SECURITIES PURCHASE AGREEMENT LAURUS MASTER FUND, LTD. and APPLIED DIGITAL SOLUTIONS, INC. Dated: August 24, 2006
Exhibit
10.1
LAURUS
MASTER FUND, LTD.
and
APPLIED
DIGITAL SOLUTIONS, INC.
Dated:
August 24, 2006
TABLE
OF CONTENTS
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Page(s)
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LIST
OF EXHIBITS
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Form
of Secured Term Note
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Exhibit
A
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Form
of Warrant
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Exhibit
B
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Form
of Escrow Agreement
|
Exhibit
C
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iii |
THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
August 24, 2006, by and between APPLIED DIGITAL SOLUTIONS, INC., a Missouri
corporation (the “Company”), and LAURUS MASTER FUND, LTD., a Cayman Islands
company (the “Purchaser”).
RECITALS
WHEREAS,
the Company has authorized the sale to the Purchaser of a Secured Term Note
in
the aggregate principal amount of Thirteen Million Five Hundred Thousand Dollars
($13,500,000) substantially in the form of Exhibit A hereto (as amended,
modified and/or supplemented from time to time, the “Note”);
WHEREAS,
the Company wishes to issue to the Purchaser a warrant substantially in the
form
of Exhibit B hereto (as amended, modified and/or supplemented from time to
time,
the “Warrant”) to purchase up to 1,719,745 shares of the Company’s Common Stock
(subject to adjustment as set forth therein) in connection with the Purchaser’s
purchase of the Note;
WHEREAS,
the Purchaser desires to purchase the Note and the Warrant on the terms and
conditions set forth herein; and
WHEREAS,
the Company desires to issue and sell the Note and Warrant to the Purchaser
on
the terms and conditions set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Agreement
to Sell and Purchase.
Pursuant to the terms and conditions set forth in this Agreement,
on the Closing Date (as defined in Section 3), the Company shall sell to the
Purchaser, and the Purchaser shall purchase from the Company, the Note. The
sale
of the Note on the Closing Date shall be known as the “Offering.” The Note will
mature on the Maturity Date (as defined in the Note). Collectively, the Note
and
Warrant and Common Stock issuable upon exercise of the Warrant are referred
to
as the “Securities.”
2. Fees
and Warrant.
On the
Closing Date:
(a) The
Company will issue and deliver to the Purchaser the Warrant to purchase up
to
1,719,745 shares of Common Stock (subject to adjustment as set forth therein)
in
connection with the Offering, pursuant to Section 1 hereof. All the
representations, covenants, warranties, undertakings, and indemnification,
and
other rights made or granted to or for the benefit of the Purchaser by the
Company are hereby also made and granted for the benefit of the holder of the
Warrant and shares of the
Company’s
Common Stock issuable upon exercise of the Warrant (the “Warrant
Shares”).
(b) Subject
to the terms of Section 2(d) below, the Company shall pay to Laurus Capital
Management, LLC, the investment manager of the Purchaser (“LCM”), a
non-refundable payment in an amount equal to three and one half percent (3.50%)
of the aggregate principal amount of the Note. The foregoing payment is referred
to herein as the “LCM Payment.” Such payment shall be deemed fully earned on the
Closing Date and shall not be subject to rebate or proration for any
reason.
(c) The
Company shall pay up to $55,000 to the Purchaser in order to reimburse the
Purchaser for its reasonable expenses (including legal fees and expenses)
incurred in connection with the entering into of this Agreement and the Related
Agreements (as hereinafter defined), and expenses incurred in connection with
the Purchaser’s due diligence review of the Company and all related matters.
(d) The
LCM
Payment and the expenses referred to in the preceding clause (c) (net of the
$25,000 deposit previously paid by the Company) shall be paid at Closing out
of
funds held pursuant to the Escrow Agreement (as defined below) and a
disbursement letter (the “Disbursement Letter”).
3.1 Closing.
Subject
to the terms and conditions herein, the closing of the transactions contemplated
hereby (the “Closing”) shall take place on the date hereof, at such time or
place as the Company and the Purchaser may mutually agree (such date is
hereinafter referred to as the “Closing Date”).
3.2 Delivery.
Pursuant to the Escrow Agreement, at the Closing on the Closing Date, the
Company will deliver to the Purchaser, among other things, the Note and the
Warrant and the Purchaser will deliver to the Company, among other things,
the
amounts set forth in the Disbursement Letter by certified funds or wire
transfer.
4. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchaser as follows:
4.1 Organization,
Good Standing and Qualification.
Each of
the Company and its Pledged Subsidiaries (as defined below) is a corporation,
partnership or limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization or incorporation. Each of the Company and its Pledged Subsidiaries
has the corporate, limited liability company or partnership, as the case may
be,
power and authority to own and operate its properties and assets and, insofar
as
it is or shall be a party thereto, to (1) execute and deliver (i) this
Agreement, (ii) the Note and the Warrant to be issued in connection with this
Agreement, (iii) the Master Security Agreement dated as of the date hereof
between the Company and the Purchaser (as amended, modified and/or supplemented
from time to time, the “Master Security Agreement”), (iv) the Registration
Rights Agreement relating to the Securities dated as of the date hereof between
the Company and the Purchaser (as amended, modified and/or supplemented from
time to time, the “Registration
2
Rights
Agreement”), (v) the Stock Pledge Agreement dated as of the date hereof between
the Company and the Purchaser (as amended, modified and/or or supplemented
from
time to time, the “Stock Pledge Agreement”), (vi) the Funds Escrow Agreement
dated as of the date hereof among the Company, the Purchaser and the escrow
agent referred to therein, substantially in the form of Exhibit C hereto (as
amended, modified and/or supplemented from time to time, the “Escrow Agreement”)
and (vii) all other documents, instruments and agreements entered into in
connection with the transactions contemplated hereby and thereby (the preceding
clauses (ii) through (vii), collectively, the “Related Agreements”); (2) issue
and sell the Note; (3) issue and sell the Warrant and the Warrant Shares;
and (4) carry out the provisions of this Agreement and the Related Agreements
and to carry on its business as presently conducted. Each of the Company and
its
Subsidiaries is duly qualified and is authorized to do business and is in good
standing as a foreign corporation, partnership or limited liability company,
as
the case may be, in all jurisdictions in which the nature or location of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to
do
so has not, or could not reasonably be expected to have, individually or in
the
aggregate, a Material Adverse Effect. "Material Adverse Effect" means
any
change, effect, event or occurrence that has a material adverse effect on the
assets, business, financial condition, or results of operations of the Company
and its Pledged Subsidiaries taken individually and as a whole;
provided,
however,
that no
change, effect, event or occurrence to the extent arising or resulting from
any
of the following, either alone or in combination, shall constitute or be taken
into account in determining whether there has been or will be, a Material
Adverse Effect: (i) general business or economic conditions not specific or
peculiar to the Company, (ii) acts of war or terrorism or natural disasters,
(iii) catastrophic economic or significant regulatory or political conditions
or
changes, (iv) the announcement or performance of this Agreement and the
transactions contemplated hereby, including compliance with the covenants set
forth herein, (v) changes in any applicable accounting regulations or principles
or the interpretations thereof, (vi) changes in laws, or (vii) changes
in the price or trading volume of the Company’s stock.
4.2 Subsidiaries.
Each
active Subsidiary of the Company, the direct owner of such Subsidiary and the
direct owner's percentage ownership thereof, is set forth on Schedule 4.2.
For
the purpose of this Agreement, a “Subsidiary” means
all
or any of the following subsidiaries of the Company: Computer Equity
Corporation, Government Telecommunications, Inc., Pacific Decision Sciences
Corporation, Perimeter Acquisition Corp., and Thermo Life Energy Corp. The
term
"Pledged Subsidiary" means VeriChip Corporation, InfoTech USA, Inc., Digital
Angel Corporation, and the Subsidiaries.
4.3 Capitalization;
Voting Rights.
(a) The
authorized capital stock of the Company, as of the date hereof consists of
130,000,000 shares, of which 125,000,000 are shares of Common Stock, par value
$0.01 per share, 67,973,723 shares of which are issued and 67,873,427 shares
of
which are outstanding, and 5,000,000 are shares of preferred stock, par value
$10.00 per share of which no shares of preferred stock are issued and
outstanding. The authorized, issued and outstanding capital stock of each
Subsidiary of the Company is set forth on Schedule 4.3.
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(b) Except
as
disclosed on Schedule 4.3, other than: (i) those reserved for issuance under
the
Company’s stock option plans; and (ii) those which may be granted pursuant to
this Agreement and the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or arrangements or agreements of
any
kind for the purchase or acquisition from the Company of any of its securities.
Except as disclosed on Schedule 4.3, neither the offer, issuance or sale of
any
of the Note or the Warrant nor the consummation of any transaction contemplated
hereby will result in a change in the price or number of any securities of
the
Company outstanding, under anti-dilution or other similar provisions contained
in or affecting any such securities.
(c) Except
as
set forth on Schedule 4.3, all issued and outstanding shares of the Company’s
Common Stock: (i) have been duly authorized and validly issued and are
fully paid and nonassessable; and (ii) were issued in compliance with all
applicable state and federal laws concerning the issuance of
securities.
(d) The
rights, preferences, privileges and restrictions of the shares of the Common
Stock are as stated in the Company’s Articles of Incorporation, as amended (the
“Charter”). The Warrant Shares have been duly and validly reserved for issuance.
When issued in compliance with the provisions of this Agreement and the
Company’s Charter, the Securities will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Securities may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required
by
such laws at the time a transfer is proposed.
4.4 Authorization;
Binding Obligations.
All
corporate, partnership or limited liability company, as the case may be, action
on the part of the Company and each of its Subsidiaries (including their
respective officers and directors) necessary for the authorization of this
Agreement and the Related Agreements, the performance of all obligations of
the
Company and its Subsidiaries hereunder and under the Related Agreements at
the
Closing and, the authorization, sale, issuance and delivery of the Note and
Warrant has been taken or will be taken prior to the Closing. This Agreement
and
the Related Agreements, when executed and delivered and to the extent it is
a
party thereto, will be valid and binding obligations of each of the Company
and
each of its Subsidiaries, enforceable against each such person or entity in
accordance with their terms, except:
(a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights;
and
(b) general
principles of equity that restrict the availability of equitable or legal
remedies.
The
sale
of the Note is not and will not be subject to any preemptive rights or rights
of
first refusal that have not been properly waived or complied with. The issuance
of the Warrant and the subsequent exercise of the Warrant for Warrant Shares
are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.
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4.5 Liabilities;
Solvency.
(a) Neither
the Company nor any of its Subsidiaries has any liabilities, except current
liabilities, liabilities incurred in the ordinary course of business,
intercompany liabilities which are eliminated in consolidation of the Company
and its Subsidiaries, and liabilities disclosed in any of the Company’s filings
under the Securities Exchange Act of 1934 (“Exchange Act”) made prior to the
date of this Agreement (collectively, the “Exchange Act Filings”), copies of
which have been provided or made available to the Purchaser.
(b) Beginning
on the Closing Date and continuing until the Company's complete satisfaction
of
its obligations arising under this Agreement and the Related Agreements, the
Company is, and will be, Solvent. For purposes of this Section 4.5(b), “Solvent”
means, with respect to the Company on a particular date, that on such date
(a)
the fair value of the property of the Company is greater than the total amount
of liabilities, including contingent liabilities of the Company; (b) the present
fair salable value of the assets of the Company is not less than the amount
that
will be required to pay the probable liability of the Company on its debts
as
they become absolute and matured; (c) the Company does not intend to, and does
not believe that it will, incur debts or liabilities beyond the Company’s
ability to pay as such debts and liabilities mature; and (d) the Company is
not
engaged in a business or transaction, and is not about to engage in a business
or transaction, for which the Company's property would constitute an
unreasonably small capital. The amount of contingent liabilities (such as
litigation, guaranties and pension plan liabilities) at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can reasonably be expected
to
become an actual or matured liability.
4.6 Agreements;
Action.
Except
as set forth on Schedule 4.6 or as disclosed in the Exchange
Filings:
(a) There
are
no agreements, understandings, instruments, contracts, proposed transactions,
judgments, orders, writs or decrees to which the Company or any of its
Subsidiaries is a party or by which it is bound which may involve: (i)
obligations (contingent or otherwise) of, or payments to, the Company or any
of
its Subsidiaries in excess of $250,000 (other than obligations of, or payments
to, the Company or any of its Subsidiaries arising from purchase or sale
agreements, contracts for services, marketing and advertising related
agreements, etc. entered into in the ordinary course of business); (ii) the
transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Company or any of its Subsidiaries (other than licenses
arising from the purchase of “off the shelf” or other standard products); (iii)
provisions restricting the development, manufacture or distribution of the
Company’s or any of its Subsidiaries' material products or services; or (iv)
indemnification by the Company or any of its Subsidiaries with respect to
infringements of material proprietary rights.
(b) Except
as
set forth on Schedule 4.6, since December 31, 2005 (the “Balance Sheet Date”),
neither the Company nor any of its Subsidiaries has: (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to
any
5
class
or
series of its capital stock; (ii) incurred any indebtedness for money borrowed
or any other liabilities (other than ordinary course obligations and
intercompany loans) individually in excess of $250,000 or, in the case of
indebtedness and/or liabilities individually less than $250,000, in excess
of
$500,000 in the aggregate; (iii) made any loans or advances in excess of
$500,000, in the aggregate of all such loans and advances, other than ordinary
course advances for travel expenses; or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory
in
the ordinary course of business.
(c) For
the
purposes of subsections (a) and (b) above, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions
involving the same person or entity (including persons or entities the Company
or any Subsidiary of the Company has reason to believe are affiliated therewith)
shall be aggregated for the purpose of meeting the individual minimum dollar
amounts of such subsections.
(d) The
Company maintains disclosure controls and procedures (“Disclosure Controls”)
designed to ensure that information required to be disclosed by the Company
in
its Exchange Act Filings is recorded, processed, summarized, and reported,
within the time periods specified by the Exchange Act, and the applicable rules
and forms promulgated by the Securities and Exchange Commission
(“SEC”).
(e) The
Company makes and keeps books, records, and accounts, that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of
the
Company’s assets. The Company maintains internal control over financial
reporting (“Financial Reporting Controls”) designed by, or under the supervision
of, the Company’s principal executive and principal financial officers, and
effected by the Company’s board of directors, management, and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles (“GAAP”), including
that:
(i) transactions
are executed in accordance with management’s general or specific
authorization;
(ii) unauthorized
acquisition, use, or disposition of the Company’s assets that could have a
material effect on the financial statements are prevented or timely
detected;
(iii) transactions
are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that the Company’s receipts and expenditures are being
made only in accordance with authorizations of the Company’s management and
board of directors;
(iv) transactions
are recorded as necessary to maintain accountability for assets;
and
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(v) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.
(f) There
is
no weakness in any of the Company’s Disclosure Controls or Financial Reporting
Controls that is required to be disclosed in any of the Exchange Act Filings,
except as so disclosed.
4.7 Obligations
to Related Parties.
Except
as set forth on Schedule 4.7, there are no obligations of the Company or any
of
its Pledged Subsidiaries to officers, directors, stockholders or employees
of
the Company or any of its Pledged Subsidiaries other than for:
(a) payment
of salary for services rendered and for bonus payments;
(b) reimbursement
of reasonable expenses incurred on behalf of the Company and its
Subsidiaries;
(c) other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by
the
Board of Directors of the Company and each Pledged Subsidiary of the Company,
as
applicable); and
(d) obligations
listed in the Company’s and each of its Pledged Subsidiary’s financial
statements or disclosed in any of the Company’s or its Pledged Subsidiary's
applicable Exchange Act Filings.
Except
as
described above or as set forth on Schedule 4.7, none of the key officers,
directors or, to the Company’s Knowledge (as defined herein), key employees or
stockholders of the Company or any of its Subsidiaries or any members of their
immediate families, are indebted to the Company or any of its Subsidiaries,
individually or in the aggregate, in excess of $50,000 or have any direct or
indirect ownership interest in any firm or corporation with which the Company
or
any of its Subsidiaries has a business relationship, or any firm or corporation
which competes with the Company or any of its Subsidiaries, other than passive
investments in publicly traded companies (representing less than five percent
(5%) of such company) which may compete with the Company or any of its
Subsidiaries. Except as described above, no officer, director or stockholder
of
the Company or any of its Subsidiaries, or any member of their immediate
families, is, directly or indirectly, interested in any material contract with
the Company or any of its Subsidiaries and no agreements, understandings or
proposed transactions are contemplated between the Company or any of its
Subsidiaries and any such person. Except as set forth on Schedule 4.7, neither
the Company nor any of its Subsidiaries is a guarantor or indemnitor of any
indebtedness of any other person or entity. "Knowledge" means with respect
to
the Company and any of its Subsidiaries, the actual knowledge after reasonable
inquiry of the chief executive officer, chief financial officer, and general
counsel.
7
4.8 Changes.
Since
the Balance Sheet Date, except as disclosed in any Exchange Act Filing or in
any
Schedule to this Agreement or to any of the Related Agreements, there has not
been:
(a) any
change in the business, assets, liabilities, condition (financial or otherwise),
properties, operations or prospects of the Company or any of its Subsidiaries,
which individually or in the aggregate has had, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect;
(b) any
resignation or termination of any key officer, key employee or group of
employees of the Company or any of its Subsidiaries;
(c) any
material change, except in the ordinary course of business, in the contingent
obligations of the Company or any of its Subsidiaries by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) any
damage, destruction or loss, whether or not covered by insurance, which has
had,
or could reasonably be expected to have, individually or in the aggregate,
a
Material Adverse Effect;
(e) any
waiver by the Company or any of its Subsidiaries of a valuable right or of
a
material debt owed to it;
(f) any
direct or indirect loans made by the Company or any of its Subsidiaries to
any
stockholder, employee, officer or director of the Company or any of its
Subsidiaries, other than advances made in the ordinary course of
business;
(g) any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder of the Company or any of its Subsidiaries;
(h) any
declaration or payment of any dividend or other distribution of the assets
of
the Company or any of its Subsidiaries;
(i) any
labor
organization activity related to the Company or any of its
Subsidiaries;
(j) any
debt,
obligation or liability incurred, assumed or guaranteed by the Company or any
of
its Subsidiaries, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) any
sale,
assignment or transfer of any material patents, trademarks, copyrights, trade
secrets or other intangible assets owned by the Company or any of its
Subsidiaries;
(l) any
change in any material agreement to which the Company or any of its Subsidiaries
is a party or by which either the Company or any of its Subsidiaries is bound
which either individually or in the aggregate has had, or could reasonably
be
expected to have, individually or in the aggregate, a Material Adverse
Effect;
8
(m) any
other
event or condition of any character that, either individually or in the
aggregate, has had, or could reasonably be expected to have, individually or
in
the aggregate, a Material Adverse Effect; or
(n) any
arrangement or commitment by the Company or any of its Subsidiaries to do any
of
the acts described in subsection (a) through (m) above.
4.9 Title
to Properties and Assets; Liens, Etc.
Except
as set forth on Schedule 4.9, each of the Company and its Subsidiaries has
good and marketable title to its properties and assets, and good title to its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than:
(a) those
resulting from taxes which have not yet become delinquent;
(b) minor
liens and encumbrances which do not materially detract from the value of the
property subject thereto or materially impair the operations of the Company
or
any of its Subsidiaries, so long as in each such case, such liens and
encumbrances have no effect on the lien priority of the Purchaser in such
property; and
(c) those
that have otherwise arisen in the ordinary course of business, so long as they
have no effect on the lien priority of the Purchaser therein.
All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company and its Subsidiaries are in operating condition
and repair and are reasonably fit and usable for the purposes for which they
are
being used, reasonable wear and tear accepted. The Company and its Subsidiaries
are in compliance with all material terms of each lease to which it is a party
or is otherwise bound.
4.10 Intellectual
Property.
(a) Except
as
set forth on Schedule 4.10 hereto, each
of
the Company and its Pledged
Subsidiaries either (i) owns sufficient legal rights to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, and other
proprietary rights and processes necessary for its business as now conducted,
or
(ii) has a license, agreement or other permission to use the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
and
other proprietary rights and processes necessary for its business as now
conducted (the “Intellectual Property”), without any known infringement of the
rights of others. There are no outstanding options, licenses or agreements
of
any kind relating to the foregoing proprietary rights owned by the Company,
nor
is the Company or any of its Pledged Subsidiaries bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
and
other proprietary rights and processes of any other person or entity other
than:
(w) such licenses or agreements arising from the license or purchase of “off the
shelf” or standard products, (x) licenses and agreements relating to the
manufacture, distribution, marketing, sales and maintenance of the Company’s
products entered into in arms length transactions, (y) license grants by the
Company to purchasers of its products or purchasers of licenses to
9
its
products, and (z) intra-company agreements between the Company and its Pledged
Subsidiaries.
(b) Except
as
set forth on Schedule 4.10 hereto, neither the Company nor any of its Pledged
Subsidiaries has received any communications alleging that the Company or any
of
its Pledged Subsidiaries has violated any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights
of
any other person or entity, nor is the Company or any of its Pledged
Subsidiaries aware of any basis therefor.
(c) The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior
to
their employment by the Company or any of its Pledged Subsidiaries, except
for
(i) inventions, trade secrets or proprietary information that have been
rightfully assigned to the Company or any of its Pledged Subsidiaries, and
(ii)
inventions, trade secrets or proprietary information for which the Company
has
acquired license rights from the employee’s prior employer.
4.11 Compliance
with Other Instruments.
Neither
the Company nor any of its Subsidiaries is in violation or default of (x) any
term of its Charter or Bylaws, or (y) any provision of any indebtedness,
mortgage, indenture, contract, agreement or instrument to which it is party
or
by which it is bound or of any judgment, decree, order or writ, which violation
or default, in the case of this clause (y), has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. The execution, delivery and performance of and compliance with this
Agreement and the Related Agreements to which it is a party, and the issuance
and sale of the Note by the Company and the other Securities by the Company
each
pursuant hereto and thereto, will not, with or without the passage of time
or
giving of notice, result in any such material violation, or be in conflict
with
or constitute a default under any such term or provision, or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or any of its Subsidiaries or the
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to the Company, its business
or
operations or any of its assets or properties.
4.12 Litigation.
Except
as set forth on Schedule 4.12 hereto, there is no action, suit, proceeding
or
investigation pending or, to the Company’s Knowledge, currently threatened
against the Company or any of its Subsidiaries that prevents the Company or
any
of its Subsidiaries from entering into this Agreement or the other Related
Agreements, or from consummating the transactions contemplated hereby or
thereby, or which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect or any change in
the
current equity ownership of the Company or any of its Subsidiaries, nor is
the
Company aware that there is any basis to assert any of the foregoing. Neither
the Company nor any of its Subsidiaries is a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court
or
Governmental Authority. There is no material action, suit, proceeding or
investigation by the Company or any of its Subsidiaries currently pending or
which the Company or any of its Subsidiaries intends to initiate. “Governmental
Authority” means any nation or government, any state, provincial or political
subdivision thereof and any
10
entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including without limitation any
stock
exchange, securities market or self-regulatory organization.
4.13 Tax
Returns and Payments.
Each of
the Company and its Pledged
Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by the
Company or any of its
Pledged
Subsidiaries on or before the Closing, have been paid or will be paid prior
to
the time they become delinquent. Neither the Company nor any of its Pledged
Subsidiaries has been advised in writing:
(a) that
any
of its returns, federal, state or other, have been or are being audited as
of
the date hereof; or
(b) of
any
adjustment, deficiency, assessment or court decision in respect of its federal,
state or other taxes.
The
Company has no Knowledge of any liability in excess of $100,000 for any tax
to
be imposed upon its properties or assets as of the date of this Agreement that
is not adequately provided for.
4.14 Employees.
Except
as
set forth on Schedule 4.14 or except as disclosed in the Exchange Act Filings,
neither the Company nor any of its Subsidiaries has any collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company’s knowledge, threatened with respect to the
Company or any of its Subsidiaries. Except as disclosed on Schedule 4.14 or
except as disclosed in the Exchange Act Filings, neither the Company nor any
of
its Subsidiaries is a party to or bound by any currently effective employment
contract, deferred compensation arrangement, bonus plan, incentive plan, profit
sharing plan, retirement agreement or other employee compensation plan or
agreement. Except as set forth on Schedule 4.14, each employment contract and
consultant contract to which the Company or any of its Subsidiaries is a party
is valid and binding on the Company or its Subsidiaries, as the case may be,
and
, to the Company's knowledge, each other party thereto and is in full force
and
effect. Neither the Company nor any of its Subsidiaries is aware that any of
its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) that would materially interfere with their duties
to
the Company or any of its Subsidiaries. Except for employees who have a current
effective employment agreement with the Company or any of its Subsidiaries
or as
set forth on Schedule 4.14 or except as disclosed in the Exchange Act Filings,
no employee of the Company or any of its Subsidiaries has been granted the
right
to continued employment by the Company or any of its Subsidiaries or to any
material compensation following termination of employment with the Company
or
any of its Subsidiaries. Except as set forth on Schedule 4.14 or except as
disclosed in the Exchange Act Filings, the Company is not aware that any
officer, key employee or group of employees intends to terminate his, her or
their employment with the Company or any of its Subsidiaries, nor does the
Company or any of its Subsidiaries have a present intention to terminate the
employment of any officer, key employee or group of employees.
4.15 Registration
Rights and Voting Rights.
Except
as set forth on Schedule 4.15, neither the Company nor any of its
Subsidiaries is presently under any obligation,
11
and
neither the Company nor any of its Subsidiaries has granted any rights, to
register any of the Company’s or its Subsidiaries’ presently outstanding
securities or any of its securities that may hereafter be issued. Except as
set
forth on Schedule 4.15, to the Company’s Knowledge, no stockholder of the
Company or any of its Subsidiaries has entered into any agreement with respect
to the voting of equity securities of the Company or any of its
Subsidiaries.
4.16 Compliance
with Laws; Permits.
Neither
the Company nor any of its Subsidiaries is in violation of any provision of
the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or any SEC related regulation or rule or any rule
of
the Principal Market (as hereafter defined) promulgated thereunder or any other
applicable statute, rule, regulation, order or restriction of any domestic
or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which has had, or
could reasonably be expected to have, either individually or in the aggregate,
a
Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations
or
declarations are required to be filed in connection with the execution and
delivery of this Agreement or any other Related Agreement and the issuance
of
any of the Securities, except such as have been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing,
as
will be filed in a timely manner. Each of the Company and its Subsidiaries
has
all material franchises, permits, licenses and any similar authority necessary
for the conduct of its business as now being conducted by it, the lack of which
could, either individually or in the aggregate, reasonably be expected to have
a
Material Adverse Effect.
4.17 Environmental
and Safety Laws.
To the
Company's Knowledge, neither the Company nor any of its Subsidiaries is in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and no material expenditures are
or will be required in order to comply with any such existing statute, law
or
regulation. To the Company's Knowledge, no Hazardous Materials (as defined
below) are used, stored, or disposed of by the Company or any of its
Subsidiaries or, by any other person or entity on any property owned, leased
or
used by the Company or any of its Subsidiaries. For the purposes of the
preceding sentence, “Hazardous Materials” shall mean:
(a) materials
which are listed or otherwise defined as “hazardous” or “toxic” under any
applicable local, state, federal and/or foreign laws and regulations that govern
the existence and/or remedy of contamination on property, the protection of
the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials;
or
(b) any
petroleum products or nuclear materials.
4.18 Valid
Offering.
Assuming the accuracy of the representations and warranties of the Purchaser
contained in this Agreement, the offer, sale and issuance of the Securities
will
be exempt from the registration requirements of the Securities Act of 1933,
as
amended (the “Securities Act”), and will have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities
laws.
12
4.19 Full
Disclosure.
Each of
the Company and each of its Subsidiaries has provided the Purchaser with all
information requested by the Purchaser in connection with its decision to
purchase the Note and Warrant, including all information the Company and its
Subsidiaries believe is reasonably necessary to make such investment decision.
Neither this Agreement, the Related Agreements, the exhibits and schedules
hereto and thereto contain any untrue statement of a material fact nor omit
to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances in which they are made, not
misleading. Any financial projections and other estimates provided to the
Purchaser by the Company or any of its Subsidiaries were based on the Company’s
and its Subsidiaries’ experience in the industry and on assumptions of fact and
opinion as to future events which the Company or any of its Subsidiaries, at
the
date of the issuance of such projections or estimates, believed to be
reasonable..
4.20 Insurance.
Each of
the Company and each of its Pledged
Subsidiaries has general commercial, product liability, fire and casualty
insurance policies with coverages which the Company believes are customary
for
companies similarly situated to the Company and its Pledged
Subsidiaries in the same or similar business.
4.21 SEC
Reports.
The
Company has filed all proxy statements, reports and other documents required
to
be filed by it under the Exchange Act since January 1, 2004. Copies of the
following documents are publicly available via ▇▇▇▇▇ on the SEC's website:
(i)
the Company's Annual Report on Form 10-K for its fiscal year ended December
31,
2005; and (ii) the Company's Quarterly Reports on Form 10-Q for its fiscal
quarters ended March 31, 2006 and June 30, 2006, and the Form 8-K filings which
it has made or amended during the fiscal year 2006 to date (collectively, the
“SEC Reports”). Each SEC Report was, at the time of its filing, in substantial
compliance with the requirements of its respective form and none of the SEC
Reports, nor the financial statements (and the notes thereto) included in the
SEC Reports, as of their respective filing dates, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.22 Listing.
The
Company’s Common Stock is listed or quoted, as applicable, on a Principal Market
(as hereafter defined) and satisfies and, at all times until the Company's
complete satisfaction of its obligations under this Agreement and the Related
Agreements, will satisfy, all requirements for the continuation of such listing
or quotation, as applicable. The Company has not received any notice that its
Common Stock will be delisted from, or no longer quoted on, as applicable,
the
Principal Market or that its Common Stock does not meet all requirements for
such listing or quotation, as applicable. For purposes hereof, the term
“Principal Market” means the NASD Over The Counter Bulletin Board, NASDAQ
Capital Market, NASDAQ National Markets System, American Stock Exchange or
New
York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock).
4.23 No
Integrated Offering.
To the
Company's Knowledge, neither the Company, nor any of its Subsidiaries, nor
any
person acting on its or their behalf, has directly or indirectly made any offers
or sales of any security or solicited any offers to buy any security under
circumstances that would cause the offering of the Securities pursuant to this
Agreement
13
or
any of
the Related Agreements to be integrated with prior offerings by the Company
for
purposes of the Securities Act which would prevent the Company from selling
the
Securities pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any
of
its affiliates or Subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.
4.24 Stop
Transfer.
The
Securities are restricted securities as of the date of this Agreement. Neither
the Company nor any of its Subsidiaries will issue any stop transfer order
or
other order impeding the sale and delivery of any of the Securities at such
time
as the Securities are registered for public sale or an exemption from
registration is available, except as required by state and federal securities
laws.
4.25 Dilution.
The
Company specifically acknowledges that its obligation to issue the shares of
Common Stock upon exercise of the Warrant is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other stockholders of the Company.
4.26
Patriot
Act.
The
Company certifies that, to the Company’s Knowledge, neither the Company nor any
of its Subsidiaries has been designated, nor is or shall be owned or controlled,
by a “suspected terrorist” as defined in Executive Order 13224. The Company
hereby acknowledges that the Purchaser seeks to comply with all applicable
laws
concerning money laundering and related activities. In furtherance of those
efforts, the Company hereby represents, warrants and covenants that: (i) none
of
the cash or property that the Company or any of its Subsidiaries will pay or
will contribute to the Purchaser has been or shall be derived from, or related
to, any activity that is deemed criminal under United States law; and (ii)
no
contribution or payment by the Company or any of its Subsidiaries to the
Purchaser, to the extent that they are within the Company’s and/or its
Subsidiaries’ control shall cause the Purchaser to be in violation of the United
States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. The Company shall promptly
notify the Purchaser if any of these representations, warranties or covenants
ceases to be true and accurate regarding the Company or any of its Subsidiaries.
The Company shall provide the Purchaser all additional information regarding
the
Company or any of its Subsidiaries that the Purchaser deems necessary or
convenient to ensure compliance with all applicable laws concerning money
laundering and similar activities. The Company understands and agrees that
if at
any time it is discovered that any of the foregoing representations, warranties
or covenants are incorrect, or if otherwise required by applicable law or
regulation related to money laundering or similar activities, the Purchaser
may
undertake appropriate actions to ensure compliance with applicable law or
regulation, including but not limited to segregation and/or redemption of the
Purchaser’s investment in the Company. The Company further understands that
solely to the extent required by applicable law, the Purchaser may release
confidential information about the Company and its Subsidiaries and, if
applicable, any underlying beneficial owners, to proper authorities if the
Purchaser, in its sole discretion, determines that it is in the best interests
of the Purchaser in light of relevant rules and regulations under the laws
set
forth in subsection (ii) above.
4.27
ERISA.
Based
upon the Employee Retirement Income Security Act of 1974 (“ERISA”),
and
the regulations and published interpretations thereunder: (i) neither
the
14
Company
nor any of its Subsidiaries has engaged in any non-exempt Prohibited
Transactions (as defined in Section 406 of ERISA and Section 4975 of
the Internal
Revenue Code of 1986, as amended (the “Code”));
(ii)
each of the Company and its Subsidiaries has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of its ERISA-governed plans;
(iii) neither the Company nor any of its Subsidiaries has any Knowledge of
any
event or occurrence which would cause the Pension Benefit Guaranty Corporation
to institute proceedings under Title IV of ERISA to terminate any employee
benefit plan(s); (iv) neither the Company nor any of its Subsidiaries has any
fiduciary responsibility for investments with respect to any plan existing
for
the benefit of persons other than the Company’s or such Subsidiary’s employees
and their beneficiaries; and (v) neither the Company nor any of its Subsidiaries
has withdrawn, completely or partially, from any multi-employer pension plan
so
as to incur liability under the Multiemployer Pension Plan Amendments Act of
1980.
5. Representations
and Warranties of the Purchaser.
The
Purchaser hereby represents and warrants to the Company as follows:
5.1 Organization,
Good Standing and Qualification.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. The Purchaser is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature or location of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to
do
so has not, or could not reasonably be expected to have, individually or in
the
aggregate, a Material Adverse Effect.
5.2 No
Shorting.
The
Purchaser or any of its affiliates and investment partners has not, will not
and
will not cause any person or entity, to directly engage in “short sales” of the
Company’s Common Stock as long as the Note shall be outstanding.
5.3 Requisite
Power and Authority.
The
Purchaser has all necessary power and authority under all applicable provisions
of law to execute and deliver this Agreement and the Related Agreements and
to
carry out their provisions. All corporate action on the Purchaser’s part
required for the lawful execution and delivery of this Agreement and the Related
Agreements has been taken or will be taken prior to the Closing. Upon their
execution and delivery, this Agreement and the Related Agreements will be valid
and binding obligations of the Purchaser, enforceable in accordance with their
terms, except:
(a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights;
and
(b) as
limited by general principles of equity that restrict the availability of
equitable and legal remedies.
5.4 Investment
Representations.
The
Purchaser understands that the Securities are being offered and sold pursuant
to
an exemption from registration contained in the Securities Act based in part
upon the Purchaser’s representations contained in this Agreement, including,
without limitation, that the Purchaser is an “accredited investor” within the
meaning
15
of
Regulation D under the Securities Act. The Purchaser confirms that it has
received or has had full access to all the information it considers necessary
or
appropriate to make an informed investment decision with respect to the Note
and
the Warrant to be purchased by it under this Agreement and the Warrant Shares
acquired by it upon the exercise of the Warrant, respectively. The Purchaser
further confirms that it has had an opportunity to ask questions and receive
answers from the Company regarding the Company’s and its Pledged
Subsidiaries’ business, management and financial affairs and the terms and
conditions of the Offering, the Note, the Warrant and the Securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Purchaser or to which
the
Purchaser had access.
5.5 The
Purchaser Bears Economic Risk.
The
Purchaser has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so
that
it is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect its own interests. The Purchaser must
bear the economic risk of this investment until the Securities are sold pursuant
to: (i) an effective registration statement under the Securities Act; or (ii)
an
exemption from registration is available with respect to such sale.
5.6 Acquisition
for Own Account.
The
Purchaser is acquiring the Note and Warrant and the Warrant Shares for the
Purchaser’s own account for investment only, and not as a nominee or agent and
not with a view towards or for resale in connection with their
distribution.
5.7 The
Purchaser Can Protect Its Interest.
The
Purchaser represents that by reason of its, or of its management’s, business and
financial experience, the Purchaser has the capacity to evaluate the merits
and
risks of its investment in the Note, the Warrant and the Securities and to
protect its own interests in connection with the transactions contemplated
in
this Agreement and the Related Agreements. Further, the Purchaser is aware
of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Related Agreements.
5.8 Intentionally
Omitted.
5.9 Legends.
(a) The
Warrant Shares, if not issued by DWAC system (as hereinafter defined), shall
bear a legend which shall be in substantially the following form until such
shares are covered by an effective registration statement filed with the
SEC:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
APPLIED
16
DIGITAL
SOLUTIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”
(b) The
Warrant shall bear substantially the following legend:
“THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO APPLIED DIGITAL
SOLUTIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”
6. Covenants
of the Company.
The
Company covenants and agrees with the Purchaser as follows:
6.1 Stop-Orders.
The
Company will advise the Purchaser, promptly after it receives notice of issuance
by the SEC, any state securities commission or any other regulatory authority
of
any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Listing.
The
Company shall promptly secure the listing or quotation, as applicable, of the
Warrant Shares on the Principal Market upon which shares of Common Stock are
listed or quoted for trading, as applicable (subject to official notice of
issuance), and shall maintain such listing or quotation, as applicable, of
the
Warrant Shares so long as any other shares of Common Stock shall be so listed
or
quoted, as applicable. Until its complete satisfaction of its obligations under
this Agreement and the Related Agreements, the Company will maintain the listing
or quotation, as applicable, of its Common Stock on the Principal Market, and
will comply in all material respects with the Company’s reporting, filing and
other obligations under the bylaws or rules of the National Association of
Securities Dealers (“NASD”) and such exchanges, as applicable.
6.3 Market
Regulations.
The
Company shall notify the SEC, NASD and applicable state authorities, in
accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may
be
required and permitted by applicable law, rule and regulation, for the legal
and
valid issuance of the Securities to the Purchaser and promptly provide copies
thereof to the Purchaser.
17
6.4 Reporting
Requirements.
The
Company
will deliver, or cause to be delivered, to the Purchaser each of the following,
which shall be in form and detail acceptable to the Purchaser:
(a) As
soon
as available, and in any event within ninety (90) days after the end of each
fiscal year of the Company, each of the Company’s and each of its Subsidiaries’
audited financial statements with a report of independent certified public
accountants of recognized standing selected by the Company and reasonably
acceptable to the Purchaser (the “Accountants”),
which
annual financial statements shall be without qualification and shall include
each of the Company’s and each of its Subsidiaries’ balance sheet as at the end
of such fiscal year and the related statements of each of the Company’s and each
of its Subsidiaries’ income, retained earnings and cash flows for the fiscal
year then ended, prepared on a consolidating and consolidated basis to include
the Company, each Subsidiary of the Company and each of their respective
affiliates, all prepared in accordance with GAAP, together with (i) if and
when
available, copies of any management letters prepared by the Accountants; and
(ii) a certificate of the Company’s President, Chief Executive Officer or Chief
Financial Officer stating that such financial statements have been prepared
in
accordance with GAAP and whether or not such officer has knowledge of the
occurrence of any Event of Default (as defined in the Note) and, if so, stating
in reasonable detail the facts with respect thereto;
(b) As
soon
as available and in any event within forty five (45) days after the end of
each
fiscal quarter of the Company, an unaudited/internal balance sheet and
statements of income, retained earnings and cash flows of the Company and each
of its Subsidiaries as at the end of and for such quarter and for the year
to
date period then ended, prepared on a consolidating and consolidated basis
to
include all the Company, each Subsidiary of the Company and each of their
respective affiliates, all prepared in accordance with GAAP, subject to year-end
adjustments and accompanied by a certificate of the Company’s President, Chief
Executive Officer or Chief Financial Officer, stating (i) that such financial
statements have been prepared in accordance with GAAP, subject to year-end
audit
adjustments, and (ii) whether or not such officer has knowledge of the
occurrence of any Event of Default (as defined in the Note) not theretofore
reported and remedied and, if so, stating in reasonable detail the facts with
respect thereto;
(c) As
soon
as available and in any event within thirty (30) days after the end of each
calendar month, an unaudited/internal balance sheet and statements of income,
of
each of the Company and its Subsidiaries as at the end of and for such month
and
for the year to date period then ended, prepared on a consolidating and
consolidated basis to include the Company, each Subsidiary of the Company and
each of their respective affiliates, all prepared in accordance with GAAP,
subject to year-end adjustments and accompanied by a certificate of the
Company’s President, Chief Executive Officer or Chief Financial Officer, stating
(i) that such financial statements have been prepared in accordance with GAAP,
subject to year-end audit adjustments, and (ii) whether or not such officer
has
knowledge of the occurrence of any Event of Default (as defined in the Note)
not
theretofore reported and remedied and, if so, stating in reasonable detail
the
facts with respect thereto;
18
(d) The
Company shall timely file with the SEC all reports required to be filed pursuant
to the Exchange Act and refrain from terminating its status as an issuer
required by the Exchange Act to file reports thereunder even if the Exchange
Act
or the rules or regulations thereunder would permit such termination.
Promptly
after (i) the filing thereof, copies of the Company’s most recent registration
statements and annual, quarterly, monthly or other regular reports which the
Company files with the Securities and Exchange Commission (the “SEC”),
and
(ii) the issuance thereof, copies of such financial statements, reports and
proxy statements as the Company shall send to its stockholders; and
(e) The
Company shall timely deliver such other information as the Purchaser shall
reasonably request.
6.5 Use
of
Funds.
The
Company shall use the proceeds of the sale of the Note and the Warrant for
general working capital purposes only and to repay in full the Company’s
existing senior secured debt with Satellite Senior Income Fund,
LLC.
6.6 Access
to Facilities.
The
Company will permit any representatives designated by the Purchaser (or any
successor of the Purchaser), upon reasonable notice and during normal business
hours, at Purchaser's expense and accompanied by a representative of the Company
(provided that no such prior notice shall be required to be given and no such
representative of the Company shall be required to accompany the Purchaser
in
the event the Purchaser believes such access is necessary to preserve or protect
the Collateral (as defined in the Master Security Agreement) or following the
occurrence and during the continuance of an Event of Default (as defined in
the
Note)) to:
(a) visit
and
inspect any of the properties of the Company;
(b) examine
the corporate and financial records of the Company (unless such examination
is
not permitted by federal, state or local law or by contract) and make copies
thereof or extracts therefrom; and
(c) discuss
the affairs, finances and accounts of the Company with the directors, officers
and independent accountants of the Company.
Notwithstanding
the foregoing, neither the Company nor any of its Subsidiaries will provide
any
material, non-public information to the Purchaser unless the Purchaser signs
a
confidentiality agreement and otherwise complies with Regulation FD, under
the
federal securities laws.
6.7 Taxes.
Each of
the Company and its Subsidiaries will promptly pay and discharge, or cause
to be
paid and discharged, when due and payable, all taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company and its Subsidiaries; provided, however, that any such
tax, assessment, charge or levy need not be paid currently if (i) the validity
thereof shall currently and diligently be contested in good faith by appropriate
proceedings, (ii) such tax, assessment, charge or levy shall have no effect
on
the lien priority of the Purchaser in any property of the Company or any of
its
Subsidiaries and (iii) if the Company and/or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto in accordance with
GAAP; and provided, further, that the
19
Company
and its Subsidiaries will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien which
may
have attached as security therefor.
6.8 Insurance.
(i) The
Company shall bear the full risk of loss from any loss of any nature whatsoever
with respect to the Collateral (as defined in each of the Master Security
Agreement, the Stock Pledge Agreement and each other security agreement entered
into by the Company for the benefit of the Purchaser) and the Company will
bear
the full risk of loss from any loss of any nature whatsoever with respect to
the
assets pledged to the Purchaser as security for the Obligations (as defined
in
the Master Security Agreement). Furthermore, the Company will insure or cause
the Collateral to be insured, against loss or damage by fire, flood, sprinkler
leakage, theft, burglary, pilferage, loss in transit and other risks customarily
insured against by companies in similar business similarly situated as the
Company including, but not limited to, workers compensation, public and product
liability and business interruption, and such other hazards in amounts and
under
insurance policies and bonds by insurers consistent with current practice and
reasonably acceptable to the Purchaser. All premiums thereon shall be paid
by
the Company, the policies delivered to the Purchaser, and each such policy
shall
be endorsed in the Purchaser’s name as an additional insured and lender loss
payee, with an appropriate loss payable endorsement by the Company in form
and
substance satisfactory to the Purchaser. If the Company fails to obtain the
insurance and in such amounts of coverage as otherwise required pursuant to
this
Section 6.8, the Purchaser may procure such insurance and the cost thereof
shall
be promptly reimbursed by the Company and shall constitute
Obligations.
(ii) The
Company’s insurance coverage shall not be impaired or invalidated by any act or
neglect of the Company or any of its Subsidiaries and the insurer will provide
the Purchaser with no less than thirty (30) days notice prior of
cancellation.
(iii) The
Purchaser, in connection with its status as a lender loss payee, will be
assigned at all times to a first lien position until such time as all the
Purchaser’s Obligations have been indefeasibly satisfied in full.
6.9 Intellectual
Property.
Each of
the Company and its Subsidiaries shall maintain in full force and effect its
existence, rights and franchises and all licenses and other rights to use
Intellectual Property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business.
6.10 Properties.
Each of
the Company and its Subsidiaries will keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time
to
time make all needful and proper repairs, renewals, replacements, additions
and
improvements thereto; and each of the Company and each of its Subsidiaries
will
at all times comply with each provision of all leases to which it is a party
or
under which it occupies property if the breach of such provision could, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.11 Confidentiality.
The
Company will not, and will not permit any of its Subsidiaries to, disclose,
and
will not include in any public announcement, the name of the
20
Purchaser,
unless expressly agreed to by the Purchaser or unless and until such disclosure
is required by law or applicable regulation, and then only to the extent of
such
requirement. Notwithstanding the foregoing, the Company may disclose the
Purchaser’s identity and the terms of this Agreement to its current and
prospective debt and equity financing sources.
6.12 Required
Approvals.
For so
long as twenty-five percent (25%) of the principal amount of the Note is
outstanding, the Company, without the prior written consent of the Purchaser,
shall not:
(a) (i)
directly or indirectly declare or pay any dividends, (ii) issue any
preferred stock that is manditorily redeemable prior to the one year anniversary
of the Maturity Date (as defined in the Note) or (iii) redeem any of its
preferred stock or other equity interests;
(b) liquidate,
dissolve or effect a material reorganization (it being understood that in no
event shall the Company dissolve, liquidate or merge with any other person
or
entity without
the prior written consent of Laurus, which shall not unreasonably be withheld;
(c) become
subject to (including, without limitation, by way of amendment to or
modification of) any agreement or instrument which by its terms would (under
any
circumstances) restrict the Company’s right to perform the provisions of this
Agreement, any Related Agreement or any of the agreements contemplated hereby
or
thereby;
(d) materially
alter or change the scope of the business of the Company and its Pledged
Subsidiaries (to the extent the Company shall have control over such alteration
or change as a result of owning a controlling interest in the voting stock
of
such Pledged Subsidiary) taken as a whole; or
(e) (i)
create, incur, assume or suffer to exist any indebtedness (exclusive of trade
debt and debt incurred to finance the purchase of equipment (not in excess
of
five percent (5%) of the fair market value of the Company’s assets)) whether
secured or unsecured other than (A) the Company’s obligations owed to the
Purchaser, (B) intercompany indebtedness incurred in the ordinary course of
business between or among the Company and its Pledged Subsidiaries, (C)
indebtedness set forth on Schedule 6.12(e) attached hereto and made a part
hereof and any extensions, refinancings or replacements thereof on terms no
less
favorable to the Purchaser than the indebtedness being extended, refinanced
or
replaced, (D) any indebtedness incurred in connection with the purchase of
assets (other than equipment) in the ordinary course of business, or any
extensions, refinancings or replacements thereof on terms no less favorable
to
the Purchaser than the indebtedness being refinanced or replaced, so long as
any
lien relating thereto shall only encumber the fixed assets so purchased and
no
other assets of the Company or any of its Subsidiaries, (E) debt expressly
subordinated to the Obligations (as defined in the Master Security Agreement)
incurred by the Company that, individually or in the aggregate, does not exceed
$2 million in principal or face amount and is reasonably acceptable to Laurus;
and (F) debt
assumed or incurred in connection with the acquisition by the Company or its
Subsidiaries of all or substantially all of the capital stock or other equity
interests in, or
21
all
or
substantially all of the assets of, any entity; provided the total debt assumed
or incurred in connection with any such acquisition shall (i) be subordinated
to
Purchaser on terms acceptable to Laurus and (ii) not exceed the product of
(x)
two (2) times (y) the amount of the acquired entity's or business unit's total
earnings before interest, taxes, depreciation, and amortization (as determined
in accordance with GAAP) for the twelve (12) calendar months immediately prior
to such acquisition; (ii)
cancel any indebtedness owing to it in excess of $100,000 in the aggregate
during any 12 month period, except intercompany debt between the Company and
its
Subsidiaries without the prior written consent of Purchaser, which consent
shall
not be unreasonably withheld; or (iii) assume, guarantee, endorse or otherwise
become directly or contingently liable in connection with any obligations of
any
other person or entity, except the endorsement of negotiable instruments by
the
Company thereof for deposit or collection or similar transactions in the
ordinary course of business or guarantees of indebtedness otherwise permitted
to
be outstanding pursuant to this clause (e).
6.13 Reissuance
of Securities.
The
Company agrees to reissue certificates representing the Securities without
the
legends set forth in Section 5.8 above at such time as:
(a) the
holder thereof is permitted to dispose of such Securities pursuant to Rule
144(k) under the Securities Act; or
(b) upon
resale subject to an effective registration statement after such Securities
are
registered under the Securities Act.
The
Company agrees to cooperate with the Purchaser in connection with all resales
pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary
to
allow such resales provided the Company and its counsel receive reasonably
requested representations from the Purchaser and broker, if any.
6.14 Opinion.
On the
Closing Date, the Company will deliver to the Purchaser an opinion, subject
to
the Purchaser's reasonable acceptance, from the Company’s in-house or external
legal counsel. The Company will provide, at the Company’s expense, such other
legal opinions in the future as are deemed reasonably necessary by the Purchaser
(and acceptable to the Purchaser) in connection with the exercise of the
Warrant.
6.15 Margin
Stock. The
Company will not permit any of the proceeds of the Note or the Warrant to be
used directly or indirectly to “purchase” or “carry” “margin stock” or to repay
indebtedness incurred to “purchase” or “carry” “margin stock” within the
respective meanings of each of the quoted terms under Regulation U of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect.
6.16 FIRPTA.
Neither
the Company, nor any of its Subsidiaries, is a “United States real property
holding corporation” as such term is defined in Section 897(c)(2) of the Code
and Treasury Regulation Section 1.897-2 promulgated thereunder and neither
the
Company nor any of its Subsidiaries shall at any time take any action or
otherwise acquire any interest in any asset or property to the extent the effect
of which shall cause the Company and/or such Subsidiary, as the case may be,
to
be a “United States real property holding corporation” as such
22
term
is
defined in Section 897(c)(2) of the Code and Treasury Regulation Section 1.897-2
promulgated thereunder.
6.17 Intentionally
Omitted.
6.18 Authorization
and Reservation of Shares.
The
Company shall at all times have authorized and reserved a sufficient number
of
shares of Common Stock to provide for the exercise of the Warrants.
7. Covenants
of the Purchaser.
The
Purchaser covenants and agrees with the Company as follows:
7.1 Confidentiality.
The
Purchaser will not disclose, and will not include in any public announcement,
the name of the Company, unless expressly agreed to by the Company or unless
and
until such disclosure is required by law or applicable regulation, and then
only
to the extent of such requirement.
7.2 Non-Public
Information.
The
Purchaser and its officers, directors, employees, affiliates, agents,
shareholders, and control persons, will not effect any sales in the shares
of
the Company’s Common Stock while in possession of material, non-public
information regarding the Company if such sales would violate applicable
securities law.
7.3 Limitation
on Acquisition of Common Stock of the Company.
Notwithstanding anything to the contrary contained in this Agreement, any
Related Agreement or any document, instrument or agreement entered into in
connection with any other transactions between the Purchaser and the Company,
the Purchaser may not acquire stock in the Company (including, without
limitation, pursuant to a contract to purchase, by exercising an option or
warrant, including the Warrant, by converting any other security or instrument,
by acquiring or exercising any other right to acquire, shares of stock or other
security convertible into shares of stock in the Company, or otherwise, and
such
contracts, options, warrants, conversion or other rights shall not be
enforceable or exercisable) to the extent such stock acquisition would cause
any
interest (including any original issue discount) payable by the Company to
the
Purchaser not to qualify as “portfolio interest” within the meaning of Section
881(c)(2) of the Code, by reason of Section 881(c)(3) of the Code, taking
into account the constructive ownership rules under Section 871(h)(3)(C) of
the
Code (the “Stock Acquisition Limitation”). The Stock Acquisition Limitation
shall automatically become null and void without any notice to the Company
upon
the earlier to occur of either (a) the Company’s delivery to the Purchaser of a
Notice of Redemption (as defined in the Note) or (b) the existence of an Event
of Default (as defined in the Note) at a time when the average closing price
of
the Company’s common stock as reported by Bloomberg, L.P. on the Principal
Market for the immediately preceding five trading days is greater than or equal
to 150% of the Exercise Price (as defined in the Warrant).
8. Covenants
of the Company and the Purchaser Regarding Indemnification.
8.1 Company
Indemnification.
The
Company agrees to indemnify, hold harmless, reimburse and defend the Purchaser,
each of the Purchaser’s officers, directors, agents, affiliates, control
persons, and principal shareholders, against all claims, costs, expenses,
liabilities, obligations, losses or damages (including reasonable legal fees)
of
any nature,
23
incurred
by or imposed upon the Purchaser which result, arise out of or are based upon:
(i) any misrepresentation by the Company or any of its Subsidiaries or breach
of
any warranty by the Company or any of its Subsidiaries in this Agreement, any
other Related Agreement or in any exhibits or schedules attached hereto or
thereto; or (ii) any breach or default in performance by Company or any of
its
Subsidiaries of any covenant or undertaking to be performed by Company or any
of
its Subsidiaries hereunder, under any other Related Agreement or any other
agreement entered into by the Company and/or any of its Subsidiaries and the
Purchaser relating hereto or thereto.
8.2 Purchaser’s
Indemnification.
The
Purchaser agrees to indemnify, hold harmless, reimburse and defend the Company
and each of the Company’s officers, directors, agents, affiliates, control
persons and principal shareholders, at all times against any claims, costs,
expenses, liabilities, obligations, losses or damages (including reasonable
legal fees) of any nature, incurred by or imposed upon the Company which result,
arise out of or are based upon: (i) any misrepresentation by the Purchaser
or
breach of any warranty by the Purchaser in this Agreement or in any exhibits
or
schedules attached hereto or any Related Agreement; or (ii) any breach or
default in performance by the Purchaser of any covenant or undertaking to be
performed by the Purchaser hereunder, under any other Related Agreement, or
any
other agreement entered into by the Company and the Purchaser relating hereto
or
thereto.
9. Intentionally
Omitted.
10. Registration
Rights.
10.1 Registration
Rights Granted.
The
Company hereby grants registration rights to the Purchaser pursuant to the
Registration Rights Agreement.
10.2 Offering
Restrictions.
Except
for stock or stock options granted to employees, directors or consultants of
the
Company and its Pledged Subsidiaries (these exceptions hereinafter referred
to
as the “Excepted Issuances”), neither the Company nor any of its Subsidiaries
will, prior to the full repayment of the Note (together with all accrued and
unpaid interest and fees related thereto), (x) enter into any equity line of
credit agreement or similar agreement or (y) issue, or enter into any agreement
to issue, any securities with a variable/floating conversion and/or pricing
feature which are or could be (by conversion or registration)(commonly known
as
“floorless convertible instruments”) free-trading securities (i.e. common stock
subject to a registration statement).
11. Miscellaneous.
11.1 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS
AGREEMENT AND THE OTHER RELATED AGREEMENTS 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, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
24
(b) THE
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
AND THE PURCHASER, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF
THE
RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED,
THAT
THE PURCHASER AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE
OF
NEW YORK; AND FURTHER PROVIDED,
THAT,
NOTHING
IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE MASTER SECURITY
AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE MASTER
SECURITY AGREEMENT), OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
OF
THE PURCHASER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY
HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS.
THE
COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL
ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION 12.8 AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE COMPANY’S ACTUAL RECEIPT
THEREOF.
(c) THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS
TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PURCHASER AND/OR
THE
COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY
OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
THERETO.
11.2 Severability.
Wherever possible each provision of this Agreement and the Related Agreements
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or any Related Agreement
shall be prohibited by or invalid or illegal under applicable law such provision
shall be ineffective to the
25
extent
of
such prohibition or invalidity or illegality, without invalidating the remainder
of such provision or the remaining provisions thereof which shall not in any
way
be affected or impaired thereby.
11.3 Survival.
The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by the Purchaser and the Closing of the transactions
contemplated hereby to the extent provided therein for a period of twelve (12)
months following the repayment of the obligations under the Note. All statements
as to factual matters contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate
or
instrument. All indemnities set forth herein shall survive the execution,
delivery and termination of this Agreement and the Note and the making and
repayment of the obligations arising hereunder, under the Note and under the
other Related Agreements for a period of twelve (12) months following the
repayment of the obligations under the Note.
11.4 Successors.
Except
as otherwise expressly provided herein, the provisions hereof shall inure to
the
benefit of, and be binding upon, the successors, heirs, executors and
administrators of the parties hereto and shall inure to the benefit of and
be
enforceable by each person or entity which shall be a holder of the Securities
from time to time, other than the holders of Common Stock which has been sold
by
the Purchaser pursuant to Rule 144 or an effective registration statement.
The
Purchaser shall not be permitted to assign its rights hereunder or under any
Related Agreement to (a) a competitor of the Company unless an Event of Default
(as defined in the Note) has occurred and is continuing
or (b)
an entity or person affiliated, directly or indirectly, with any former
executive officer of the Company.
11.5 Entire
Agreement; Maximum Interest.
This
Agreement, the Related Agreements, the exhibits and schedules hereto and thereto
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by
any
representations, warranties, covenants and agreements except as specifically
set
forth herein and therein. Nothing contained in this Agreement, any Related
Agreement or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum rate permitted by applicable
law. In the event that the rate of interest or dividends required to be paid
or
other charges hereunder exceed the maximum rate permitted by such law, any
payments in excess of such maximum shall be credited against amounts owed by
the
Company to the Purchaser and thus refunded to the Company.
11.6 Amendment
and Waiver.
(a) This
Agreement may be amended or modified only upon the written consent of the
Company and the Purchaser.
(b) The
obligations of the Company and the rights of the Purchaser under this Agreement
may be waived only with the written consent of the Purchaser.
26
(c) The
obligations of the Purchaser and the rights of the Company under this Agreement
may be waived only with the written consent of the Company.
11.7 Delays
or Omissions.
It is
agreed that no delay or omission to exercise any right, power or remedy accruing
to any party, upon any breach, default or noncompliance by another party under
this Agreement or the Related Agreements, shall impair any such right, power
or
remedy, nor shall it be construed to be a waiver of any such breach, default
or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. All remedies, either under this
Agreement or the Related Agreements, by law or otherwise afforded to any party,
shall be cumulative and not alternative.
11.8 Notices.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given:
(a) upon
personal delivery to the party to be notified;
(b) when
sent
by confirmed facsimile if sent during normal business hours of the recipient,
if
not, then on the next business day;
(c) three
(3)
business days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or
(d) one
(1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt.
All
communications shall be sent as follows:
|
If
to the Company, to:
|
Applied
Digital Solutions, Inc.
16▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇ttention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
|
|
with
a copy to:
|
|
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇, Esq.
Holland
& Knight LLP
70▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇,
▇▇ ▇▇▇▇▇
▇acsimile:
▇▇▇-▇▇▇-▇▇▇▇
|
27
|
If
to the Purchaser, to:
|
Laurus
Master Fund, Ltd.
c/o
M&C Corporate Services Limited
P.▇.
▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇
▇outh
Church Street
Grand
Cayman, Cayman Islands
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
|
|
with
a copy to:
|
|
|
Portfolio
Services
82▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
▇acsimile: ▇▇▇-▇▇▇-▇▇▇▇
|
or
at
such other address as the Company or the Purchaser may designate by written
notice to the other parties hereto given in accordance herewith.
11.9 Attorneys’
Fees.
In the
event that any suit or action is instituted to enforce any provision in this
Agreement or any Related Agreement, the prevailing party in such dispute shall
be entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement and/or such Related Agreement, including, without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
11.10 Titles
and Subtitles.
The
titles of the sections and subsections of this Agreement are for convenience
of
reference only and are not to be considered in construing this
Agreement.
11.11 Facsimile
Signatures; Counterparts.
This
Agreement may be executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one agreement.
11.12 Broker’s
Fees.
Except
as set forth on Schedule 12.12 hereof, each party hereto represents and warrants
that no agent, broker, investment banker, person or firm acting on behalf of
or
under the authority of such party hereto is or will be entitled to any broker’s
or finder’s fee or any other commission directly or indirectly in connection
with the transactions contemplated herein. Each party hereto further agrees
to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 12.12 being
untrue.
11.13 Construction.
Each
party acknowledges that its legal counsel participated in the preparation of
this Agreement and the Related Agreements and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Agreement or any
Related Agreement to favor any party against the other.
28
IN
WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
|
COMPANY:
|
PURCHASER:
|
|
APPLIED
DIGITAL SOLUTIONS, INC.
|
LAURUS
MASTER FUND, LTD.
|
|
By:
/s/ ▇▇▇▇ ▇.
▇▇▇▇▇▇▇
|
By: /s/
▇▇▇▇▇
Grin
|
|
Name:
▇▇▇▇ ▇.
▇▇▇▇▇▇▇
|
Name: ▇▇▇▇▇
Grin
|
|
Title:
SVP &
CFO
|
Title: Director
|
29
EXHIBIT
A
FORM
OF SECURED TERM NOTE
A-1
EXHIBIT
B
FORM
OF WARRANT
B-1
EXHIBIT
C
FORM
OF ESCROW AGREEMENT
C-1