Contract
Exhibit
10.7
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE
“SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED
OR SOLD UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR
AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE.
NOTWITHSTANDING THE FOREGOING BUT SUBJECT TO COMPLIANCE WITH THE REQUIREMENTS
OF
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, THIS NOTE (I) MAY
BE
PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER
LOAN SECURED BY THIS NOTE AND (II) MAY BE TRANSFERRED OR ASSIGNED TO AN
AFFILIATE OF THE HOLDER HEREOF.
THIS
NOTE WAS ISSUED AT A DISCOUNT TO ITS FACE AMOUNT AND SO THE AMOUNT OWED
HEREUNDER MAY BE LESS THAN THE PRINCIPAL AMOUNT INDICATED
BELOW.
APPLIED
DIGITAL SOLUTIONS, INC.
FORM
OF SENIOR UNSECURED NOTE
New
York, New York $_______________
Issue
Date: June 10, 2005
FOR
VALUE RECEIVED, APPLIED
DIGITAL SOLUTIONS, INC., a
Delaware corporation (the
“Company”),
hereby unconditionally promises to pay to the order of
_____________________________________, or its permitted successors or assigns
(the “Holder”),
the
principal sum of up to _______________________________ in same day funds,
on or
before the Maturity Date. All payments hereunder shall be made to the Holder
unconditionally in full without set-off, counterclaim or, to the extent
permitted by applicable law, other defense, and free and clear of, and without
reduction for or on account of, any present and future taxes or withholdings,
and all liabilities with respect thereto.
The
Company has issued this Senior Unsecured Note (this “Note”)
pursuant to, and this Note is subject to the terms and conditions of, a certain
Securities Purchase Agreement, dated as of June 9, 2005 (the “Securities
Purchase Agreement”).
The
following additional terms shall apply to this Note:
1. DEFINITIONS.
“Board
of Directors”
means
the Company’s board of directors.
“Business
Day”
means
any
day
other than a Saturday, a Sunday or a day on which the New York Stock Exchange
is
closed or on which banks are authorized by law to close in New York, New
York.
“Common
Stock”
means
the common stock, par value $0.01 per share, of the Company.
“Default
Interest Rate”
means
the lower of fifteen percent (15%) and the maximum rate permitted by applicable
law.
“Exchange
Condition”
means,
as of a particular date, each of the following:
(i)
the
Reserved Amount is equal to the number of shares of Common Stock that the
Company is required to reserve by the Securities Purchase Agreement as of
the
Exchange Date (after giving effect to the Exchange);
(ii)
the
Common Stock is authorized for quotation on the Nasdaq SmallCap Market or
Nasdaq
National Market or listed on the New York Stock Exchange;
(iii) the
Initial Registration Statement is effective and available for the resale
of
Registrable Securities as required by the Registration Rights Agreement (and
no
more than one (1) Allowed Delay (as defined in the Registration Rights
Agreement) has occurred since the effectiveness of such Registration Statement);
and
(iv)
an
Event
of Default (as defined herein) has not occurred and is not continuing, and
no
event has occurred that with the giving of notice or passage of time, or
both,
would constitute an Event of Default.
“Floor
Price”
means
$3.25 (subject to adjustment for stock splits, stock dividends and similar
events affecting the Common Stock).
“Governmental
Authority”
means
any nation or government, any state, provincial or political subdivision
thereof
and any 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.
“Issue
Date”
means
the date on which this Note is issued pursuant to the Securities Purchase
Agreement.
“Liquidation
Event”
means
the (i) institution of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company,
any of
the Company’s Subsidiaries
or to
its or their creditors, as such, or to its or their assets, or (ii) the
dissolution or other winding up, whether voluntary or involuntary and whether
or
not involving insolvency or bankruptcy proceedings, of the Company
or any
of the Company’s Subsidiaries that had gross revenues, during
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the
twelve month period immediately preceding such dissolution or winding up,
of at
least $3,000,000,
(iii)
any assignment for the benefit of creditors or any marshalling of the material
assets or material liabilities of the Company
or any
of the Company’s Subsidiaries, or (iv) the admission, in writing, by the Company
of its inability to pay its debts as such debts become due or the failure
of the
Company generally to pay its debts as they come due.
“Maturity
Date”
means
the six (6) month anniversary of the Issue Date (or, if such day is not a
Business Day, on the next succeeding Business Day); provided,
however,
that the
Company shall have the option to extend the Maturity Date by up to an additional
three (3) months if, on any of the ten (10) Trading Days ending on and including
the original Maturity Date, the Market Price is less than the Floor Price.
In
order to extend the Maturity Date, the Company must deliver written notice
of
such extension to the Holder on or before the tenth (10th)
Business Day prior to the original Maturity Date (such notice to specify
the
number of days by which the Company wishes to extend the Maturity
Date).
“Maximum
Price”
means
two hundred percent (200%) of the Conversion Price for the Initial Preferred
Shares (subject to adjustment for stock splits, stock dividends and similar
events affecting the Common Stock).
“Person”
means
any individual, corporation, trust, association, company, partnership, joint
venture, limited liability company, joint stock company, Governmental Authority
or other entity.
All
definitions contained in this Note are equally applicable to the singular
and
plural forms of the terms defined. The words “hereof”, “herein” and “hereunder”
and words of similar import referring to this Note refer to this Note as
a whole
and not to any particular provision of this Note. Any capitalized term used
but
not defined herein has the meaning specified in the Securities Purchase
Agreement.
2. INTEREST;
ORIGINAL ISSUE DISCOUNT; EXCHANGE FOR PREFERRED STOCK.
(a) Other
than as specifically provided herein, no interest shall accrue on this
Note.
(b) This
Note
was issued at a price equal to 93.45% of its face amount (such percentage,
the
“Original
Principal Amount”).
Principal of this Note shall accrue on a daily basis from the Issue Date
through
the earlier of the date on which this Note is paid in full or the Exchange
Date
(as defined below). The amount of accrued principal of this Note on any date
(the “Accrued
Principal Amount”)
shall
be equal to the Original Principal Amount increased by 1.092% for each thirty
day period from and including the Issue Date through and including such date
(pro rated for partial periods), it being intended that the Accrued Principal
Amount shall be equal to the face amount of this Note on the six-month
anniversary of the Issue Date (and shall continue to accrue if not paid on
such
six-month anniversary).
(c) On
the
Maturity Date, the Company shall pay to the Holder the Accrued Principal
Amount
as of such date in cash or, at the option of the Company, exchange shares
of the
Company’s Series D Convertible Preferred Stock (“Preferred
Stock”)
for
this Note (the
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“Exchange”).
In
order for the Company to effect an Exchange, all of the Exchange Conditions
must
be satisfied on the Maturity Date (as defined below) and on each of the twenty
(20) Trading Days immediately preceding such date, and the Company must notify
the Holder in writing (an “Exchange
Notice”)
on or
before the Maturity Date that it wishes to do so. An Exchange Notice shall
be
irrevocable once it is delivered to the Holder. In the event that the Company
delivers an Exchange Notice to the Holder, the Company will, on the tenth
(10th)
Trading
Day following the Maturity Date (the “Exchange
Date”),
deliver to the Holder, in exchange for this Note, shares of Preferred Stock
with
a Stated Value equal to the Accrued Principal Amount as of the Exchange Date.
If
(i) the Company elects to pay the Accrued Principal Amount in cash, (ii)
the
Company does not deliver an Exchange Notice to the Holder on or before the
tenth
(10th)
Business Day prior to the Maturity Date, (iii) the Exchange Conditions are
not
satisfied as required by this paragraph 2(c), or (iv) the Conversion Price
on
the Maturity Date is lower than the Floor Price, the Company will pay such
amount in cash on the Maturity Date by wire transfer of immediately available
funds to the Holder. Amounts payable hereunder that are not paid when due
shall
accrue interest at the Default Interest Rate.
(d) The
Conversion Price applicable to Preferred Stock issued pursuant to the Exchange
will be equal to one hundred and five percent (105%) of the Market Price
on the
Maturity Date; provided,
however,
that in
no event shall the Conversion Price be lower than the Floor Price or greater
than the Maximum Price. In the event that the Conversion Price is greater
than
the Maximum Price on the Maturity Date (and as long as the Company has not
extended the Maturity Date as specified in the definition thereof), the Company
may extend the Maturity Date by up to an additional ninety (90) days by
delivering written notice of such extension to the Holder (such notice to
specify the number of days by which the Company wishes to extend the Maturity
Date) on or before the original Maturity Date; if the Company does not extend
the Maturity Date on or before the original Maturity Date, or if on the Maturity
Date as so extended the Conversion Price is greater than the Maximum Price,
the
Company must either (A) pay the Accrued Principal Amount to the Holder in
cash
on the Maturity Date or (B) deliver shares of Preferred Stock in exchange
for
this Note as required by paragraph 2(b) above with a Conversion Price equal
to
the Maximum Price.
3. PREPAYMENT.
In
the
event that during
any period of ten (10) consecutive Trading Days occurring after the Issue
Date,
the Market Price of the Common Stock is less than the Floor Price, the
Company may prepay this Note in whole or in part, at any time, by paying
to the
Holder an amount of cash equal to one hundred and one percent (101%) of the
face
amount of this Note being prepaid or, if greater, the Accrued Principal Amount
at the time of such prepayment being prepaid. Except as provided in this
Section
3, the Company may not prepay this Note without the prior written consent
of the
Holder, which consent may be withheld for any reason or for no
reason.
4. EVENTS
OF DEFAULT.
(a) Events
of Default.
Each of
the following events shall be deemed an “Event
of Default”:
(i) The
Company shall fail to pay when due any amount of principal or other amount
payable hereunder;
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(ii)
a
Liquidation Event occurs or is publicly announced;
(iii) the
Company breaches or provides notice of its intent to breach, in a material
respect, any material covenant or other material term or condition of this
Note
(including without limitation any payment obligation thereunder), the
Certificate of Designation, the Securities Purchase Agreement, Registration
Rights Agreement or any other Transaction Document, and such breach continues
for a period of five (5) Business Days following written notice thereof from
the
Holder;
(iv) any
representation or warranty made by the Company in this Note, the Certificate
of
Designation, the Securities Purchase Agreement, the Registration Rights
Agreement or any other Transaction Document was inaccurate or misleading
in any
material respect as of the date such representation or warranty was made;
and
(v)
a
default
occurs or is declared and not waived, or any amounts are accelerated, under
or
with respect to any instrument that evidences Debt of the Company or any
of its
Subsidiaries in a principal amount exceeding $100,000.
(b) If
any
Event of Default shall occur, the Holder may (i) by notice to the Company,
declare the entire Accrued Principal Amount of this Note, and all other amounts
payable hereunder, to be forthwith due and payable, whereupon all unpaid
principal under this Note and all such other amounts shall become and be
forthwith due and payable in cash, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Company, provided that if an event described in clause (ii) of Section
3(a)
hereof
shall occur, this Note shall automatically become immediately due and
payable.
(c) Upon
the
occurrence and during the continuation of an Event of Default, interest shall
accrue on the outstanding principal balance of this Note at the Default Interest
Rate until such amount is paid in full. Any interest that accrues at the
Default
Interest Rate shall be due and payable on the first day of each month.
(d) The
remedies of the Holder in this Note or in the other Transaction Documents,
or at
law or in equity, shall be cumulative and concurrent, and may be pursued
singly,
successively or together in the Holder’s discretion. The Company agrees to pay
all costs of collection with respect to amounts owing under this Note,
including, but not limited to, reasonable legal fees and expenses.
5. MISCELLANEOUS.
(a) Failure
to Exercise Rights not Waiver.
No
failure or delay on the part of the Holder in the exercise of any power,
right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude any other
or
further exercise thereof. All rights and remedies of the Holder hereunder
are
cumulative and not exclusive of any rights or remedies otherwise
available.
(b) Notices.
Any
notice, demand or request required or permitted to be given by the Company
or
the Holder pursuant to the terms of this Note shall be in writing and shall
be
deemed delivered (i) when delivered personally or by verifiable facsimile
transmission, unless such
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delivery
is made on a day that is not a Business Day, in which case such delivery
will be
deemed to be made on the next succeeding Business Day, (ii) on the next Business
Day after timely delivery to an overnight courier and (iii) on
the
Business Day actually received if deposited
in the U.S. mail (certified or registered mail, return receipt requested,
postage prepaid), addressed as follows:
If
to
the Company:
0000
X.
Xxxxxxxx Xxxxxx, Xxxxx 000
Delray
Beach, FL 33445
Attn: Xxxxx
X.
Xxxxxxxxx
Tel:
000-000-0000
Fax:
000-000-0000
with
a copy to:
Holland
& Knight LLP
000
Xxxxxxxx Xxxxxx, Xxxxx 0000
Miami,
Florida 33131
Mailing
Address: P.O. Box 015441, Florida, 33101
Attn: Xxxxxx
X.
Xxxxxxx, Esq.
Tel: 000-000-0000
Fax:
000-000-0000
Either
party may from time to time designate by notice delivered in accordance with
this Section
5(b),
specify
a different address for notices, demands and requests hereunder.
(c) Amendments.
No
amendment, modification or other change to, or waiver of any provision of,
this
Note may be made unless such amendment, modification or change is set forth
in
writing and is signed by the Company and the Holder.
(d) Transfer
of Note.
The
Holder may not sell, transfer or otherwise dispose of all or any part of
this
Note (including without limitation pursuant to a pledge) to any person or
entity.
(e) Lost
or Stolen Note.
Upon
receipt by the Company of evidence of the loss, theft, destruction or mutilation
of this Note, and (in the case of loss, theft or destruction) of indemnity
or
security reasonably satisfactory to the Company, and upon surrender and
cancellation of the Note, if mutilated, the Company shall execute and deliver
to
the Holder a new Note identical in all respects to this Note.
(f) Governing
Law.
This
Note shall be governed by and construed in accordance with the laws of the
State
of Delaware applicable
to contracts made and to be performed entirely within the State of Delaware.
(g) Successors
and Assigns.
The
terms and conditions of this Note shall inure to the benefit of and be binding
upon the respective successors (whether by merger or otherwise)
and
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permitted
assigns of the Company and the Holder. The Company may not assign its rights
or
obligations under this Note except as specifically required or permitted
pursuant to the terms hereof.
(h) Usury.
This
Note
is subject to the express condition that at no time shall the Company be
obligated or required to pay interest hereunder at a rate which could subject
the Holder to either civil or criminal liability as a result of being in
excess
of the maximum interest rate which the Company is permitted by applicable
law to
contract or agree to pay. If by the terms of this Note, the Company
is at
any time required or obligated to pay interest hereunder at a rate in excess
of
such maximum rate, the rate of interest under this Note shall be deemed to
be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of
such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of this Note.
[Signature
Page to Follow]
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IN
WITNESS WHEREOF, the Company has caused this Note to be signed in its name
by
its duly authorized officer on the date first above written.
APPLIED
DIGITAL SOLUTIONS, INC.
By:
/s/
Xxxxxxxx X. XxXxxxx
Name:
/s/
Xxxxxxxx X. XxXxxxx
Title:
VP, Business Development
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