Exhibit 10.18
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Citizens
Bank' Investments.Trust. Insurance www.citizensnational.net
PROMISSORY NOTE
References in the shaded area are for Lender's use only and
do not limit the applicability of this document to any particular loan
or item. Any item above containing "***" has been omitted due to
text length limitations.
Borrower_
REMOTEMDX, INC.
150 W CIVIC CENTER DRIVE SUITE 400 SANDY,UT 84070
lender:
Citizens National Bank Main Office
127 S Side Square P.O. Box 1279 Macomb,IL 61455
Principal Amount: $2,000,000.00 Initial Rate: 8.000% Date of Note: June 26, 2006
PROMISE TO PAY. REMOTEMDX, INC. ("Borrower") promises to pay to Citizens
National Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Two Million & 00/100 Dollars ($2,000,000.00) or
so much as may be outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date of
each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on June 30, 2007. In addition, Borrower will
pay regular monthly payments of all accrued unpaid interest due as of each
payment date, beginning August 1, 2006, with all subsequent interest payments to
be due on the same day of each month after that. Unless otherwise agreed or
required by applicable law, payments will be applied first to any accrued unpaid
interest; and then to principal. Interest on this Note is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual interest
rate over the number of days in a year, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Prime Rate as
published in The Wall Street Journal (the "Index"r. The Index is not necessarily
the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notifying Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. The interest rate change will not occur more often than each
day. Borrower understands that Lender may make loans based on other rates as
well. The Index currently is 8.000% per annum. The interest rate to be applied
to the unpaid principal balance during this Note will be at a rate equal to the
Index, resulting in an initial rate of 8.000% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments of accrued unpaid interest. Rather, early payments will reduce
the principal balance due. Borrower agrees not to send Lender payments marked
"paid in full", "without recourse", or similar language. If Borrower sends such
a payment, Lender may accept it without losing any of Lender's rights under this
Note, and Borrower will remain obligated to pay any further amount owed to
Lender. All written communications concerning disputed amounts, including any
check or other payment instrument that indicates that the payment constitutes
"payment in full" of the amount owed or that is tendered with other conditions
or limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: Citizens National Bank, Main Office, 127 S Side Square, P.O. Box
1279, Macomb, IL 61455.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $25.00, whichever is less.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased to 15.000% per
annum. However, in no event will the interest rate exceed the maximum interest
rate limitations under applicable law. DEFAULT. Each of the following shall
constitute an event of default ("Event of Default") under this Note: Payment
Default. Borrower fails to make any payment when due under this Note. Other
Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.
False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the loan. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any guaranty of the indebtedness evidenced by this Note. In the event of a
loan No: 400949881
PROMISSORY NOTE {Continued}
Page 2
death, Lender, at its option, may, but shall not be required to, permit the
guarantor's estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of
Default.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower. Adverse Change. A material adverse change
occurs in Borrower's financial condition, or Lender believes the prospect of
payment or performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance under this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.
GOVERNING LAW. This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of
Illinois without regard to its conflicts of law provisions. This Note has been
accepted by Lender in the State of Illinois.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of McDonough County, State of Illinois.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.
COLLATERAL. Borrower acknowledges this Note is secured by the following
collateral described in the security instruments listed herein:
(A) inventory, chattel paper, accounts, equipment and general intangibles
described in Commercial Security Agreements dated June 26, 2006.
(B) deposit accounts described in an Assignment of Deposit Account dated June
26, 2006.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested only in writing by Borrower or as provided in this
paragraph. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following person currently is authorized, except as provided in this paragraph,
to request advances and authorize payments under the line of credit until Lender
receives from Borrower, at Lender's address shown above, written notice of
revocation of his or her authority: DAVID DERRICK, Chief Executive Officer of
REMOTEMDX, INC. Draws to be taken on approved invoices presented to Citizens
National Bank from the following companies: CP Baker Securities, Inc, RemoteMDx,
Inc., Dynamic Source Manufacturing and Advanta Design Group, Inc. Lender may
advance funds under this note to iii pay itself interest, (m make deposits into
the Account (as defined below) if it contains less than the required
compensating balance, and (im to pay itself fees and other amounts that may be
owed to it. Borrower agrees to be liable for all sums either: (A) advanced in
accordance with the instructions of an authorized person or (B) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (A) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (B) Borrower or any guarantor ceases doing business or is
insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (D) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (E) Lender in good faith
believes itself insecure.
ADDITIONAL REQUIREMENTS. Lender will require borrower to open their operating
deposit account and research and development account at lenders institution.
Lender will require quarterly profit and loss statements, business balance sheet
and annual tax returns from borrower. Lender will require an amount equal to 10%
of the line of credit as compensating balance in the operating account. Lock
Box: Lender will provide a PO Box specifically for borrower lock box purposes.
Lender will provide daily emails including scanned images of all checks being
deposited. In addition to and not in limitation of other rights of Lender to
payment, twenty-five (25) percent of all deposits received into the Account (as
defined in the Assignment of Deposit Account described above) will be applied to
the operating line of credit and seventy-five (75) percent will remain in the
borrowers operating deposit account.
LETTER OF CREDIT. In addition to the other collateral for this Note, Borrower
acknowledges and agrees that this Note is secured by a Letter of Credit issued
to Lender on its behalf by United States Trust Company, N.A. dated June 26, 2006
Lender shall return the letter(s) of credit securing the loan after the
applicable preference period following the occurence of both of the following
(i) payment in full of all amounts payable to Lender under the Note and related
documents and (ii) Borrower's acknowledgment that Lender has no further
obligation to loan amounts to Borrower pursuant to such documents.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed by
law, waive presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan or release any party or guarantor or collateral; or impair, fail
to realize upon or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Note are joint and several.
ILLINOIS INSURANCE NOTICE. Unless Borrower provides Lender with evidence of the
insurance coverage required by Borrower's agreement with Lender, Lender may
purchase insurance at Borrower's expense to protect Lender's interests in the
collateral. This insurance may, but need
Loan No: 400949881
PROMISSORY NOTE (Continued)
Page 3
not, protect Borrower's interests. The coverage that lender purchases may not
pay any claim that Borrower makes or any claim that is made against Borrower in
connection with the collateral. Borrower may later cancel any insurance
purchased by lender, but only after providing lender with evidence that Borrower
has obtained insurance as required by their agreement. If lender purchases
insurance for the collateral, Borrower will be responsible for the costs of that
insurance, including interest and any other charges lender may impose in
connection with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance may be
added to Borrower's total outstanding balance or obligation. The costs of the
insurance may be more than the cost of insurance Borrower may be able to obtain
on Borrower's own.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD All THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COpy OF THIS
PROMISSORY NOTE.
BORROWER:
REMOTEMDX, INC.
Executive
Officer
of
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