Day, (ii) if sent by overnight courier, the next Business Day or (iii) if delivered by messenger upon delivery, provided the same is on a Business Day and, if not, on the next Business Day.

 

8.4           Counterparts.  This Agreement may be executed by the parties hereto in several counterparts, and each such counterpart shall be deemed to be an original and all of which shall constitute together but one and the same agreement.

 

  

  

  

 

8.5           GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.  THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.  EACH OF THE PARTIES HERETO HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES AMONG THE PARTIES HERETO PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT; PROVIDED THAT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK.  EACH OF THE PARTIES HERETO EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH OF THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.

 

8.6           MUTUAL WAIVER OF JURY TRIAL.  THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE PARTIES ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR THE TRANSACTIONS RELATED THERETO.

 

8.7           Amendments.  No amendment or waiver of any provision of this Agreement, and no consent to any departure by any Person from the terms hereof, shall in any event be effective unless it is in writing and signed by the Second Lien Holder and the First Lien Holder.  In no event shall the consent of any Obligor be required in connection with any amendment or other modification of this Agreement.

 

8.8           No Waiver.  No failure or delay on the part of any Secured Creditor in exercising any power or right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right.

 

8.9           Severability.  Any provision of this Agreement 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 of this Agreement or affecting the validity or enforceability of such provisions in any other jurisdiction.

 

8.10         Further Assurances.  Each party hereto agrees to cooperate fully with each other party hereto to effectuate the intent and provisions of this Agreement and, from time to time, to execute and deliver any and all other agreements, documents or instruments, and to take such other actions, as may be reasonably necessary or desirable to effectuate the intent and provisions of this Agreement.

 

8.11         Headings.  The section headings contained in this Agreement are and shall be without meaning or content whatsoever and are not part of this Agreement.

 

  

  

  

 

8.12         Priority Provisions.  This Agreement and the rights and benefits hereunder shall inure solely to the benefit of the First Lien Holder and the Second Lien Holder and their respective successors and permitted assigns and no other Person (including the Obligors or any trustee, receiver, debtor in possession or bankruptcy estate in a bankruptcy or like proceeding) shall have or be entitled to assert rights or benefits hereunder.  Nothing contained in this Agreement is intended to or shall impair the obligation of any Obligor to pay and perform the Obligations as and when the same shall become required, due and/or payable in accordance with their respective terms, or to affect the relative rights of the lenders or licensees of any Obligor, other than the First Lien Holder and the Second Lien Holder as between themselves.

 

8.13         Credit Analysis.  The Secured Creditors shall each be responsible for keeping themselves informed of (a) the financial condition of the Obligors and all other all endorsers, obligors and/or guarantors of the Obligations and (b) all other circumstances bearing upon the risk of nonpayment of the Obligations.  No Secured Creditor shall have any duty to advise any other Secured Creditor of information known to it regarding such condition or any such other circumstances.  No Secured Creditor assumes any liability to any other Secured Creditor or to any other Person with respect to:  (i) the financial or other condition of Obligors under any instruments of guarantee with respect to the Obligations, (ii) the enforceability, validity, value or collectability of the Obligations, any Collateral therefor or any guarantee or security which may have been granted in connection with any of the Obligations or (iii) any Obligor’s title or right to transfer any Collateral or security.

 

8.14         Waiver of Claims.  To the maximum extent permitted by law, each party hereto waives any claim it might have against any Secured Creditor with respect to, or arising out of, any action or failure to act or any error of judgment or negligence, mistake or oversight whatsoever on the part of any other party hereto or their respective directors, officers, employees or agents with respect to any exercise of rights or remedies under the Documents (other than this Agreement) or any transaction relating to the Collateral in accordance with this Agreement.  None of the Secured Creditors, nor any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or, except as specifically provided herein, shall be under any obligation to Dispose of any Collateral upon the request of any Obligor or any Secured Creditor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof.

 

8.15         Conflicts.  In the event of any conflict between the provisions of this Agreement and the provisions of the Documents, the provisions of this Agreement shall govern.

 

8.16         Specific Performance.  Each of First Lien Holder and Second Lien Holder may demand specific performance of this Agreement and, on behalf of itself and the respective other Secured Creditors, hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense that might be asserted to bar the remedy of specific performance in any action which may be brought by the respective Secured Creditors.

 

8.17         Provisions Solely to Define Relative Rights.  The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the Secured Creditors.  None of the Obligors or any other creditor thereof shall have any rights hereunder, and none of the Obligors may rely on the terms hereof.  Nothing in this Agreement is intended to or shall impair the obligations of Obligors, which are absolute and unconditional, to pay, perform and satisfy the First Lien Obligations and the Second Lien Obligations as and when the same shall become due and/or payable or otherwise required to be satisfied in accordance with their terms.

 

  

  

  

 

8.18          Subrogation.  The Second Lien Holder hereby agrees that it will not assert any rights of subrogation it may acquire as a result of any payment hereunder; provided that as between the Obligors, on the one hand, and the Second Lien Holder, on the other hand, any such payment that is paid over to the First Lien Holder pursuant to this Agreement shall be deemed not to reduce any of the Second Lien Obligations.

 

8.19          Entire Agreement.  This Agreement and the Documents embody the entire agreement of the Obligors, the First Lien Holder, and the Second Lien Holder with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings relating to the subject matter hereof and thereof and any draft agreements, negotiations and/or discussions involving any Obligor and the First Lien Holder and the Second Lien Holder relating to the subject matter hereof.

 

8.20         Indirect Actions. If a party may not take an action under this Agreement, then it may not take such action indirectly (whether through an affiliate, related person or otherwise) or assist or support any other Person in taking such action directly or indirectly.  “Taking an action indirectly” means taking an action that might not be expressly prohibited but has or is intended to have substantially the same effects as the prohibited action.

 

8.21         Prevailing Party.  The prevailing party in any action under this Agreement shall be entitled to its fees and costs (including, without limitation, its attorneys’ fees and costs).

 

8.22         Consent.  By its execution of this Agreement, and subject to Second Lien Holder’s compliance with this Agreement, First Lien Holder consents to Debtor’s entry into the Second Lien Documents.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.

 

	 	

FIRST LIEN HOLDER:

	 
	 	 	 	 
	 	

THE BOEING COMPANY

	 
	 	 	 	 
	
 

	
By: 

	/s/ Al Lambert	 
	 	Name: 	Al Lambert	 
	 	Title: 	Senior Counsel	 

 

	 	

SECOND LIEN HOLDER:

	 
	 	 	 	 
	 	

TCA GLOBAL CREDIT MASTER FUND, LP

	 
	 	 	 	 
	
 

	
By: 

	/s/ Robert Press	 
	 	Name: 	Robert Press	 
	 	Title: 	Director	 

 

  

  

  

 

Each of the undersigned hereby acknowledges and agrees to the foregoing terms and provisions.

 

DEBTORS:

 

	 	

POSITIVEID CORPORATION

	 
	 	 	 	 
	
 

	
By: 

	/s/ William Caragol	 
	 	Name: 	William J Caragol	 
	 	Title: 	Chief Executive Officer	 

 

	 	

MICROFLUDIC SYSTEMS

	 
	 	 	 	 
	
 

	
By: 

	/s/ William Caragol	 
	 	Name: 	William J Caragol	 
	 	Title: 	Chief Executive Officer	 

 

 

OBLIGORS:

 

	 	

VERIGREEN ENERGY CORPORATION

	 
	 	 	 	 
	
 

	
By: 

	/s/ William Caragol	 
	 	Name: 	William J Caragol	 
	 	Title: 	Chief Executive Officer	 

 

	 	

STEEL VAULT CORPORATION

	 
	 	 	 	 
	
 

	
By: 

	/s/ William Caragol	 
	 	Name: 	William J Caragol	 
	 	Title: 	Chief Executive Officer	 

 

	 	

IFTH NY SUB, INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ William Caragol	 
	 	Name: 	William J Caragol	 
	 	Title: 	Chief Executive Officer	 

 

	 	

IFTH NJ SUB, INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ William Caragol	 
	 	Name: 	William J Caragol	 
	 	Title: 	Chief Executive Officer	 

 

  

  

  

 

Exhibit “A”

BOEING COLLATERAL

All right, title and interest of POSITIVEID CORPORATION, a Delaware Corporation and MICROFLUIDIC SYSTEMS, a California corporation (collectively, the “Companies”), tangible or intangible, personal or mixed, wheresoever located and whether now existing or hereafter arising or acquired, in and to the Licensed Products (defined below) and Intellectual Property Rights (defined below) therein, including all related Documents (defined below), Licenses (defined below), and Intellectual Property (defined below), including any and all interest of any of the Companies in any of them.

“Licensed Products” or “Products” means any current or future products or services sold or licensed by POSITIVEID CORPORATION and/or MICROFLUIDIC SYSTEMS, including any improvements made or added by such person(s), or on behalf of any such person(s), including without limitation any product line and successors and replacements thereto, however named or branded, relating to the MBAND Technology (defined below) and any Confidential Information (defined below) or Intellectual Property Rights (defined below) contained in the MBAND Technology.  "Licensed Products" include, but are not limited to all present and future Intellectual Property Rights (defined below), and the drawings, models, technical specifications, technical documents, test and operations procedures, and fabrication and assembly procedures relating to the MBAND Technology, including but not limited to, the control, collection, preparation, PCR, toxin, archive, communications, and environmental subsystems, as well as the software and source code related to the operation of the M-BAND Technology and other materials utilized with the MBAND Technology and/or necessary to make the MBAND Technology function, except to the extent any of the foregoing items constitute third party commercial off the shelf software and hardware.

The “Licensed Products” also includes all Intellectual Property Rights (defined below) in the MBAND Technology, including without limitation, the following patents and patent applications:

Patents Issued

Number Title Date

US 7,553,647 B2 Microfluidic Differential Extraction Cartridge Jun. 30, 2009

US 7,705,739 B2 Integrated Airborne Substance Collection and Detection System Apr. 27, 2010

US 7,785,869 B2 Sonication to Selectively Lyse Different Cell Types Aug. 31, 2010

US 7,815,718 B2 Automated Particle Collection Off of Fan Blades into a Liquid Buffer Oct. 19, 2010

US 7,858,366 B2 Integrated Airborne Substance Collection and Detection System Dec. 28, 1010

US 8,053,214 B2 Apparatus and Method of Extracting and Optically Analyzing an Analyte from a Fluid‐Based Sample Nov. 8, 2011

US 7,491,527 B2 Microfluidic Differential Extraction Cartridge Feb. 17, 2009

US 7,541,166 B2 Sonication to Selectively Lyse Different Cell Types Jun. 2, 2009

US 7,618,588 B2 Disposable Integrated Heater and Tube Assembly For Thermally‐Driven Chemical Reactions Nov. 17, 2009

US 7,633,606 B2 Integrated Airborne Substance Collection and Detection System Dec. 15, 2009

US 7,699,915 B2 Liquid Impingement Unit Apr. 20, 2010

 

  

  

  

Patent Applications

Number Title Date

MFSI‐2100 12/462,174 Thermal Cycler for Even Heating of One or More Samples Jul. 29, 2009

MFSI‐2200 12/603,428 Integrated Sample Preparation and Amplification for Nucleic Acid Detection from Biological Samples Oct. 21, 2009

MFSI‐2300 12/621,332 A Sample Preparation Technique to Eliminate Inhibition of PCR by Humic Acid Nov. 18, 2009

MFSI‐2400 12/621,367 Increase of Signal Sensitivity Using Dual Probes in PCR Reactions Nov. 18, 2009

MFSI‐2501 13/047,632 Method and Apparatus for Optically Interrogating and Analyzing a Fluid Sample Mar. 14, 2011

MFSI‐2600 12/715,261 A Flow‐Through Bead Purification and Concentration Device Mar. 1, 2010

“MBAND Technology” means all Products (defined above), Confidential Information (defined below), Intellectual Property Rights (defined below), and other concepts or ideas created by or owned by POSITIVEID CORPORATION and/or MICROFLUIDIC SYSTEMS to the extent licensed to The Boeing Company pursuant to the License Agreement (defined below).

"Confidential Information" means all information related to the License Agreement (defined below) that is identified as Confidential and/or Proprietary Information (defined above and below), including, but not limited to, financial information and technical information in the form of designs, concepts, requirements, specifications, software, interfaces, components, processes, or the like in each case relating to the MBAND Technology.

“License Agreement” means that certain Sole and Exclusive MBAND Licensing Agreement entered into by and among The Boeing Company, POSITIVEID CORPORATION, and MICROFLUIDIC SYSTEMS dated December 20, 2012.

"Intellectual Property Rights" means all rights to Confidential Information (defined above) or Proprietary Information (defined below), know how, Inventions (defined below), all technical data relating to the MBAND Technology, including, but not limited to drawings, designs, specifications, source code, process information, developments, discoveries, inventions (whether or not patentable), formulae, techniques, technical reports; and all computer software and related documentation, including that which can be obtained from examination or reverse engineering of any such item.  “Intellectual Property Rights” also includes all common law and statutory rights to the foregoing, including without limitation, patents, copyrights, trademarks, trade secrets, mask work registrations, relating to the MBAND Technology.

“Proprietary Information” means all information related to the License Agreement (defined above) that is identified as proprietary or confidential, or is disclosed under circumstances reasonably indicating that such information is proprietary or confidential to the disclosing Party, including, but not limited to, technical information in the form of designs, concepts, requirements, specifications, software, interfaces, components, processes, or the like, and business, management and financial information.

“Inventions” means any invention or discovery, or improvements thereof, that is or may be patentable or otherwise protectable under Title 35 of the U.S. Code, except that which is otherwise covered by the License Agreement (defined above) as a derivative work or enhancement (each as defined in the License Agreement defined above) in each case relating to the MBAND Technology.

"Documents" means any and all books, accounts, invoices, letters, papers, security certificates, documents, and other records (including customer lists and records) in any form evidencing or relating to any part of the MBAND Technology, together with all agreements, Licenses (defined below), and other rights and benefits relating to any of them.

 

  

  

  

"Licenses" means (i) any authorization from any governmental authority having jurisdiction and/or (ii) any Intellectual Property (defined below) license, distribution agreement, co-existence agreement, or other right to use (or agreement not to pursue a claim with respect to) any Intellectual Property (defined below).

"Intellectual Property" means the following (i) all inventions, patents, patent rights, patent applications (including all reissues, divisions, continuations, continuations-in-part, and extensions of any patent or patent application), patentable subject matter, unregistered industrial designs, applications for registration of individual designs, and registered designs related to the MBAND Technology; (ii) all trademark and service mark rights, whether registered or not, applications to register and registrations of the same and like protections, related to the MBAND Technology and the goodwill of the business of POSITIVEID CORPORATION and/or MICROFLUIDIC SYSTEMS connected with and symbolized by such trademarks; (iii) present and future copyrights, whether registered or not and all present and future applications for copyright registrations (including applications for copyright registrations of derivative works and compilations) related to the MBAND Technology; (iv) rights and interests in and to processes, data, trade secrets, designs, know-how, processes, product formulae and information, manufacturing, engineering, and other drawings and manuals, technology, algorithms, blue prints, research and development reports, technical information, technical assistance, engineering data, design and engineering specifications, and similar materials recording or evidencing expertise or information related to the Collateral identified herein; (v) right, title and interest in and to any and all present and future domain names now or hereafter existing, created, acquired or held related to the MBAND Technology; (vi) right, title and interest in and to any and all present and future Licenses (defined above) with respect to any intellectual property referenced in this definition of "Intellectual Property"; (vii) and any claims for damages by way of present and future infringements of any of other intellectual property referenced in this definition of "Intellectual Property," with the right, but not the obligation, to sue for and collect such damages for said use or infringement of intellectual property rights; (viii) amendments, extensions, renewals and extensions of any of the intellectual property referenced in this definition of "Intellectual Property"; (ix) commercial tort claims associated with or arising out of any of the intellectual property referenced in this definition of "Intellectual Property"; (x) goodwill in any intellectual property referenced in this definition of "Intellectual Property," including, without limitation, all payments under insurance or any indemnity or warranty payable in respect thereto, and foreign rights; and (xi) other intellectual and industrial property rights owned by POSITIVEID CORPORATION and/or MICROFLUIDIC SYSTEMS or their respective affiliates, in each case relating to the MBAND Technology.

For the avoidance of doubt, this Description of Collateral does not include any of the Companies’ assets, properties or rights to the extent such assets, properties and rights do not relate in any way to and are not held for use in connection with any MBAND Technology.

For further avoidance of doubt, this Description of Collateral shall automatically be deemed to include all collateral with respect to which a new senior lien would be required to be created in favor of The Boeing Company pursuant to Section 3.10 of that certain Intercreditor and Non-disturbance Agreement, dated March __, 2013, by and between The Boeing Company, TCA Global Credit Master Fund LP and the other parties party thereto.

  

  

  

 

Exhibit “B”

TCA COLLATERAL

Any and all property or assets of PositiveId Corporation, a Delaware corporation, Steel Vault Security, LLC, a Florida limited liability company, MicroFluidic Systems, a California corporation, VeriGreen Energy Corporation, a Florida corporation, Steel Vault Corporation, a Delaware corporation, IFTH NY Sub, Inc., a New York corporation, or IFTH NJ Sub, Inc., a New Jersey corporation (each individually referred to as a “Debtor” and all of them collectively referred to as the “Debtors”), of any kind or description, tangible or intangible, real, personal or mixed, wheresoever located and whether now existing or hereafter arising or acquired, including, without limitation:

(i) all property of, or for the account of, each Debtor now or hereafter coming into the possession, control or custody of, or in transit to, Secured Party or any agent or bailee for Secured Party or any parent, affiliate or subsidiary of Secured Party or any participant with Secured Party in the Obligations (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise), including all cash, earnings, dividends, interest, or other rights in connection therewith and the products and proceeds therefrom, including the proceeds of insurance thereon; and

(ii) the following additional property of each Debtor, whether now existing or hereafter arising or acquired, and wherever now or hereafter located, together with all additions and accessions thereto, substitutions, betterments and replacements therefor, products and Proceeds therefrom, and all of each Debtor’s books and records and recorded data relating thereto (regardless of the medium of recording or storage), together with all of each Debtor’s right, title and interest in and to all computer software required to utilize, create, maintain and process any such records or data on electronic media, including all: (A) Accounts, and all goods whose sale, lease or other disposition by each Debtor has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, any Debtor, or rejected or refused by an Account debtor; (B) As-extracted Collateral; (C) Chattel Paper (whether tangible or electronic); (D) Commodity Accounts; (E) Commodity Contracts; (F) Deposit Accounts, including all cash and other property from time to time deposited therein and the monies and property in the possession or under the control of the Secured Party or any affiliate, representative, agent, designee or correspondent of the Secured Party; (G) Documents; (H) Equipment; (I) Farm Products; (J) Fixtures; (K) General Intangibles (including all Payment Intangibles); (L) Goods, and all accessions thereto and goods with which the Goods are commingled; (M) Health-Care Insurance Receivables; (N) Instruments; (O) Inventory, including raw materials, work-in-process and finished goods; (P) Investment Property; (Q) Letter-of-Credit Rights; (R) Promissory Notes; (S) Software; (T) all Supporting Obligations; (U) all commercial tort claims hereafter arising; (V) all other tangible and intangible personal property of each Debtor (whether or not subject to the Code), including, all bank and other accounts and all cash and all investments therein, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of each Debtor described within the definition of Collateral (including, any proceeds of insurance thereon and all causes of action, claims and warranties now or hereafter held by each Debtor in respect of any of the items listed within the property or assets covered hereby), and all books, correspondence, files and other Records, including, all tapes, desks, cards, Software, data and computer programs in the possession or under the control of each Debtor or any other Person from time to time acting for each Debtor, in each case, to the extent of each Debtor’s rights therein, that at any time evidence or contain information relating to any of the property described or listed within the definition of Collateral or which are otherwise necessary or helpful in the collection or realization thereof; (W) all real property interests of each Debtor and the interest of each Debtor in fixtures related to such real property interests; and (X) Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any or all of the foregoing, in each case howsoever each Debtor’s interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).

 

  

  

  

Capitalized terms utilized herein shall have the same meaning ascribed to them in the Uniform Commercial Code as in effect from time to time in the State of Nevada, provided that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of Nevada on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute, except as Second Lien Holder may otherwise agree.  Terms not otherwise defined in the Uniform Commercial Code as in effect from time to time in the State of Nevada shall have the meanings ascribed to such terms in the Second Lien Documents.ex10-93.htm

Exhibit 10.93

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”) is dated as of the 31st day of December, 2012, but made effective as of January 16, 2013 (the “Effective Date”), by and between POSITIVEID CORPORATION, a Delaware corporation (the “Company”), and TCA GLOBAL CREDIT MASTER FUND, LP, a Cayman Islands limited partnership (the “Buyer”).

RECITALS

WHEREAS, Buyer desires to purchase from Company, and the Company desires to sell and issue to Buyer, upon the terms and subject to the conditions contained herein, up to Five Million Dollars ($5,000,000) of senior secured, convertible, redeemable debentures in the form attached hereto as Exhibit “A” (the “Debentures”), of which Five Hundred Fifty Thousand Dollars ($550,000) shall be purchased on the date hereof (the “First Closing”), and up to Four Million Four Hundred Fifty Thousand Dollars ($4,450,000) may be purchased in additional closings as set forth in Section 4.2 below (the “Additional Closings”)(each of the First Closing and the Additional Closings are sometimes hereinafter individually referred to as a “Closing” and collectively as the “Closings”), all for the total purchase price of up to Five Million Dollars ($5,000,000) (the “Purchase Price”), and all otherwise subject to the terms and provisions hereinafter set forth; and

WHEREAS, the Company and its subsidiaries have agreed to secure all of their respective “Obligations” (as hereinafter defined) to Buyer under the Debentures, this Agreement and all other Transaction Documents by: (i) granting to the Buyer a continuing and second priority security interest in all of the assets and properties of the Company pursuant to a Security Agreement dated as of the date hereof (the “Security Agreement”); (ii) causing Steel Vault Security, LLC, a Florida limited liability company, MicroFluidic Systems, a California corporation, VeriGreen Energy Corporation, a Florida corporation, Steel Vault Corporation, a Delaware corporation, IFTH NY Sub, Inc., a New York corporation, and IFTH NJ Sub, Inc., a New Jersey corporation (such subsidiaries, together with any other subsidiaries hereafter created, acquired or coming into existence, collectively, the “Subsidiaries”), all wholly-owned subsidiaries of the Company, to guaranty all of the Company’s Obligations pursuant to a guaranty agreement executed by the Subsidiaries in favor of Buyer (the “Subsidiary Guaranty”); (iii) causing each of the Subsidiaries to grant to the Buyer a continuing and second priority lien and security interest in all of the assets and properties of each of the Subsidiaries pursuant to a Security Agreement dated as of the date hereof (the “Sub Security Agreement”); and (iv) agreeing to the filing of UCC-1 Financing Statements covering all of the assets and properties of the Company and the Subsidiaries (collectively, the “UCC-1’s”);

NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereinafter expressed and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, agree as follows:

 

  

  

  

ARTICLE I

RECITALS, EXHIBITS, SCHEDULES

The foregoing recitals are true and correct and, together with the Schedules and Exhibits referred to hereafter, are hereby incorporated into this Agreement by this reference.

ARTICLE II

DEFINITIONS

For purposes of this Agreement, except as otherwise expressly provided or otherwise defined elsewhere in this Agreement, or unless the context otherwise requires, the capitalized terms in this Agreement shall have the meanings assigned to them in this Article as follows:

2.1           “Affiliate” means, with respect to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person at any time during the period for which the determination of affiliation is being made. For purposes of this definition, the term “control,” “controlling,” “controlled” and words of similar import, when used in this context, means, with respect to any Person, the possession, directly or indirectly, of the power to direct, or cause the direction of, management policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

2.2           “Assets” means all of the properties and assets of the Person in question, as the context may so require, whether real, personal or mixed, tangible or intangible, wherever located, whether now owned or hereafter acquired.

2.3           “Claims” means any Proceedings, Judgments, Obligations, threats, losses, damages, deficiencies, settlements, assessments, charges, costs and expenses of any nature or kind.

2.4           “Common Stock” means the Company’s common stock, $0.01 par value per share.

2.5           “Consent” means any consent, approval, order or authorization of, or any declaration, filing or registration with, or any application or report to, or any waiver by, or any other action (whether similar or dissimilar to any of the foregoing) of, by or with, any Person, which is necessary in order to take a specified action or actions, in a specified manner and/or to achieve a specific result.

2.6           “Contract” means any written or oral contract, agreement, order or commitment of any nature whatsoever, including, any sales order, purchase order, lease, sublease, license agreement, services agreement, loan agreement, mortgage, security agreement, guarantee, management contract, employment agreement, consulting agreement, partnership agreement, shareholders agreement, buy-sell agreement, option, warrant, debenture, subscription, call or put.

2.7           “Effective Date” means the date so defined in the introductory paragraph of this Agreement.

2.8           “Encumbrance” means any lien, security interest, pledge, mortgage, easement, leasehold, assessment, tax, covenant, restriction, reservation, conditional sale, prior assignment, or any other encumbrance, claim, burden or charge of any nature whatsoever.

 

  

  

  

2.9           “Environmental Requirements” means all Laws and requirements relating to human, health, safety or protection of the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, or Hazardous Materials in the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), or otherwise relating to the treatment, storage, disposal, transport or handling of any Hazardous Materials.

2.10         “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

2.11         “GAAP” means generally accepted accounting principles, methods and practices set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, and statements and pronouncements of the Financial Accounting Standards Board, the SEC or of such other Person as may be approved by a significant segment of the U.S. accounting profession, in each case as of the date or period at issue, and as applied in the U.S. to U.S. companies.

2.12         “Governmental Authority” means any foreign, federal, state or local government, or any political subdivision thereof, or any court, agency or other body, organization, group, stock market or exchange exercising any executive, legislative, judicial, quasi-judicial, regulatory or administrative function of government.

2.13         “Hazardous Materials” means: (i) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCB’s); (ii) any chemicals, materials, substances or wastes which are now or hereafter become defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants” or words of similar import, under any Law; and (iii) any other chemical, material, substance, or waste, exposure to which is now or hereafter prohibited, limited or regulated by any Governmental Authority.

2.14         “Incentive Shares” means the shares of the Company’s Common Stock to be issued by the Company to Buyer in accordance with Section 7.5 below.

2.15         “Judgment” means any order, writ, injunction, fine, citation, award, decree, or any other judgment of any nature whatsoever of any Governmental Authority.

2.16         “Law” means any provision of any law, statute, ordinance, code, constitution, charter, treaty, rule or regulation of any Governmental Authority.

2.17         “Leases” means all leases for real or personal property.

 

  

  

  

2.18         “Material Adverse Effect” means with respect to the event, item or question at issue, that such event, item or question would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of this Agreement or any of the Transaction Documents; (ii) a material adverse effect on the results of operations, Assets, business or condition (financial or otherwise) or prospects of the Company or any of its subsidiaries, either individually or taken as a whole; or (iii) a material adverse effect on the Company’s or its subsidiaries’ ability to perform, on a timely basis, its or their respective Obligations under this Agreement or any Transaction Documents; provided, however, that none of the following, individually or in the aggregate, shall be taken into account in determining whether a Material Adverse Effect has occurred or insofar as reasonably can be foreseen would likely occur: (a) changes in conditions in the U.S. or global capital, credit or financial markets generally, including changes in the availability of capital or currency exchange rates, provided such changes shall not have affected the Company in a materially disproportionate manner as compared to other similarly situated companies; or (b) any effect of the announcement of, or the consummation of the transactions contemplated by, this Agreement and the other Transaction Documents on the Company’s relationships, contractual or otherwise, with customers, suppliers, vendors, bank lenders, strategic venture partners or employees.

2.19         “Material Contract” shall mean any Contract to which the Company is a party or by which the Company or any of its Assets are bound and which: (i) must be disclosed to the SEC pursuant to the Securities Act, the Exchange Act, or the rules and regulations of the SEC; (ii) involves aggregate payments of Two Hundred Thousand Dollars ($200,000) or more to or from the Company; (iii) involves delivery, purchase, licensing or provision, by or to the Company, of any goods, services, assets or other items having a value (or potential value) over the term of such Contract of Two Hundred Thousand Dollars ($200,000) or more or is otherwise material to the conduct of the Company’s business as now conducted and as contemplated to be conducted in the future; (iv) involves a Company Lease; (v) imposes any guaranty, surety or indemnification Obligations on the Company; or (vi) prohibits the Company from engaging in any business or competing anywhere in the world.

2.20         “Obligation” means any debt, liability or obligation of any nature whatsoever, whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown or obligations under executory Contracts.

2.21         “Ordinary Course of Business” means the ordinary course of business of the person in question, consistent with past custom and practice (including with respect to quantity, quality and frequency).

2.22         “Permit” means any license, permit, approval, waiver, order, authorization, right or privilege of any nature whatsoever, granted, issued, approved or allowed by any Governmental Authority.

2.23         “Person” means any individual, sole proprietorship, joint venture, partnership, company, corporation, association, cooperation, trust, estate, Governmental Authority, or any other entity of any nature whatsoever.

2.24         “Principal Trading Market” shall mean the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Markets, including the Bulletin Board and Pink Sheets, the NYSE Euronext or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

2.25         “Proceeding” means any demand, claim, suit, action, litigation, investigation, audit, study, arbitration, administrative hearing, or any other proceeding of any nature whatsoever.

 

  

  

  

2.26         “Real Property” means any real estate, land, building, structure, improvement, fixture or other real property of any nature whatsoever, including, but not limited to, fee and leasehold interests.

2.27         “SEC” means the United States Securities and Exchange Commission.

2.28         “Securities” means, collectively, the Debentures, the Incentive Shares and any additional shares of Common Stock issuable in connection with a conversion of the Debentures or the terms of this Agreement or any other Transaction Documents.

2.29         “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

2.30         “Tax” means (i) any foreign, federal, state or local income, profits, gross receipts, franchise, sales, use, occupancy, general property, real property, personal property, intangible property, transfer, fuel, excise, accumulated earnings, personal holding company, unemployment compensation, social security, withholding taxes, payroll taxes, or any other tax of any nature whatsoever, (ii) any foreign, federal, state or local organization fee, qualification fee, annual report fee, filing fee, occupation fee, assessment, rent, or any other fee or charge of any nature whatsoever, or (iii) any deficiency, interest or penalty imposed with respect to any of the foregoing.

2.31         “Tax Return” means any tax return, filing, declaration, information statement or other form or document required to be filed in connection with or with respect to any Tax.

2.32         “Transaction Documents” means any documents or instruments executed or to be executed by Company in connection with this Agreement, including the Debentures, the Security Agreement, the Subsidiary Guaranty, the Sub Security Agreement, and the UCC-1’s, together with all modifications, amendments, extensions, future advances, renewals, and substitutions thereof.

ARTICLE III

INTERPRETATION

In this Agreement, unless the express context otherwise requires: (i) the words “herein,” “hereof” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement; (ii) references to the words “Article” or “Section” refer to the respective Articles and Sections of this Agreement, and references to “Exhibit” or “Schedule” refer to the respective Exhibits and Schedules annexed hereto; (iii) references to a “party” mean a party to this Agreement and include references to such party’s permitted successors and permitted assigns; (iv) references to a “third party” mean a Person not a party to this Agreement; (v) the terms “dollars” and “$” means U.S. dollars; (vi) wherever the word “include,” “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation;” and (vi) the term “Company” shall refer collectively to the Company and all of its Subsidiaries, whether listed as part of the Subsidiaries in the Recitals hereof or not, and to each of them individually, in each case as the context may so require, it being the intent of the parties under this Agreement that all of the terms, conditions, provisions and representations hereof shall, to the greatest extent possible, while still maintaining the intent and purpose of this Agreement, apply equally to each of the Subsidiaries, as if each term, covenant, provision and representation was separately made herein by each of them, except only with respect to any terms and provisions that deal directly with the issuance of any of the Securities, in which case the term Company shall mean and refer only to the Company, as the issuer of such Securities, without its Subsidiaries.

 

  

  

  

ARTICLE IV

PURCHASE AND SALE OF DEBENTURES

4.1           Purchase and Sale of Debentures.  Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement, Buyer agrees to purchase, at each Closing, and Company agrees to sell and issue to Buyer, at each Closing, Debentures in the amount of the Purchase Price applicable to each Closing as more specifically set forth below.

4.2           Closing Dates. The First Closing of the purchase and sale of the Debentures shall be for Five Hundred Fifty Thousand Dollars ($550,000), and shall take place on the Effective Date, subject to satisfaction of the conditions to the First Closing set forth in this Agreement (the “First Closing Date”).  Additional Closings of the purchase and sale of the Debentures shall be at such times and for such amounts as determined in accordance with Section 4.4 below, subject to satisfaction of the conditions to the Additional Closings set forth in this Agreement (the “Additional Closing Dates”) (collectively referred to as the “Closing Dates”).  The Closings shall occur on the respective Closing Dates through the use of overnight mails and subject to customary escrow instructions from Buyer and its counsel, or in such other manner as is mutually agreed to by the Company and the Buyer.

4.3           Form of Payment.  Subject to the satisfaction of the terms and conditions of this Agreement, on each Closing Date: (i) the Buyer shall deliver to the Company, to a Company account designated by the Company, the aggregate proceeds for the Debentures to be issued and sold to Buyer at each such Closing, minus the fees to be paid directly from the proceeds of each such Closing as set forth in this Agreement, in the form of wire transfers of immediately available U.S. dollars; and (ii) the Company shall deliver to Buyer the Securities which Buyer is purchasing hereunder at each Closing, duly executed on behalf of the Company, together with any other documents required to be delivered pursuant to this Agreement.

4.4           Additional Closings.  At any time after the First Closing but prior to the maturity date of any of the Debentures issued in the First Closing, the Company may request that Buyer purchase additional Debentures hereunder in Additional Closings by written notice to Buyer, and, subject to the conditions below, Buyer shall purchase such additional Debentures in such amounts and at such times as Buyer and the Company may mutually agree, so long as the following conditions have been satisfied, in Buyer’s sole and absolute discretion: (i) no default or “Event of Default” (as such term is defined in any of the Transaction Documents) shall have occurred or be continuing under this Agreement or any other Transaction Documents, and no event shall have occurred that, with the passage of time, the giving of notice, or both, would constitute a default or an Event of Default hereunder or thereunder; and (ii) any additional purchase of Debentures beyond the purchase of Debentures at the First Closing shall have been approved by Buyer, which approval may be given or withheld in Buyer’s sole and absolute discretion.

 

  

  

  

ARTICLE V

BUYER’S REPRESENTATIONS AND WARRANTIES

Buyer represents and warrants to the Company, that:

 

5.1           Organization; Authority. Buyer is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder.

5.2           Investment Purpose. Buyer is acquiring the Securities for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, Buyer reserves the right to dispose of the Securities at any time in accordance with or pursuant to an effective registration statement covering such Securities or an available exemption under the Securities Act.

5.3           Accredited Buyer Status.  Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D, as promulgated under the Securities Act.

5.4           Reliance on Exemptions.  Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of Buyer to acquire the Securities.

5.5           Information. Buyer has been furnished with all materials it has requested relating to the business, finances and operations of the Company and information Buyer deemed material to making an informed investment decision regarding its purchase of the Securities. Buyer has been afforded the opportunity to ask questions of the Company and its management. Neither such inquiries, nor any materials provided to Buyer, nor any other due diligence investigations conducted by Buyer or its advisors, if any, or its representatives, shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Article VI below.  Buyer understands that its investment in the Securities involves a high degree of risk.  Buyer is in a position regarding the Company, which, based upon economic bargaining power, enabled and enables Buyer to obtain information from the Company in order to evaluate the merits and risks of this investment.  Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

5.6           No Governmental Review. Buyer understands that no United States federal or state Governmental Authority has passed on or made any recommendation or endorsement of the Securities, or the fairness or suitability of the investment in the Securities, nor have such Governmental Authorities passed upon or endorsed the merits of the offering of the Securities.

5.7           Authorization, Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of Buyer and is a valid and binding agreement of Buyer, enforceable in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

  

  

  

5.8           Transfer or Resale. Buyer understands that: (i) the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless: (A) subsequently registered thereunder; or (B) such Securities may be sold, assigned or transferred pursuant to an exemption from such registration; and (ii) neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder, except as otherwise specifically set forth in this Agreement.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE SELLER

Except as set forth and disclosed in the SEC Documents or in the disclosure schedule attached to this Agreement and made a part hereof, the Company hereby makes the following representations and warranties to the Buyer:

6.1           Subsidiaries.  Except for the Subsidiaries or as set forth in Schedule 6.1, all of whom are wholly-owned subsidiaries of the Company, the Company has no subsidiaries and the Company does not own, directly or indirectly, any outstanding securities of or other interests in, or have any control over, any other Person.  With respect to each of the Subsidiaries, all representations and warranties in this Article VI and elsewhere in this Agreement shall be deemed repeated and re-made from and by each of the Subsidiaries, as if such representations and warranties were independently made by each of such Subsidiaries in this Agreement.  In addition, each representation and warranty contained in this Article VI or otherwise set forth in this Agreement shall be deemed to mean and be construed to include the Company and each of its Subsidiaries, as applicable, regardless of whether each of such representations and warranties in Article VI specifically refers to the Company’s Subsidiaries or not.

6.2           Organization.  The Company is a corporation, duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated.  The Company has the full corporate power and authority and all necessary certificates, licenses, approvals and Permits to: (i) enter into and execute this Agreement and the Transaction Documents and to perform all of its Obligations hereunder and thereunder; and (ii) own and operate its Assets and properties and to conduct and carry on its business as and to the extent now conducted.  The Company is duly qualified to transact business and is in good standing as a foreign corporation in each jurisdiction where the character of its business or the ownership or use and operation of its Assets or properties requires such qualification.

6.3           Authority and Approval of Agreement; Binding Effect.  The execution and delivery by Company of this Agreement and the Transaction Documents, and the performance by Company of all of its Obligations hereunder and thereunder, including the issuance of the Securities, have been duly and validly authorized and approved by Company and its board of directors pursuant to all applicable Laws and no other corporate action or Consent on the part of Company, its board of directors, stockholders or any other Person is necessary or required by the Company to execute this Agreement and the Transaction Documents, consummate the transactions contemplated herein and therein, perform all of Company’s Obligations hereunder and thereunder, or to issue the Securities.  This Agreement and each of the Transaction Documents have been duly and validly executed by Company (and the officer executing this Agreement and all such other Transaction Documents is duly authorized to act and execute same on behalf of Company) and constitute the valid and legally binding agreements of Company, enforceable against Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

  

  

  

6.4           Capitalization. As of the date hereof, the authorized capital stock of the Company consists of: (i) 470,000,000 shares of Common Stock, of which 293,308,620 are issued and outstanding and 67,249,117 shares are reserved for issuance pursuant to securities exercisable or exchangeable for, or convertible into, shares of Common Stock; and (ii) 5,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”), of which 400 shares have been previously designated as Series C Preferred Stock, of which none are currently issued and outstanding, 2,500 have been previously designated as Series F Preferred Stock, of which 600 shares are currently issued and outstanding, and 500 shares have been previously designated as Series H Preferred Stock, of which none are currently issued and outstanding. No shares of Common Stock are held in treasury.  All of such outstanding shares have been validly issued and are fully paid and nonassessable.  The Common Stock is currently quoted on the OTC Bulletin Board under the trading symbol “PSID”.  The Company has received no notice, either oral or written, with respect to the continued eligibility of the Common Stock for quotation on the Principal Trading Market, and the Company has maintained, in all material respects, all requirements on its part for the continuation of such quotation.  Except as disclosed in the “SEC Documents” (as hereinafter defined) or on Schedule 6.4, no shares of Common Stock are subject to preemptive rights or any other similar rights or any Encumbrances suffered or permitted by the Company.  Except as disclosed in the SEC Documents or in Schedule 6.4, as of the date hereof: (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or Contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries; (ii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other Contracts or instruments evidencing indebtedness of the Company or any of its Subsidiaries, or by which the Company or any of its Subsidiaries is or may become bound; (iii) there are no outstanding registration statements with respect to the Company or any of its securities; (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except pursuant to this Agreement); (v) there are no financing statements securing obligations filed in connection with the Company or any of its Assets; (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein; and (vii) there are no outstanding securities or instruments of the Company which contain any redemption or similar provisions, and there are no Contracts by which the Company is or may become bound to redeem a security of the Company.  The Company has furnished to the Buyer true, complete and correct copies of: (I) the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”); and (II) the Company’s Bylaws, as in effect on the date hereof (the “Bylaws”).  Except for the Certificate of Incorporation and the Bylaws, there are no other shareholder agreements, voting agreements or other Contracts of any nature or kind that restrict, limit or in any manner impose Obligations on the governance of the Company.

6.5           No Conflicts; Consents and Approvals.  The execution, delivery  and performance of this Agreement and the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby, including the issuance of any of the Securities, will not: (i) constitute a violation of or conflict with the Certificate of Incorporation, Bylaws or any other organizational or governing documents of Company; (ii) constitute a material violation of, or a material default or material breach under (either immediately, upon notice, upon lapse of time, or both), or materially conflicts with, or gives to any other Person any rights of termination, amendment, acceleration or cancellation of, any provision of any Contract to which Company is a party or by which any of its Assets or properties may be bound; (iii) constitute a material violation of, or a material default or breach under (either immediately, upon notice, upon lapse of time, or both), or conflicts with, any Judgment; (iv) constitute a violation of, or conflict with, any Law (including United States federal and state securities Laws and the rules and regulations of any market or exchange on which the Common Stock is quoted); or (v) result in the loss or adverse modification of, or the imposition of any fine, penalty or other Encumbrance with respect to, any Permit granted or issued to, or otherwise held by or for the use of, Company or any of Company’s Assets.  The Company is not in violation of its Certificate of Incorporation, Bylaws or other organizational or governing documents, and the Company is not in material default or breach (and no event has occurred which with notice or lapse of time or both could put the Company in default or breach) under, and the Company has not taken any action or failed to take any action that would give to any other Person any rights of termination, amendment, acceleration or cancellation of, any Contract to which the Company is a party or by which any property or Assets of the Company are bound or affected. The businesses of the Company are not being conducted, and shall not be conducted so long as Buyer owns any of the Securities, in violation of any Law in any material respect. Except as specifically contemplated by this Agreement, the Company is not required to obtain any Consent of, from, or with any Governmental Authority, or any other Person, in order for it to execute, deliver or perform any of its Obligations under this Agreement or the Transaction Documents in accordance with the terms hereof or thereof, or to issue and sell the Securities in accordance with the terms hereof.  All Consents which the Company is required to obtain pursuant to the immediately preceding sentence have been obtained or effected on or prior to the date hereof.  The Company is not aware of any facts or circumstances which might give rise to any of the foregoing.

 

  

  

  

6.6           Issuance of Securities. The Securities are duly authorized and, upon issuance in accordance with the terms hereof, shall be duly issued, fully paid and non-assessable, and free from all Encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable United States federal and state securities Laws.  Assuming the accuracy of the representations and warranties of the Buyer set forth in Article V above, the offer and sale by the Company of the Securities is exempt from: (i) the registration and prospectus delivery requirements of the Securities Act; and (ii) the registration and/or qualification provisions of all applicable state and provincial securities and “blue sky” laws.

6.7           SEC Documents; Financial Statements. The Common Stock of the Company is registered pursuant to Section 12 of the Exchange Act, the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, and the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC under the Exchange Act (all of the foregoing filed within the two (2) years preceding the date hereof or amended after the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the “SEC Documents”).  The Company is current with its filing obligations under the Exchange Act and all SEC Documents have been filed on a timely basis or the Company has received a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension.  The Company represents and warrants that true and complete copies of the SEC Documents are available on the SEC’s website (www.sec.gov) at no charge to Buyer, and Buyer acknowledges that it may retrieve all SEC Documents from such website and Buyer’s access to such SEC Documents through such website shall constitute delivery of the SEC Documents to Buyer; provided, however, that if Buyer is unable to obtain any of such SEC Documents from such website at no charge, as result of such website not being available or any other reason beyond Buyer’s control, then upon request from Buyer, the Company shall deliver to Buyer true and complete copies of such SEC Documents.  The Buyer shall also deliver to Buyer, upon request, true and complete copies of all draft filings, reports, schedules, statements and other documents required to be filed with the SEC that have been prepared but not filed with the SEC as of the date hereof. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable Law (except for such statements as have been amended or updated in subsequent filings prior the date hereof, which amendments or updates are also part of the SEC Documents).  As of their respective dates, the financial statements of the Company included in the SEC Documents (the “Financial Statements”) complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. All of the Financial Statements have been prepared in accordance with GAAP, consistently applied, during the periods involved (except: (i) as may be otherwise indicated in such Financial Statements or the notes thereto; or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements), and fairly present in all material respects the consolidated financial position of the Company as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  To the knowledge of the Company and its officers, no other information provided by or on behalf of the Company to the Buyer, whether included in the SEC Documents or not, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.

 

  

  

  

6.8           Absence of Certain Changes.  Since the date the last of the SEC Documents was filed with the SEC and since the date of the most recent Financial Statements, none of the following have occurred:

(a)           There has been no event or circumstance of any nature whatsoever that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect; or

(b)           Any material transaction, event, action, development, payment, or any other matter of any nature whatsoever entered into by the Company other than in the Ordinary Course of Business.

6.9           Absence of Litigation or Adverse Matters. (i) There is no material Proceeding before or by any Governmental Authority or any other Person, pending, or the best of Company’s knowledge, threatened or contemplated by, against or affecting the Company, its business or Assets; (ii) there is no outstanding Judgments against or affecting the Company, its business or Assets; (iii) the Company is not in material breach or violation of any Contract; and (iv) the Company has not received any material complaint from any customer, supplier, vendor or employee.

6.10           Liabilities and Indebtedness of the Company.  The Company does not have any Obligations of any nature whatsoever, except: (i) as disclosed in the Financial Statements; or (ii) Obligations incurred in the Ordinary Course of Business since the date of the most recent Financial Statements filed by the Company with the SEC, or otherwise disclosed to Buyer in connection with Buyer’s due diligence of the Company, which do not or would not, individually or in the aggregate, exceed Twenty-five Thousand Dollars ($25,000) or otherwise have a Material Adverse Effect.

 

  

  

  

6.11         Title to Assets.  Except for the “Boeing Encumbrance” (as hereinafter defined), the Company has good and marketable title to, or a valid leasehold interest in, all of its Assets which are material to the business and operations of the Company as presently conducted, free and clear of all Encumbrances or restrictions on the transfer or use of same.  Except as would not have a Material Adverse Effect, the Company’s Assets are in good operating condition and repair, ordinary wear and tear excepted, and are free of any latent or patent defects which might impair their usefulness, and are suitable for the purposes for which they are currently used and for the purposes for which they are proposed to be used.

6.12         Real Estate.

(a)           Real Property Ownership.  The Company does not own any Real Property.

(b)           Real Property Leases.  Except for ordinary and customary office Leases for market rent, and as otherwise described in the SEC Documents (the “Company Leases”), the Company does not lease any other Real Property.  With respect to each of the Company Leases: (i) the Company has been in peaceful possession of the property leased thereunder and neither the Company nor the landlord is in default thereunder; (ii) no waiver, indulgence or postponement of any of the Obligations thereunder has been granted by the Company or landlord thereunder; and (iii) there exists no event, occurrence, condition or act known to the Company which, upon notice or lapse of time or both, would be or could become a default thereunder or which could result in the termination of the Company Leases, or any of them, or have a Material Adverse Effect on the business of the Company, its Assets or its operations or financial results.  The Company has not violated nor breached any provision of any such Company Leases, and all Obligations required to be performed by the Company under any of such Company Leases have been fully, timely and properly performed.  The Company has delivered to the Buyer true, correct and complete copies of all Company Leases, including all modifications and amendments thereto, whether in writing or otherwise.  The Company has not received any written or oral notice to the effect that any of the Company Leases will not be renewed at the termination of the term of such Company Leases, or that any of such Company Leases will be renewed only at higher rents.

6.13         Material Contracts.  An accurate, current and complete copy of each of the Material Contracts has been furnished to Buyer and/or is readily available as part of the SEC Documents, and each of the Material Contracts constitutes the entire agreement of the respective parties thereto relating to the subject matter thereof.  There are no outstanding offers, bids, proposals or quotations made by Company which, if accepted, would create a Material Contract with Company.  Each of the Material Contracts is in full force and effect and is a valid and binding Obligation of the parties thereto in accordance with the terms and conditions thereof.  To the knowledge of the Company and its officers, all Obligations required to be performed under the terms of each of the Material Contracts by any party thereto have been fully performed by all parties thereto, and no party to any Material Contracts is in material default with respect to any term or condition thereof, nor has any event occurred which, through the passage of time or the giving of notice, or both, would constitute a default thereunder or would cause the acceleration or modification of any Obligation of any party thereto or the creation of any Encumbrance upon any of the Assets of the Company.  Further, the Company has received no notice, nor does the Company have any knowledge, of any pending or contemplated termination of any of the Material Contracts and, no such termination is proposed or has been threatened, whether in writing or orally.

 

  

  

  

6.14         Compliance with Laws.  To the knowledge of the Company and its officers, the Company is and at all times has been in material compliance with all Laws.  The Company has not received any written notice that it is in violation of, has violated, or is under investigation with respect to, or has been threatened to be charged with, any material violation of any Law.

6.15         Intellectual Property.  The Company owns or possesses adequate and legally enforceable  rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and all other intellectual property rights necessary to conduct its business as now conducted. Except as set forth in Schedule 6.15, the Company does not have any knowledge of any infringement by the Company of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other intellectual property rights of others, and, to the knowledge of the Company, there is no Claim being made or brought against, or to the Company’s knowledge, being threatened against, the Company regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other intellectual property infringement; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing.

6.16         Labor and Employment Matters.  The Company is not involved in any material labor dispute or, to the knowledge of the Company, is any such dispute threatened. To the knowledge of the Company and its officers, none of the Company’s employees is a member of a union and the Company believes that its relations with its employees are good.  To the knowledge of the Company and its officers, the Company has complied in all material respects with all Laws relating to employment matters, civil rights and equal employment opportunities.

6.17         Employee Benefit Plans.  Except as set forth in the SEC Documents, the Company does not have and has not ever maintained, and has no Obligations with respect to any employee benefit plans or arrangements, including employee pension benefit plans, as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), multiemployer plans, as defined in Section 3(37) of ERISA, employee welfare benefit plans, as defined in Section 3(1) of ERISA, deferred compensation plans, stock option plans, bonus plans, stock purchase plans, hospitalization, disability and other insurance plans, severance or termination pay plans and policies, whether or not described in Section 3(3) of ERISA, in which employees, their spouses or dependents of the Company participate (collectively, the “Employee Benefit Plans”).  To the Company’s knowledge, all Employee Benefit Plans meet the minimum funding standards of Section 302 of ERISA, where applicable, and each such Employee Benefit Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code of 1986 is qualified.  No withdrawal liability has been incurred under any such Employee Benefit Plans and no “Reportable Event” or “Prohibited Transaction” (as such terms are defined in ERISA), has occurred with respect to any such Employee Benefit Plans, unless approved by the appropriate Governmental Authority.  To the Company’s knowledge, the Company has promptly paid and discharged all Obligations arising under ERISA of a character which if unpaid or unperformed might result in the imposition of an Encumbrance against any of its Assets or otherwise have a Material Adverse Effect.

 

  

  

  

6.18         Tax Matters.  Except as set forth in Schedule 6.18, the Company has made and timely filed all Tax Returns required by any jurisdiction to which it is subject, and each such Tax Return has been prepared in material compliance with all applicable Laws, and all such Tax Returns are true and accurate in all material respects.  Except and only to the extent that the Company has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported Taxes, the Company has timely paid all Taxes shown or determined to be due on such Tax Returns, except those being contested in good faith, and the Company has set aside on its books provision reasonably adequate for the payment of all Taxes for periods subsequent to the periods to which such Tax Returns apply. There are no unpaid Taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.  The Company has withheld and paid all Taxes to the appropriate Governmental Authority required to have been withheld and paid in connection with amounts paid or owing to any Person.  There is no Proceeding or Claim for refund now in progress, pending or threatened against or with respect to the Company regarding Taxes.

6.19         Insurance.  The Company is covered by valid, outstanding and enforceable policies of insurance which were issued to it by reputable insurers of recognized financial responsibility, covering its properties, Assets and businesses against losses and risks normally insured against by other corporations or entities in the same or similar lines of businesses as the Company is engaged and in coverage amounts which are prudent and typically and reasonably carried by such other corporations or entities (the “Insurance Policies”).  Such Insurance Policies are in full force and effect, and all premiums due thereon have been paid.  None of the Insurance Policies will lapse or terminate as a result of the transactions contemplated by this Agreement.  The Company has complied in all material respects with the provisions of such Insurance Policies.  The Company has not been refused any insurance coverage sought or applied for and the Company does not have any reason to believe that it will not be able to renew its existing Insurance Policies as and when such Insurance Policies expire or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company.

6.20         Permits.  The Company possesses all Permits necessary to conduct its business, and the Company has not received any notice of, or is otherwise involved in any Proceedings relating to, the revocation or modification of any such Permits.  All such Permits are valid and in full force and effect and the Company is in material compliance with the respective requirements of all such Permits.

6.21         Bank Accounts; Business Location.  Schedule 6.21 sets forth, with respect to each account of the Company with any bank, broker or other depository institution: (i) the name and account number of such account; (ii) the name and address of the institution where such account is held; (iii) the name of any Person(s) holding a power of attorney with respect to such account, if any; and (iv) the names of all authorized signatories and other Persons authorized to withdraw funds from each such account.  The Company has no office or place of business other than as identified on Schedule 6.21 and the Company's principal places of business and chief executive offices are indicated on Schedule 6.21.  All books and records of the Company and other material Assets of the Company are held or located at the principal offices of the Company indicated on Schedule 6.21.

6.22         Environmental Laws.  The Company is and has at all times been in material compliance with any and all applicable Environmental Requirements, and there are no pending Claims against the Company relating to any Environmental Requirements, nor to the best knowledge of the Company, is there any basis for any such Claims.

 

  

  

  

6.23         Illegal Payments.  Neither the Company, nor any director, officer, agent, employee or other Person acting on behalf of the Company has, in the course of his or her actions for, or on behalf of, the Company: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

6.24         Related Party Transactions.  Except for arm’s length transactions pursuant to which the Company makes payments in the Ordinary Course of Business upon terms no less favorable than the Company could obtain from third parties, none of the officers, directors or employees of the Company, nor any stockholders who own, legally or beneficially, five percent (5%) or more of the issued and outstanding shares of any class of the Company’s capital stock (each a “Material Shareholder”), is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any Contract providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from, any officer, director or such employee or Material Shareholder or, to the best knowledge of the Company, any other Person in which any officer, director, or any such employee or Material Shareholder has a substantial or material interest in or of which any officer, director or employee of the Company or Material Shareholder is an officer, director, trustee or partner.  There are no Claims or disputes of any nature or kind between the Company and any officer, director or employee of the Company or any Material Shareholder, or between any of them, relating to the Company and its business.

6.25         Internal Accounting Controls.  The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to Assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for Assets is compared with the existing Assets at reasonable intervals and appropriate action is taken with respect to any differences.

6.26         Acknowledgment Regarding Buyer’s Purchase of the Securities. The Company acknowledges and agrees that Buyer is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by Buyer or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to Buyer’s purchase of the Securities. The Company further represents to Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation by the Company and its representatives.

6.27         Seniority.  Except for Encumbrances in favor of The Boeing Company (the “Boeing Encumbrance”), no indebtedness or other equity or security of the Company is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, except only purchase money security interests (which are senior only as to underlying Assets covered thereby).

 

  

  

  

6.28         Brokerage Fees.  Except for Meyers Associates, LP, there is no Person acting on behalf of the Company who is entitled to or has any claim for any brokerage or finder’s fee or commission in connection with the execution of this Agreement or the consummation of the transactions contemplated hereby.  Meyers Associates, LP, a FINRA registered securities brokerage firm, shall be paid a finder’s fee by the Company, at Closing, in accordance with a separate agreement between the Company and Meyers Associates, LP.

6.29         Full Disclosure.  All the representations and warranties made by Company herein or in the Schedules hereto, and all of the statements, documents or other information pertaining to the transaction contemplated herein made or given by Company, are complete and accurate in all material respects, and do not omit any information required to make the statements and information provided, in light of the transaction contemplated herein and in light of the circumstances under which they were made, not misleading, accurate and meaningful.

ARTICLE VII

COVENANTS

7.1           Negative Covenants.

(a)           Indebtedness.  So long as Buyer owns, legally or beneficially, any of the Debentures, neither the Company, nor any of its Subsidiaries shall, either directly or indirectly, create, assume, incur or have outstanding any indebtedness for borrowed money of any nature or kind (including purchase money indebtedness), or become liable, whether as endorser, guarantor, surety or otherwise, for any Obligation of any other Person, except for: (i) the Debentures; and (ii) Obligations for accounts payable, other than for money borrowed, incurred in the Ordinary Course of Business.

(b)           Encumbrances.  So long as Buyer owns, legally or beneficially, any of the Debentures, neither the Company, nor any of its Subsidiaries shall, either directly or indirectly, create, assume, incur or suffer or permit to exist any Encumbrance upon any Asset of the Company or any of its Subsidiaries, whether owned at the date hereof or hereafter acquired, except for the Boeing Encumbrance.

(c)           Issuances.  So long as Buyer owns, legally or beneficially, any of the Debentures, in the event the Company or any of its Subsidiaries issues any equity securities, or securities convertible or exchangeable into any equity securities of the Company or its Subsidiaries, then: (i) the Company shall notify the Buyer in writing of such issuance, no later than the date of closing of such issuance, including the pertinent details applicable to same; (ii) no such issuance shall be undertaken or closed without Buyer’s prior written approval, if such issuance will result in any change of the management of the Company or result in a “Change of Control” (as hereinafter defined); and (iii) in the event any such issuance is for gross consideration of $550,000 or more payable to the Company, then within ten (10) business days of the closing of such issuance, the Company shall redeem the Incentive Shares then in the Buyer’s possession for an amount payable by the Company to Buyer in cleared U.S. dollars equal to the Share Value, less any net cash proceeds received by the Buyer from any previous sales of Incentive Shares.

 

  

  

  

(d)           Transfer; Merger.  So long as Buyer owns, legally or beneficially, any of the Debentures, neither the Company, nor any of its Subsidiaries shall, either directly or indirectly, permit or enter into any transaction involving a “Change in Control” (as hereinafter defined), or any other merger, consolidation, sale, transfer, license, Lease, Encumbrance or other disposition of all or substantially all of its properties or business or all or substantially all of its Assets, except for the sale, lease or licensing of property or Assets of the Company in the Ordinary Course of Business.  For purposes of this Agreement, the term “Change of Control” shall mean any sale, conveyance, assignment or other transfer, directly or indirectly, of any ownership interest of the Company or any of its subsidiaries which results in any change in the identity of the individuals or entities previously having the power to direct, or cause the direction of, the management and policies of the Company or any of its subsidiaries, or the grant of a security interest in any ownership interest of any Person directly or indirectly controlling the Company, which could result in a change in the identity of the individuals or entities previously having the power to direct, or cause the direction of, the management and policies of the Company or any of its subsidiaries.

(e)           Distributions; Restricted Payments.  So long as Buyer owns, legally or beneficially, any of the Debentures, neither the Company, nor any of its Subsidiaries shall, either directly or indirectly: (i) purchase or redeem any shares of its capital stock; (ii) declare or pay any dividends or distributions, whether in cash or otherwise, or set aside any funds for any such purpose; (iii) make any loans, advances or extensions of credit to, or investments in, any Person, including, without limitation, any Affiliates of the Company or its Subsidiaries, or the Company’s officers, directors, employees or Material Shareholders, or the officers, directors, employees of any Subsidiary of the Company; or (iv) increase the annual salary paid to any officers or directors of the Company or any of its Subsidiaries as of the Effective Date, unless any such increase is part of a written employment contract with any such officers entered into prior to the Effective Date, a copy of which has been delivered to and approved by the Buyer.

(f)           Use of Proceeds.  Neither the Company, nor any of its Subsidiaries, shall use any portion of the proceeds of the Debentures, either directly or indirectly, for any of the following purposes: (i) to make any payment towards any indebtedness for borrowed money of the Company or any of its  Subsidiaries; (ii) to pay any Taxes of any nature or kind that may be due by the Company or any of its Subsidiaries; (iii) to pay any Obligations of any nature or kind due or owing to any officers, directors, employees, or Material Shareholders of the Company or any of its Subsidiaries, other than salaries payable in the Ordinary Course of Business.  The Company covenants and agrees to only use any portion of the proceeds of the purchase and sale of the Debentures for the purposes set forth in a “Use of Proceeds Confirmation” to be executed by the Company on the Effective Date, unless the Company obtains the prior written consent of the Buyer to use such proceeds for any other purpose, which consent may be granted or withheld by Buyer in its sole and absolute discretion.

(g)           Business Activities; Change of Legal Status and Organizational Documents.  So long as Buyer owns, legally or beneficially, any of the Debentures, neither the Company, nor any of its Subsidiaries, shall: (i) engage in any line of business other than the businesses engaged in as of the Effective Date and business reasonably related thereto; (ii) change its respective name, organizational identification number, its type of organization, its jurisdiction of organization or other legal structure; or (iii) permit its Certificate of Incorporation, Bylaws or other organizational documents to be amended or modified in any way which could reasonably be expected to have a Material Adverse Effect.

(h)           Transactions with Affiliates.  So long as Buyer owns, legally or beneficially, any of the Debentures, neither the Company, nor any of its Subsidiaries, shall enter into any transaction with any of its Affiliates, officers, directors, employees, Material Shareholders or other insiders, except in the Ordinary Course of Business and upon fair and reasonable terms that are no less favorable to the Company or its Subsidiaries, as applicable, than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate of the Company or any of its Subsidiaries.

 

  

  

  

7.2           Affirmative Covenants.

(a)           Corporate Existence.  So long as Buyer owns, legally or beneficially, any of the Debentures, the Company and each of its Subsidiaries shall at all times preserve and maintain their respective: (i) existence and good standing in the jurisdiction of its and their organization; and (ii) its and their qualification to do business and good standing in each jurisdiction where the nature of its and their business makes such qualification necessary, and shall at all times continue as a going concern in the business which the Company is presently conducting.

(b)           Tax Liabilities.  So long as Buyer owns, legally or beneficially, any of the Debentures, the Company and each of its Subsidiaries shall at all times pay and discharge all Taxes upon, and all Claims (including claims for labor, materials and supplies) against the Company and each of its Subsidiaries or any of its or their properties or Assets, before the same shall become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP are being maintained.

(c)           Notice of Proceedings.  So long as Buyer owns, legally or beneficially, any of the Debentures, the Company shall, promptly, but not more than five (5) days after knowledge thereof shall have come to the attention of any officer of the Company, give written notice to the Buyer of all threatened or pending material Proceedings before any Governmental Authority or otherwise, affecting the Company or any of its Subsidiaries.

(d)           Material Adverse Effect.  So long as Buyer owns, legally or beneficially, any of the Debentures, the Company shall, promptly, but not more than five (5) days after knowledge thereof shall have come to the attention of any officer of the Company, give written notice to the Buyer of any event, circumstance, fact or other matter that could in any way have or be reasonably expected to have a Material Adverse Effect.

(e)           Notice of Default.  So long as Buyer owns, legally or beneficially, any of the Debentures, the Company shall, promptly, but not more than five (5) days after the commencement thereof, give notice to the Buyer in writing of the occurrence of any “Event of Default” (as such term is defined in any of the Transaction Documents) or of any event which, with the lapse of time, the giving of notice or both, would constitute an Event of Default hereunder or under any other Transaction Documents.

(f)            Maintain Property.  So long as Buyer owns, legally or beneficially, any of the Debentures, the Company and each of its Subsidiaries shall at all times maintain, preserve and keep all of their respective Assets in good repair, working order and condition, normal wear and tear excepted, and shall from time to time, as the Company deems appropriate in its reasonable judgment, make all needful and proper repairs, renewals, replacements, and additions thereto so that at all times the efficiency thereof shall be fully preserved and maintained.  The Company shall permit Buyer to examine and inspect such Assets (and all Assets and properties of its Subsidiaries) at all reasonable times upon reasonable notice during business hours.  During the continuance of any Event of Default hereunder or under any Transaction Documents, the Buyer shall, at the Company’s expense, have the right to make additional inspections without providing advance notice.

 

  

  

  

(g)           Maintain Insurance.  So long as Buyer owns, legally or beneficially, any of the Debentures, the Company and its Subsidiaries shall at all times insure and keep insured with insurance companies acceptable to Buyer, all insurable property owned by the Company and its Subsidiaries, respectively and as applicable, which is of a character usually insured by companies similarly situated and operating like properties, against loss or damage from environmental, fire and such other hazards or risks as are customarily insured against by companies similarly situated and operating like properties; and shall similarly insure employers’, public and professional liability risks.  The Company has delivered to the Buyer a summary setting forth the nature and extent of the insurance maintained pursuant to this Section.  All such policies of insurance must be satisfactory to Buyer in relation to the amount and term of the Debentures and type and value of the Assets of the Company and the assets and properties of its Subsidiaries, shall identify Buyer as sole/lender’s loss payee and as an additional insured.  Upon request from the Buyer, the Company shall deliver Certificates of Insurance evidencing the insurance requirements required hereby.  In the event the Company fails to provide Buyer with evidence of the insurance coverage required by this Section or at any time hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay any premium in whole or in part relating thereto, then the Buyer, without waiving or releasing any obligation or default by the Company hereunder, may at any time (but shall be under no obligation to so act), obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto, which Buyer deems advisable.  This insurance coverage: (i) may, but need not, protect the Company’s interest in such property; and (ii) may not pay any claim made by, or against, the Company in connection with such property.  The Company may later request that the Buyer cancel any such insurance purchased by Buyer, but only after providing Buyer with evidence that the insurance coverage required by this Section is in force.  The costs of such insurance obtained by Buyer, through and including the effective date such insurance coverage is canceled or expires, shall be payable on demand by the Company to Buyer, together with interest at the highest non-usurious rate permitted by law on such amounts until repaid and any other charges by Buyer in connection with the placement of such insurance.  The costs of such insurance, which may be greater than the cost of insurance which the Company may be able to obtain on its own, together with interest thereon at the highest non-usurious rate permitted by Law and any other charges incurred by Buyer in connection with the placement of such insurance may be added to the total Obligations due and owing by the Company hereunder and under the Debentures to the extent not paid by the Company.

(h)           Reporting Status; Listing.  So long as Buyer owns, legally or beneficially, any of the Securities, the Company shall: (i) file in a timely manner all reports required to be filed under the Securities Act, the Exchange Act or any securities Laws and regulations thereof applicable to the Company of any state of the United States, or by the rules and regulations of the Principal Trading Market; (ii) not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination; (iii) if required by the rules and regulations of the Principal Trading Market, promptly secure the listing of the Incentive Shares or any other shares of Common Stock issuable to Buyer under any of the Transaction Documents upon the Principal Trading Market (subject to official notice of issuance) and, take all reasonable action under its control to maintain the continued listing, quotation and trading of its Common Stock (including, without limitation, the Incentive Shares or any other shares of Common Stock issuable to Buyer under any of the Transaction Documents) on the Principal Trading Market, and the Company shall comply in all material respects with the Company’s reporting, filing and other Obligations under the bylaws or rules of the Principal Trading Market, the Financial Industry Regulatory Authority, Inc. and such other Governmental Authorities, as applicable. The Company shall promptly provide to Buyer copies of any notices it receives from the SEC or any Principal Trading Market, to the extent any such notices could in any way have or be reasonably expected to have a Material Adverse Effect.

 

  

  

  

(i)            Rule 144.  With a view to making available to Buyer the benefits of Rule 144 under the Securities Act (“Rule 144”), or any similar rule or regulation of the SEC that may at any time permit Buyer to sell the Incentive Shares or other shares of Common Stock issuable to Buyer under any Transaction Documents to the public without registration, the Company represents and warrants that: (i) the Company is, and has been for a period of at least ninety (90) days immediately preceding the date hereof, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; (ii) the Company has filed all required reports under Section 13 or 15(d) of the Exchange Act, as applicable, during the twelve (12) months preceding the First Closing Date (or for such shorter period that the Company was required to file such reports); and (iii) the Company is not an issuer defined as a “Shell Company” (as hereinafter defined).  For the purposes hereof, the term “Shell Company” shall mean an issuer that meets the description defined under Rule 144.  In addition, so long as Buyer owns, legally or beneficially, any securities of the Company, the Company shall, at its sole expense:

(i)            Make, keep and ensure that adequate current public information with respect to the Company, as required in accordance with Rule 144, is publicly available;

(ii)           furnish to the Buyer, promptly upon reasonable request: (A) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act; and (b) such other information as may be reasonably requested by Buyer to permit the Buyer to sell any of the Incentive Shares or other shares of Common Stock acquired hereunder or under any other Transaction Documents pursuant to Rule 144 without limitation or restriction; and

(iii)          promptly at the request of Buyer, give the Company’s transfer agent (the “Transfer Agent”) instructions to the effect that, upon the Transfer Agent’s receipt from Buyer of a certificate (a “Rule 144 Certificate”) certifying that Buyer’s holding period (as determined in accordance with the provisions of Rule 144) for any portion of the Incentive Shares or shares of Common Stock issuable under any Transaction Document which Buyer proposes to sell (or any portion of such shares which Buyer is not presently selling, but for which Buyer desires to remove any restrictive legends applicable thereto) (the “Securities Being Sold”) is not less than six (6) months, and receipt by the Transfer Agent of the “Rule 144 Opinion” (as hereinafter defined) from the Company or its counsel (or from Buyer and its counsel as permitted below), the Transfer Agent is to effect the transfer (or issuance of a new certificate without restrictive legends, if applicable) of the Securities Being Sold and issue to Buyer or transferee(s) thereof one or more stock certificates representing the transferred (or re-issued) Securities Being Sold without any restrictive legend and without recording any restrictions on the transferability of such shares on the Transfer Agent’s books and records.  In this regard, upon Buyer’s request, the Company shall have an affirmative obligation to cause its counsel to promptly issue to the Transfer Agent a legal opinion providing that, based on the Rule 144 Certificate, the Securities Being Sold may be sold pursuant to the provisions of Rule 144, even in the absence of an effective registration statement, or re-issued without any restrictive legends pursuant to the provisions of Rule 144, even in the absence of an effective registration statement (the “Rule 144 Opinion”). If the Transfer Agent requires any additional documentation in connection with any proposed transfer (or re-issuance) by Buyer of any Securities Being Sold, the Company shall promptly deliver or cause to be delivered to the Transfer Agent or to any other Person, all such additional documentation as may be necessary to effectuate the transfer (or re-issuance) of the Securities Being Sold and the issuance of an unlegended certificate to any such Buyer or any transferee thereof, all at the Company’s expense.  Any and all fees, charges or expenses, including, without limitation, attorneys’ fees and costs, incurred by Buyer in connection with issuance of any such shares, or the removal of any restrictive legends thereon, or the transfer of any such shares to any assignee of Buyer, shall be paid by the Company, and if not paid by the Company, the Buyer may, but shall not be required to, pay any such fees, charges or expenses, and the amount thereof, together with interest thereon at the highest non-usurious rate permitted by Law, from the date of outlay, until paid in full, shall be due and payable by the Company to Buyer immediately upon demand therefor, and all such amounts shall be additional Obligations of the company to Buyer secured under the Transaction Documents.  In the event that the Company and/or its counsel refuses or fails for any reason to render the Rule 144 Opinion or any other documents, certificates or instructions required to effectuate the transfer (or re-issuance) of the Securities Being Sold and the issuance of an unlegended certificate to any such Buyer or any transferee thereof, then: (A) to the extent the Securities Being Sold could be lawfully transferred (or re-issued) without restrictions under applicable laws, Company’s failure to promptly provide the Rule 144 Opinion or any other documents, certificates or instructions required to effectuate the transfer (or re-issuance) of the Securities Being Sold and the issuance of an unlegended certificate to any such Buyer or any transferee thereof shall be an immediate Event of Default under this Agreement and all other Transaction Documents; and (B) the Company hereby agrees and acknowledges that Buyer is hereby irrevocably and expressly authorized to have counsel to Buyer render any and all opinions and other certificates or instruments which may be required for purposes of effectuating the transfer (or re-issuance) of the Securities Being Sold and the issuance of an unlegended certificate to any such Buyer or any transferee thereof, and the Company hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from the Company, transfer or re-issue any such Securities Being Sold as instructed by Buyer and its counsel.

 

  

  

  

(j)           Matters With Respect to Securities.

(i)            Issuance of Conversion Shares.  The parties hereto acknowledge that pursuant to the terms of the Debentures, Buyer has the right, at its discretion, to convert amounts due under the Debentures into Common Stock in accordance with the terms of the Debentures.  In the event, for any reason, the Company fails to issue, or cause its Transfer Agent to issue, any portion of the Common Stock issuable upon conversion of the Debentures (the “Conversion Shares”) to Buyer in connection with the exercise by Buyer of any of its conversion rights under the Debentures, then the parties hereto acknowledge that Buyer shall irrevocably be entitled to deliver to the Transfer Agent, on behalf of itself and the Company, a “Conversion Notice” (as defined in the Debentures) requesting the issuance of the Conversion Shares then issuable in accordance with the terms of the Debentures, and the Transfer Agent, provided they are the acting transfer agent for the Company at the time, shall, and the Company hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from the Company, issue the Conversion Shares applicable to the Conversion Notice then being exercised, and surrender to a nationally recognized overnight courier for delivery to Buyer at the address specified in the Conversion Notice, a certificate of the Common Stock of the Company, registered in the name of Buyer or its nominee, for the number of Conversion Shares to which Buyer shall be then entitled under the Debentures, as set forth in the Conversion Notice.

(ii)           Issuance of Additional Common Stock Under Section 7.5.  The parties hereto acknowledge that pursuant to Section 7.5 below, the Company has agreed to issue, simultaneously with the execution of this Agreement, and possibly in the future, certain shares of the Company’s Common Stock in accordance with the terms of Section 7.5 below.  In the event, for any reason, the Company fails to issue, or cause its Transfer Agent to issue, any portion of the Common Stock issuable to Buyer under Section 7.5, either now or in the future, then the parties hereto acknowledge that Buyer shall irrevocably be entitled to deliver to the Transfer Agent, on behalf of itself and the Company, a written instruction requesting the issuance of the shares of Common Stock then issuable in accordance with Section 7.5 below, and the Transfer Agent, provided they are the acting transfer agent for the Company at the time, shall, and the Company hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from the Company, issue such shares of the Company’s Common Stock as directed by Buyer, and surrender to a nationally recognized overnight courier for delivery to Buyer at the address specified in the Buyer’s notice, a certificate of the Common Stock of the Company, registered in the name of Buyer or its nominee, for the number of shares of Common Stock issuable to Buyer in accordance with Section 7.5.

 

  

  

  

(iii)          Removal of Restrictive Legends.  In the event that Buyer has any shares of the Company’s Common Stock bearing any restrictive legends, and Buyer, through its counsel or other representatives, submits to the Transfer Agent any such shares for the removal of the restrictive legends thereon, whether in connection with a sale of such shares pursuant to any exemption to the registration requirements under the Securities Act, or otherwise, and the Company and or its counsel refuses or fails for any reason to render an opinion of counsel or any other documents or certificates required for the removal of the restrictive legends, then the Company hereby agrees and acknowledges that Buyer is hereby irrevocably and expressly authorized to have counsel to Buyer render any and all opinions and other certificates or instruments which may be required for purposes of removing such restrictive legends, and the Company hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from the Company, issue any such shares without restrictive legends as instructed by Buyer, and surrender to a common carrier for overnight delivery to the address as specified by Buyer, certificates, registered in the name of Buyer or its designees or nominees, representing the shares of Common Stock to which Buyer is entitled, without any restrictive legends and otherwise freely transferable on the books and records of the Company.

(iv)          Authorized Agent of the Company.  The Company hereby irrevocably appoints the Buyer and its counsel and its representatives, each as the Company’s duly authorized agent and attorney-in-fact for the Company for the purposes of authorizing and instructing the Transfer Agent to process issuances, transfers and legend removals upon instructions from Buyer, or any counsel or representatives of Buyer, as specifically contemplated herein.  The authorization and power of attorney granted hereby is coupled with an interest and is irrevocable so long as any obligations of the Company under Debentures remain outstanding, and so long as the Buyer owns or has the right to receive, any shares of the Company’s Common Stock hereunder or under any Transaction Documents.  In this regard, the Company hereby confirms to the Transfer Agent and the Buyer that it can NOT and will NOT give instructions, including stop orders or otherwise, inconsistent with the terms of this Agreement with regard to the matters contemplated herein, and that the Buyer shall have the absolute right to provide a copy of this Agreement to the Transfer Agent as evidence of the Company’s irrevocable authority for Buyer and Transfer Agent to process issuances, transfers and legend removals upon instructions from Buyer, or any counsel or representatives of Buyer, as specifically contemplated herein, without any further instructions, orders or confirmations from the Company.

(v)           Injunction and Specific Performance.  The Company specifically acknowledges and agrees that in the event of a breach or threatened breach by the Company of any provision of this Section 7.2(j), the Buyer will be irreparably damaged and that damages at law would be an inadequate remedy if this Agreement were not specifically enforced.  Therefore, in the event of a breach or threatened breach of any provision of this Section 7.2(j) by the Company, the Buyer shall be entitled to obtain, in addition to all other rights or remedies Buyer may have, at law or in equity, an injunction restraining such breach, without being required to show any actual damage or to post any bond or other security, and/or to a decree for specific performance of the provisions of this Section 7.2(j).

 

  

  

  

(k)           Continued Due Diligence/Field Audits.  The Company acknowledges that during the term of this Agreement, Buyer and its agents and representatives undertake ongoing and continuing due diligence reviews of the Company and its business and operations.  Such ongoing due diligence reviews may include, and the Company does hereby agree to allow Buyer, to conduct site visits and field examinations of the office locations of the Company and all of its Subsidiaries, and the Assets and records of each of them, the results of which must be satisfactory to Buyer in Buyer’s sole and absolute discretion.  In this regard, in order to cover Buyer’s expenses of the ongoing due diligence reviews and any site visits or field examinations which Buyer may undertake from time to time while this Agreement is in effect, the Company shall pay to Buyer, within five (5) business days after receipt of an invoice or demand therefor from Lender, a fee of up to $4,000 per year (based on expected filed audits and ongoing due diligence of $1,000 per quarter) to cover such ongoing expenses.  Failure to pay such fee as and when required shall be deemed an Event of Default under this Agreement and all other Transaction Documents.  The foregoing notwithstanding, from and after the occurrence of an Event of Default or any event which with notice, lapse of time or both, would become an Event of Default, Buyer may conduct site visits, field examinations and other ongoing reviews of the Company’s records, Assets and operations at any time, in its sole discretion, without any limitations in terms of number of site visits or examinations and without being limited to the fee hereby contemplated, all at the sole expense of the Company.

7.3           Reporting Requirements.  The Company agrees as follows:

(a)           Annual Audited Financial Statements.  At or before the time required by the SEC for filing of the Company’s Form 10-K (including extensions), to file with the SEC the annual audited financial statements of the Company, including all information required by the SEC to be included in a Form 10-K filing; and

(b)           Quarterly Financial Statements.  At or before the time required by the SEC for filing of the Company’s Form 10-Q (including extensions), to file with the SEC the financial statements of the Company regarding such fiscal quarter including all information required by the SEC to be included in a Form 10-Q filing;

(c)           Monthly Compliance Certificate.  On the thirtieth (30th) day of every month, the Company shall deliver to the Buyer a compliance certificate in substantial substance and form as attached hereto as Exhibit “B”, including a balance sheet and income statement of the Company, on a consolidated basis, as of the then ended calendar month.

(d)           Bank Statements.  The Company shall submit to the Buyer, within five (5) days after receipt thereof each month, true and correct copies of all bank statements received by the Company for each bank or other financial institution where the Company has a depository relationship.

(e)           Aged Accounts/Payables Schedules.  The Company shall, within twenty (20) days after the end of each calendar month, deliver to Buyer an aged schedule of the accounts receivable of the Company and its Subsidiaries, listing the name and amount due from each Person and showing the aggregate amounts due from: (i) 0-30 days; (ii) 31-60 days; (iii) 61-90 days; (iv) 91-120 days; and (v) more than 120 days, and certified as accurate by the Chief Financial Officer or the President of the Company. The Company shall, within twenty (20) days after the end of each calendar month, deliver to Buyer an aged schedule of the accounts payable of the Company and its Subsidiaries, listing the name and amount due to each creditor and showing the aggregate amounts due from: (v) 0-30 days; (w) 31-60 days; (x) 61-90 days; (y) 91-120 days; and (z) more than 120 days, and certified as accurate by the Chief Financial Officer or the President of the Company.

 

  

  

  

(f)           Additional Reporting Covenants.  No change with respect to the Company’s accounting principles shall be made by the Company without giving prior notification to Buyer. The Company represents and warrants to Buyer that the financial statements and other information or materials delivered to Buyer at or prior to the execution and delivery of this Agreement and to be delivered at all times thereafter, accurately reflect and will accurately reflect the consolidated financial condition of the Company and all of its Subsidiaries in all material respects. The Company shall at all times comply in all material respects with all reporting requirements of the SEC to the extent applicable.

7.4           Fees and Expenses.

(a)           Transaction Fees.  The Company agrees to pay to Buyer a transaction advisory fee equal to four percent (4%) of the amount of the Debentures purchased by Buyer at the First Closing, which fee shall be due and payable on the Effective Date and withheld from the gross purchase price paid by Buyer for the Debentures.  In the event of any Additional Closings, the Company shall pay to Buyer a transaction advisory fee equal to two percent (2%) of the amount of the Debentures purchased by Buyer at any such Additional Closings, which fee shall be due and payable upon such Additional Closing and withheld from the gross purchase price paid by Buyer for the Debentures at such Additional Closing.

(b)           Due Diligence Fees.  The Company agrees to pay to the Buyer a due diligence fee equal to Ten Thousand and No/100 Dollars ($10,000.00), which shall be due and payable in full on the Effective Date, or any remaining portion thereof shall be due and payable on the Effective Date if a portion of such fee was paid upon the execution of any term sheet related to this Agreement.

(c)           Document Review and Legal Fees.  The Company agrees to pay to the Buyer or its counsel a document review and legal fee equal to Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00), which shall be due and payable in full on the Effective Date, or any remaining portion thereof shall be due and payable on the Effective Date if a portion of such fee was paid upon the execution of any term sheet related to this Agreement.  The Company also agrees to be responsible for the prompt payment of all legal fees and expenses of the Company and its own counsel and other professionals incurred by the Company in connection with the negotiation and execution of this Agreement and the Transaction Documents.

(d)           Other Fees.  The Company also agrees to pay to the Buyer (or any designee of the Buyer), upon demand, or to otherwise be responsible for the payment of, any and all other costs, fees and expenses, including the reasonable fees, costs, expenses and disbursements of counsel for the Buyer and of any experts and agents, which the Buyer may incur or which may otherwise be due and payable in connection with: (i) the preparation, negotiation, execution, delivery, recordation, administration, amendment, waiver or other modification or termination of this Agreement or any other Transaction Documents; (ii) any documentary stamp taxes, intangibles taxes, recording fees, filing fees, or other similar taxes, fees or charges imposed by or due to any Governmental Authority in connection with this Agreement or any other Transaction Documents; (iii) the exercise or enforcement of any of the rights of the Buyer under this Agreement or the Transaction Documents; or (iv) the failure by the Company to perform or observe any of the provisions of this Agreement or any of the Transaction Documents.  Included in the foregoing shall be the amount of all expenses paid or incurred by Buyer in consulting with counsel concerning any of its rights under this Agreement or any other Transaction Document or under applicable Law.  To the extent any such costs, fees, charges, taxes or expenses are incurred prior to the funding of proceeds from the Closing, same shall be paid directly from the proceeds of the Closing.  All such costs and expenses, if not so immediately paid when due or upon demand thereof, shall bear interest from the date of outlay until paid, at the highest rate set forth in the Debenture, or if none is so stated, the highest rate allowed by Law.  All of such costs and expenses shall be additional Obligations of the Company to Buyer secured under the Transaction Documents.  The provisions of this subsection shall survive the termination of this Agreement.  Notwithstanding anything which may be contained herein to the contrary, the only cash fees and expenses (other than documentary stamp taxes and UCC Financing Statement search and filing expenses) which shall be assessed by the Buyer upon Closing are provided in Sections 7.4(a), (b) and (c).

 

  

  

  

7.5           Incentive Shares.

(a)           Share Issuance.  The Company shall pay to Buyer a fee for corporate advisory and investment banking services provided by the Buyer to the Company prior to the Effective Date by issuing to Buyer that number of shares of the Company’s Common Stock that equal to a dollar amount equal to $100,000.00 (the “Share Value”).  For purposes of determining the number of Incentive Shares issuable to Buyer under this Section 7.5(a), the Company’s Common Stock shall be valued at the volume weighted average price for the five (5) trading days immediately prior to the date the Company executes this Agreement (the “Valuation Date”), as reported by Bloomberg (the “VWAP”).  The Buyer shall confirm to the Company in writing, the VWAP for the Common Stock as of the Valuation Date, and the corresponding number of Incentive Shares issuable to the Buyer based on such price.  The Company shall instruct its Transfer Agent to issue certificates representing the Incentive Shares issuable to the Buyer immediately upon the Company’s execution of this Agreement, and shall cause its Transfer Agent to deliver such certificates to Buyer within five (5) business days from the date the Company executes this Agreement.  In the event such certificates representing the Incentive Shares issuable hereunder shall not be delivered to the Buyer within said five (5) business day period, same shall be an immediate default under this Agreement and the other Transaction Documents.  The Incentive Shares, when issued, shall be deemed to be validly issued, fully paid, and non-assessable shares of the Company’s Common Stock. The Incentive Shares shall be deemed fully earned as of the date the Company executes this Agreement, regardless of whether any Additional Closings are funded hereunder. 

(b)           Adjustments.  It is the intention of the Company and Buyer that by a date that is twelve (12) months after the Valuation Date (the “Twelve Month Valuation Date”) the Buyer shall have generated net proceeds from the sale of the Incentive Shares equal to the Share Value.  The Buyer shall have the right to sell the Incentive Shares in the Principal Trading Market or otherwise, at any time in accordance with applicable securities laws.  The Buyer shall, after the Twelve Month Valuation Date (or prior to such Twelve Month Valuation Date, if Buyer has sold all Incentive Shares prior to such Twelve Month Valuation Date), deliver to the Company a reconciliation statement showing the net proceeds actually received by the Buyer from the sale of the Incentive Shares (the “Sale Reconciliation”)(provided that in no way or event shall failure by Buyer to deliver such Sale Reconciliation impair, negate or otherwise adversely affect any of Buyer’s rights and remedies under this Agreement and the other Transaction Documents).  If, as of the date of the delivery by Buyer of the Sale Reconciliation, the Buyer has not realized net proceeds from the sale of such Incentive Shares equal to at least the Share Value, as shown on the Sale Reconciliation, then the Company shall immediately take all required action necessary or required in order to cause the issuance of additional shares of Common Stock to the Buyer in an amount sufficient such that, when sold and the net proceeds thereof are added to the net proceeds from the sale of any of the previously issued and sold Incentive Shares, the Buyer shall have received total net funds equal to the Share Value.  If additional shares of Common Stock are issued pursuant to the immediately preceding sentence, and after the sale of such additional issued shares of Common Stock, the Buyer still has not received net proceeds equal to at least the Share Value, then the Company shall again be required to immediately take all required action necessary or required in order to cause the issuance of additional shares of Common Stock to the Buyer as contemplated above, and such additional issuances shall continue until the Buyer has received net proceeds from the sale of such Common Stock equal to the Share Value.  In the event the Buyer receives net proceeds from the sale of Incentive Shares equal to the Share Value, and the Buyer still has Incentive Shares remaining to be sold, the Buyer shall return all such remaining Incentive Shares to the Company.  In the event additional Common Stock is required to be issued as outlined above, the Company shall instruct its Transfer Agent to issue certificates representing such additional shares of Common Stock to the Buyer or its nominee immediately subsequent to the Buyer’s notification to the Company that additional shares of Common Stock are issuable hereunder, and the Company shall in any event cause its Transfer Agent to deliver such certificates to Buyer within five (5) business days following the date Buyer notifies the Company that additional shares of Common Stock are to be issued hereunder.  In the event such certificates representing such additional shares of Common Stock issuable hereunder shall not be delivered to the Buyer within said five (5) business day period, same shall be an immediate default under this Agreement and the Transaction Documents.  Notwithstanding anything contained in this Section 7.5 to the contrary, at any time on or prior to the Twelve Month Valuation Date, but not thereafter (unless agreed to by the Buyer), the Company shall have the right, at any time during such period, to redeem any Incentive Shares then in the Buyer’s possession for an amount payable by the Company to Buyer in cleared U.S. dollars equal to the Share Value, less any net cash proceeds received by the Buyer from any previous sales of Incentive Shares.  Upon Buyer’s receipt of such cash payment in accordance with the immediately preceding sentence, the Buyer shall return any then remaining Incentive Shares in its possession back to the Company.

 

  

  

  

(c)           Fees Due Upon Purchase of Additional Debentures.  In the event the Buyer purchases additional Debentures at any Additional Closings as permitted by this Agreement, the Company agrees to pay additional advisory service fees to the Buyer through the issuance of additional Incentive Shares in an amount to be determined by the Buyer, in its sole discretion, in an amount up to ten percent (10.0%) of the additional Debentures so purchased in each Additional Closing.

(d)           Survival.  The Company’s Obligations under this Section 7.5 shall survive termination of this Agreement.

7.6           Share Reserve.  The Company shall take all action reasonably necessary to at all times have authorized, and reserved for the purpose of issuance, such number of shares of Common Stock as shall be necessary to effect the issuance of the Conversion Shares and Incentive Shares under this Agreement or any other Transaction Documents (collectively, the “Share Reserve”). The Company represents that it has sufficient authorized and unissued shares of Common Stock available to create the Share Reserve after considering all other commitments that may require the issuance of Common Stock. The Company shall take all action reasonably necessary to at all times have authorized, and reserved for the purpose of issuance, such number of shares of Common Stock as shall be necessary to effect the full conversion of the Debentures and issuance of all Incentive Shares that may be issuable hereunder. If at any time the Share Reserve is insufficient to effect the full conversion of the Debentures and issuance of all Incentive Shares that may be issuable hereunder, the Company shall take all required measures to implement an increase of the Share Reserve accordingly. If the Company does not have sufficient authorized and unissued shares of Common Stock available to increase the Share Reserve, the Company shall call and hold a special meeting of the shareholders within twenty (20) business days of such occurrence, for the sole purpose of increasing the number of shares authorized. The Company’s management shall recommend to the shareholders to vote in favor of increasing the number of shares of Common Stock authorized.

 

  

  

  

7.7           Termination.  Upon payment in full of all outstanding Debentures purchased hereunder, together with all other charges, fees and costs due and payable under any of the Transaction Documents, the Company shall have the right to terminate this Agreement upon written notice to the Buyer, provided, however, notwithstanding anything contained to the contrary in any Transaction Documents, the Company agrees and acknowledges that notwithstanding the termination of this Agreement, or the payment in full of the Debentures or any other Obligations of the Company hereunder or under any other Transaction Documents, the Company’s Obligations under this Agreement and the other Transaction Documents, and the Buyer’s security interest on all Assets and property of the Company and all of its Subsidiaries, shall remain valid and effective and shall not be released or terminated, until the Company has fully complied with all of its Obligations with respect to payment of the fee contemplated by Section 7.5, and the Buyer has generated and received net proceeds from the sale of the Incentive Shares (or otherwise received equivalent payment thereof in cash as permitted hereunder) equal to the Share Value.

ARTICLE VIII

CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL

The obligation of the Company hereunder to issue and sell the Securities to the Buyer at the Closings is subject to the satisfaction, at or before the respective Closing Dates, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

8.1           Buyer shall have executed the Transaction Documents and delivered them to the Company.

8.2           The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Dates as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Dates.

ARTICLE IX

CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATIONS TO PURCHASE

The obligation of the Buyer hereunder to purchase the Debentures at the Closings is subject to the satisfaction, at or before each applicable Closing Date, of each of the following conditions (in addition to any other conditions precedent elsewhere in this Agreement), provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

  

  

  

9.1           First Closing.  The obligation of the Buyer hereunder to purchase the Debentures at the First Closing is subject to the satisfaction, at or before the First Closing Date, of each of the following conditions (in addition to any other conditions precedent elsewhere in this Agreement), provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

(a)           The Company shall have executed and delivered the Transaction Documents applicable to the First Closing and delivered the same to the Buyer.

(b)           The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties are already qualified as to materiality in Article VI above, in which case, such representations and warranties shall be true and correct in all respects without further qualification) as of the date when made and as of the First Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the First Closing Date.

(c)           The Buyer shall have received an opinion of counsel from counsel to the Company in a form satisfactory to the Buyer and its counsel.

(d)           The Buyer or its counsel shall have issued an issuance instruction letter, authorizing the issuance of the Incentive Shares and irrevocably directing its Transfer Agent to issue and deliver the Incentive Shares to Buyer or its designee.

(e)           The Company shall have executed and delivered to Buyer a closing certificate in substance and form required by Buyer, which closing certificate shall include and attach as exhibits: (i) a true copy of a certificate of good standing evidencing the formation and good standing of the Company from the secretary of state (or comparable office) from the jurisdiction in which the Company is incorporated, as of a date within ten (10) days of the First Closing Date; (ii) the Company’s Certificate of Incorporation; (iii) the Company’s Bylaws; and (iv) copies of the resolutions of the board of directors of the Company consistent with Section 6.3, as adopted by the Company’s board of directors in a form reasonably acceptable to Buyer.

(f)            No event shall have occurred which could reasonably be expected to have a Material Adverse Effect.

(g)           The Company shall have executed such other agreements, certificates, confirmations or resolutions as the Buyer may require to consummate the transactions contemplated by this Agreement and the Transaction Documents, including a closing statement and joint disbursement instructions as may be required by Buyer.

  

9.2           Additional Closings.  Provided the Buyer is to purchase additional Debentures in accordance with Section 4.4 at an Additional Closing, the obligation of the Buyer hereunder to accept and purchase the Debentures at any Additional Closing is subject to the satisfaction, at or before the Additional Closing Date, of each of the following conditions:

 

  

  

  

(a)           The Company shall have executed the Transaction Documents applicable to the Additional Closing and delivered the same to the Buyer.

(b)           The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties are already qualified as to materiality in Article VI above, in which case, such representations and warranties shall be true and correct in all respects without further qualification) as of the date when made and as of the Additional Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Additional Closing Date.

(c)            No event shall have occurred which could reasonably be expected to have a Material Adverse Effect.

(d)           No default or Event of Default shall have occurred and be continuing under this Agreement or any other Transaction Documents, and no event shall have occurred that, with the passage of time, the giving of notice, or both, would constitute a default or an Event of Default under this Agreement or any other Transaction Documents.

(e)           The Company shall have executed such other agreements, certificates, confirmations or resolutions as the Buyer may require to consummate the transactions contemplated by this Agreement and the Transaction Documents, including a closing statement and joint disbursement instructions as may be required by Buyer.

 

ARTICLE X

INDEMNIFICATION

10.1         Company’s Obligation to Indemnify.  In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Securities hereunder, and in addition to all of the Company’s other obligations under this Agreement, the Company hereby agrees to defend and indemnify Buyer and its Affiliates and subsidiaries and their respective directors, officers, employees, agents and representatives, and the successors and assigns of each of them (collectively, the “Buyer Indemnified Parties”) and Company does hereby agree to hold the Buyer Indemnified Parties forever harmless, from and against any and all Claims made, brought or asserted against the Buyer Indemnified Parties, or any one of them, and Company hereby agrees to pay or reimburse the Buyer Indemnified Parties for any and all Claims payable by any of the Buyer Indemnified Parties to any Person, including reasonable attorneys’ and paralegals’ fees and expenses, court costs, settlement amounts, costs of investigation and interest thereon from the time such amounts are due at the highest non-usurious rate of interest permitted by applicable Law, through all negotiations, mediations, arbitrations, trial and appellate levels, as a result of, or arising out of, or relating to: (i) any misrepresentation or breach of any representation or warranty made by the Company or any of its subsidiaries in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; (ii) any breach of any covenant, agreement or Obligation of the Company or its subsidiaries contained in this Agreement, the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (iii) any Claims brought or made against the Buyer Indemnified Parties, or any one of them, by a third party and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement, the Transaction Documents or any other instrument, document or agreement executed pursuant hereto or thereto, any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Debentures, or the status of the Buyer or holder of any of the Securities, as a buyer and holder of such Securities in the Company. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Claims covered hereby, which is permissible under applicable Law.

 

  

  

  

ARTICLE XI

MISCELLANEOUS

11.1         Notices.  All notices of request, demand and other communications hereunder shall be addressed to the parties as follows:

If to the Company:                                               PositiveID Corporation

1690 S. Congress Ave., Suite 201

Delray Beach, FL 33445

Attn: Mr. William Caragol, CEO

Telephone: (561) 805-8009

Facsimile: (561) 805-8001

E-Mail: bcaragol@positiveidcorp.com

With a copy to:                                                    Tammy Knight, Esq.

Holland & Knight, LLP

515 E. Las Olas Blvd., Suite 1200

Ft. Lauderdale, FL 33301

Telephone: (954) 468-7939

Facsimile: (954) 463-2030

E-Mail: Tammy.Knight@hklaw.com

If to the Buyer:                                                     TCA Global Credit Master Fund, LP

1404 Rodman Street

Hollywood, FL 33020

Attn: Mr. Robert Press

Telephone: (786) 323-1650

Facsimile: (786) 323-1651

E-Mail: bpress@trafcap.com

With a copy to:                                                    David Kahan, P.A.

6420 Congress Ave., Suite 1800

Boca Raton, FL 33487

Attn: David Kahan, Esq.

Telephone: (561) 672-8330

Facsimile: (561) 672-8301

E-Mail: david@dkpalaw.com

unless the address is changed by the party by like notice given to the other parties.  Notice shall be in writing and shall be deemed delivered: (i) if mailed by certified mail, return receipt requested, postage prepaid and properly addressed to the address below, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by FedEx, UPS or other nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., EST, on a business day.  Any notice hand delivered after 5:00 p.m., EST, shall be deemed delivered on the following business day.  Notwithstanding the foregoing, notice, consents, waivers or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some other form of written confirmation from the receiving party) that the notice has been received by the other party.

 

  

  

  

11.2         Entire Agreement.  This Agreement, including the Exhibits and Schedules attached hereto and the documents delivered pursuant hereto, including the Transaction Documents, set forth all the promises, covenants, agreements, conditions and understandings between the parties hereto with respect to the subject matter hereof and thereof, and supersede all prior and contemporaneous agreements, understandings, inducements or conditions, expressed or implied, oral or written, except as contained herein and in the Transaction Documents.

11.3         Assignment. The Buyer may at any time assign its rights in this Agreement or any of the other Transaction Documents, or any part thereof.  Any such assignment to an Affiliate of the Buyer shall not require the Company’s consent or approval; provided, however, upon any such assignment, the Buyer shall use its good faith efforts to deliver a written notice of such assignment to the Company, provided that failure to deliver any such written notice shall not impair, negate or otherwise adversely affect any of the Buyer’s rights or remedies under this Agreement or any other Transaction Documents.  Any such assignment to any other Person who is not an Affiliate of the Buyer shall require the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed.  In addition, the Buyer may at any time sell one or more participations in the Debentures. The Company may not sell or assign this Agreement or any of the Transaction Documents, or any portion thereof, either voluntarily or by operation of law, nor delegate any of its duties of obligations hereunder or thereunder, without the prior written consent of the Buyer, which consent may be withheld in Buyer’s sole and absolute discretion.

11.4         Binding Effect.  This Agreement shall be binding upon the parties hereto, their respective successors and permitted assigns.

11.5         Amendment.  The parties hereby irrevocably agree that no attempted amendment, modification, or change of this Agreement shall be valid and effective, unless the parties shall unanimously agree in writing to such amendment, modification or change.

11.6         No Waiver.  No waiver of any provision of this Agreement shall be effective, unless it is in writing and signed by the party against whom it is asserted, and any such written waiver shall only be applicable to the specific instance to which it relates and shall not be deemed to be a continuing or future waiver.

11.7         Gender and Use of Singular and Plural.  All pronouns shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the party or parties or their personal representatives, successors and assigns may require.

 

  

  

  

11.8         Counterparts.  This Agreement and any amendments hereto may be executed in one or more counterparts, each of which shall be deemed an original and all of which together will constitute one and the same instrument.

11.9         Electronic Signatures.  The Buyer is hereby authorized to rely upon and accept as an original for all purposes, this Agreement, any other Transaction Document or other communication which is sent to Buyer or its counsel by facsimile, telegraphic, .pdf, or other electronic transmission (each, a “Communication”) which Buyer or its counsel in good faith believes has been signed by the Company and has been delivered to Buyer or its counsel by a properly authorized representative of the Company, whether or not that is in fact the case.  Notwithstanding the foregoing, the Buyer shall not be obligated to accept any such Communication as an original and may in any instance require that an original document be submitted to Buyer in lieu of, or in addition to, any such Communication.

11.10       Headings.  The article and section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of the Agreement.

11.11       Governing Law.  This Agreement shall be construed in accordance with the laws of the State of Nevada, without regard to the principles of conflicts of laws.  The parties further agree that any action between them shall be heard in Clark County, Nevada and expressly consent to the jurisdiction and venue of the State Courts sitting in Clark County, Nevada and the United States District Court for the District of Nevada for the adjudication of any civil action asserted pursuant to this Agreement; provided, however, nothing contained herein shall limit the Buyer’s ability to bring suit or enforce this Agreement or any other Transaction Documents in any other jurisdiction.

11.12       Further Assurances.  The parties hereto will execute and deliver such further instruments and do such further acts and things as may be reasonably required to carry out the intent and purposes of this Agreement.

11.13       Survival.  All covenants, agreements, representations and warranties made by the Company herein shall, notwithstanding any investigation by the Buyer, be deemed material and relied upon by Buyer and shall survive the making and execution of this Agreement and the Transaction Documents and the issuance of the Debentures, and shall be deemed to be continuing representations and warranties until such time as the Company has fulfilled all of its Obligations to Buyer, the Debentures have been repaid in full and Buyer no longer owns any of the Incentive Shares.

11.14       Time is of the Essence. The parties hereby agree that time is of the essence with respect to performance of each of the parties’ Obligations under this Agreement.  The parties agree that in the event that any date on which performance is to occur falls on a Saturday, Sunday or state or national holiday, then the time for such performance shall be extended until the next business day thereafter occurring.

11.15       Joint Preparation.  The preparation of this Agreement has been a joint effort of the parties and the resulting documents shall not, solely as a matter of judicial construction, be construed more severely against one of the parties than the other.

11.16       Severability.  If any one of the provisions contained in this Agreement, for any reason, shall be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, and this Agreement shall remain in full force and effect and be construed as if the invalid, illegal or unenforceable provision had never been contained herein.

 

  

  

  

11.17       No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

11.18       WAIVER OF JURY TRIAL. THE BUYER AND THE COMPANY, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BUYER AND THE COMPANY ARE ADVERSE PARTIES.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BUYER TO PURCHASE THE DEBENTURES.

11.19       Compliance with Federal Law.  The Company shall: (i) ensure that no Person who owns a controlling interest in or otherwise controls the Company is or shall at any time be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury, included in any Executive Orders or in any other similar lists of any Governmental Authority; (ii) not use or permit the use of the proceeds of the purchase of the Debentures to violate any of the foreign asset control regulations of OFAC or any enabling statute, Executive Order relating thereto or any other requirements or restrictions imposed by any Governmental Authority; and (iii) comply with all applicable Buyer Secrecy Act laws and regulations, as amended.  As required by federal law and Buyer’s policies and practices, Buyer may need to obtain, verify and record certain customer identification information and documentation in connection with opening or maintaining accounts or establishing or continuing to provide services.

[SIGNATURES ON THE FOLLOWING PAGE]

 

  

  

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year set forth above.

 

	 	

COMPANY:

	 
	 	 	 
	 	

POSITIVEID CORPORATION, a Delaware corporation

	 
	 	 	 	 
	 	 	 	 
	 	
By: 

	/s/ William Caragol	 
	 	Name: 	William Caragol	 
	 	Title:	CEO	 
	 	 	 	 
	 	Date:	1/16/13	 

	 	

BUYER:

	 
	 	 	 
	 	TCA GLOBAL CREDIT MASTER FUND, LP	 
	 	 	 	 
	 	By:	TCA Global Credit Fund GP, Ltd.	 
	 	Its: 	General Partner	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
By: 

	/s/ Robert Press	 
	 	 	Robert Press, Director	 
	 	 	 	 
	 	Date: 	1/16/13	 

 

  

  

  

 

Each of the Subsidiaries listed below is hereby executing this Agreement for the purpose of agreeing to all of the terms, covenants, provisions, conditions, representations and warranties deemed made and agreed to by each of such Subsidiaries under and pursuant to this Agreement.

 

 

	STEEL VAULT SECURITY, LLC	 	MICROFLUIDIC SYSTEMS	 
	 	 	 	 	 	 
	By:	/s/ William Caragol	 	By:	/s/ William Caragol	 
	Name: 	William Caragol 	 	Name:	William Caragol	 
	Title: 	President 	 	Title:	President	 

 

 

	VERIGREEN ENERGY CORPORATION 	 	STEEL VAULT CORPORATION	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	/s/ William Caragol	 	By:	/s/ William Caragol	 
	Name: 	William Caragol 	 	Name:	William Caragol	 
	Title: 	President 	 	Title:	President	 

 

 

	IFTH NY SUB, INC. 	 	IFTH NJ SUB, INC.	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	/s/ William Caragol	 	By:	/s/ William Caragol	 
	Name: 	William Caragol 	 	Name:	William Caragol	 
	Title: 	President 	 	Title:	President	 

  

  

  

 

EXHIBIT “A”

FORM OF DEBENTURE

 

  

  

  

 

 EXHIBIT “B”

Form of Compliance Certificate

 

  

  

  

 

COMPLIANCE CERTIFICATE

 

 

TCA Global Credit Master Fund, LP

1404 Rodman Street

Hollywood, Florida 33020

Attention:  Mr. Robert Press

	
  

	
Re:

	
PositiveID Corporation (the “Company”) Compliance Certificate for the Month Ending on ________________ (the “Reporting Date”)

 

Reference is made to that certain Securities Purchase Agreement, dated as of December 31, 2012, but made effective as of January 16, 2013 (the “SPA”), by and between the Company and TCA Global Credit Master Fund, LP (“TCA”).  Capitalized terms used, but not defined, herein shall have the respective meanings assigned to such terms in the SPA.

 

Pursuant to Section 7.3(c) of the SPA, the undersigned, the                                         of the Company, hereby certifies to TCA that: (a) except as set forth in Schedule 1 attached hereto, all representations and warranties of the Company and its subsidiaries in the SPA and all other Transaction Documents are true and correct in all material respects as of the Reporting Date; (b) the undersigned has no knowledge of any default or Event of Default under the SPA or any other Transaction Documents that has not been cured or waived, except as set forth on Schedule 2 attached hereto; (c) to the best of the undersigned’s knowledge, the Company and its Subsidiaries have, in all material respects, observed and performed all of their covenants and agreements contained in the SPA and the other Transaction Documents to be observed or performed by the Company and its subsidiaries during the calendar month ending on the Reporting Date; and (d) no event has occurred during the calendar month ending on the Reporting Date which could reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries, or their business, operations, financial condition, or their ability to meet their obligations under the SPA and the other Transaction Documents.

 

A true, correct and complete copy of the Company’s balance sheet as of the Reporting Date and Income Statement for the month ending on the Reporting Date is attached hereto as Schedule 3.

 

[THE NEXT PAGE IS THE SIGNATURE PAGE]

 

  

  

  

 

 

	  

IN WITNESS WHEREOF, the undersigned, the                                                 of the Company, hereby certifies to the above as of the Reporting Date.

 

	 	 
PositiveID Corporation

	 
	 	 	 	 
	 	
By: 

	 	 
	 	Name: 	 	 
	 	Title: 	 	 
	 	 	 	 

       

 

 

  

  

  

 

Schedule 1 to Compliance Certificate

 

Representations and Warranties

 

 

 

 

 

  

  

  

 

Schedule 2 to Compliance Certificate

 

Events of Default

 

 

 

 

  

  

  

 

Schedule 3 to Compliance Certificate

 

Balance Sheet and Income Statement

 

 

 

 

  

  

  

 

DISCLOSURE SCHEDULES FOR COMPANY AND SUBSIDIARIES

 

 

  

  

  

 

DISCLOSURE SCHEDULE

TO

SECURITIES PURCHASE AGREEMENT

BETWEEN

POSITIVEID CORPORATION

AND

TCA GLOBAL CREDIT MASTER FUND, LP

DATED AS OF DECEMBER 31, 2012, BUT EFFECTIVE AS JANUARY 16, 2013

 

 

 

 

  

  

  

DISCLOSURE SCHEDULE

 

 

This Disclosure Schedule is delivered pursuant to the Securities Purchase Agreement, dated as of December 31, 2012, but effective as of January 16, 2013 (the “Agreement”), by and between PositiveID Corporation, a Delaware corporation (“Company”) and TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership (“Buyer”).  Unless otherwise defined, capitalized terms have the meanings set forth in the Agreement.

 

No reference to or disclosure of any item or other matter in this Disclosure Schedule shall be construed as an admission or indication that such item or other matter is material or that such item or other matter is required to be referred to or disclosed in this Disclosure Schedule.  No disclosure in this Disclosure Schedule relating to any possible breach or violation of any agreement, law, or regulation shall be construed as an admission or indication that any such breach or violation exists or has actually occurred.  If and to the extent any information required to be furnished in any particular schedule is contained in any other schedule, such information shall also be deemed to be included in such particular schedule (without the need for a specific cross reference) to the extent the applicability of such furnished information to such schedule is reasonably apparent.

 

This Disclosure Schedule and the information and disclosures contained in this Disclosure Schedule are intended only to qualify and limit the representations and warranties contained in the Agreement and shall not be deemed to expand in any way the scope or effect of any such representations and warranties.

 

  

  

  

 

Schedule 6.1

 

Subsidiaries

 

 

	
PositiveID Medical Devices Ltd., an Israeli company

 

  

  

  

 

Schedule 6.3

 

Authority and Approval of Agreement; Binding Effect

 

The Consent of The Boeing Company, which Consent has not yet been obtained.

 

  

  

  

 

Schedule 6.4

 

Capitalization

 

Registration Rights

 

Letter Agreement, dated September 9, 2010, between the Company and FOCUS LLC

 

Stock Purchase Agreement, dated May 9, 2011, among Company, MicroFluidic Systems and certain individuals named therein.

 

Registration Rights Agreement, dated July 12, 2012, between the Company and Ironridge Technology Co., a division of Ironridge Global IV, Ltd.

 

JMJ Financial Services, Promissory Note, dated August 14, 2012 for  11,000,000 shares

 

InvestorIdeas.com, Online Advertising and Marketing Agreement, dated January 27, 2012 for 250,000 shares

 

InvestorIdeas.Com, 2012 Online Showcase Agreement, dated July 17, 2012 for 500,000 shares

 

Levelogic, Inc., Consulting Agreement, dated February 1, 2012 for 170,000 shares

 

Hanover Financial Services, Consulting Engagement Agreement dated October 19, 2012, for 2,000,000 shares

 

Vista Partners, Agreement dated October 31, 2012, for 2,800,000 shares

 

Options

 

The following individuals have been granted options by Verigreen Energy Corporation, under the 2009 Flexible Stock Plan:

 

	
  

	
·

	
Samuel Ambrose, granted an option to buy 50,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

	
  

	
·

	
Marc Poulshock, granted an option to buy 50,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

	
  

	
·

	
Michael Galinis, granted an option to buy 10,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

	
  

	
·

	
Courtney Cady, granted an option to buy 10,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

  

  

  

 

	
  

	
·

	
Allison Tomek, granted an option to buy 100,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

	
  

	
·

	
William Caragol, granted an option to buy 500,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

	
  

	
·

	
Scott Silverman, granted an option to buy 1,000,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

	
  

	
·

	
Michael Krawitz, granted an option to buy 100,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

	
  

	
·

	
Jeffrey Cobb, granted an option to buy 100,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

	
  

	
·

	
Barry Edelstein, granted an option to buy 100,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019.

 

	
  

	
·

	
Steven Foland, granted an option to buy 100,000 shares of common stock at the price of $0.01 per share on or after May 8, 2010, and on or before May 8, 2019

 

  

  

  

 

Schedule 6.5

 

No Conflicts; Consents and Approvals

 

The Consent of the Boeing Company, which Consent has not yet been obtained.

 

  

  

  

 

Schedule 6.12

 

Real Estate

 

(b) Since the last SEC Document discussing the Company’s office lease, the Company has moved within the building. The Company now leases office space at 1690 S. Congress Avenue, Suite 201, Delray Beach, Florida 33445.

 

  

  

  

 

Schedule 6.15

 

Intellectual Property

 

In November 2011, Roche Diagnostics filed a Notice of Objection to the Company’s U.S. Trademark Application for the registration of the Easy Check trademark.

 

  

  

  

 

Schedule 6.18

 

Tax Matters

 

The Company has not yet filed its 2011 Tax Return.

 

  

  

  

 

Schedule 6.21

 

Bank Accounts; Business Location

 

See Attachment 6.21.

 

  

  

  

 

	
PositiveID Corporation

	  	  	  	  	  	  	  	  	  	  
	
Attachment 6.21

	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	
Bank Information:

	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	
Authorized Person

	  	
Company

	  	
Bank

	  	
Account #

	  	
POA

	  	
Checks/Withdrawal

	  	
Wire Approval

	  	  	  	  	  	  	  	  	  	  	  	  
	
1

	
PositveID Corporation

	  	
Citibank

	  	
Checking - 3200582211

	  	
N/A

	  	
William Caragol

	  	
William Caragol

	  	
1690 S Congress Ave, STE 201

	  	
11521 US Hwy 1

	  	
IMMA - 3200582334

	  	
N/A

	  	  	  	  
	  	
Delray Beach, FL 33445

	  	
Palm Beach Gardens, FL 33410

	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	
2

	
Microfluidic Systems, Inc

	  	
Mechanics Bank

	  	
Checking - 39033503

	  	
N/A

	  	
William Caragol

	  	
N/A

	  	
1252 Quarry Lane Suite A

	  	
345 Railroad Avenue

	  	  	  	  	  	
Lyle Probst

	  	
N/A

	  	
Pleasanton, CA 95466

	  	
Danville, Cal. 94526

	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	
Principal Place of Business and Chief Executive Office :

	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	  	
PositveID Corporation

	  	  	  	  	  	  	  	  	  	  
	  	
1690 S Congress Ave, STE 201

	  	  	  	  	  	  	  	  	  	  
	  	
Delray Beach, FL 33445

	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	
Books, record and material assets held at:

	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  
	  	
PositveID Corporation

	  	  	  	  	  	  	  	  	  	  
	  	
1690 S Congress Ave, STE 201

	  	  	  	  	  	  	  	  	  	  
	  	
Delray Beach, FL 33445

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