REGISTRATION RIGHTS AGREEMENT
Exhibit
10.10
REGISTRATION
RIGHTS AGREEMENT (this “Agreement”),
dated
as of June 10, 2005, by and between APPLIED DIGITAL SOLUTIONS, INC., a Missouri
corporation (the “Company”),
and
each of the entities whose names appear on the signature pages hereof. Such
entities are each referred to herein as an “Investor”
and,
collectively, as the “Investors”.
The
Company has agreed, on the terms and subject to the conditions set forth
in the
Securities Purchase Agreement, dated as of June 9, 2005 (the “Securities
Purchase Agreement”),
to
issue and sell to the Investor (i)
shares (the “Preferred
Shares”)
of the
Company’s Series D Preferred Stock, par value $10.00 per share (“Preferred
Stock”),
(ii)
Warrants in the form attached to the Securities
Purchase Agreement
as
Exhibit
B
(the
“Warrants”)
and
Senior Unsecured Notes (the “Notes”)
that
are exchangeable into Preferred Shares.
The
shares of Common Stock into which the Preferred Shares are convertible are
referred to herein as the “Conversion
Shares”,
and
the shares of Common Stock into which the Warrants are exercisable are referred
to herein as the “Warrant
Shares”.
In
order
to induce the Investor to enter into the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended (the “Securities
Act”),
and
under applicable state securities laws. Capitalized terms used herein and
not
otherwise defined shall have the respective meanings set forth in the Securities
Purchase Agreement.
In
consideration of the Investor entering into the Securities Purchase Agreement,
and other good and valuable consideration, the receipt and sufficiency of
which
are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
For
purposes of this Agreement, the following terms shall have the meanings
specified:
(a) “Filing
Deadline”
means
each of the Initial Filing Deadline and the Subsequent Filing
Deadline;
(b) “Holder”
means
any person owning or having the right to acquire, including without limitation
through conversion of the Preferred Shares or exercise of the Warrants,
Registrable Securities, including initially the Investor and thereafter any
assignee permitted hereunder;
(c) “Initial Effective
Date”
means
the date on which the Registration Statement is declared effective by the
Securities and Exchange Commission (the “Commission”);
(d) “Initial Filing
Deadline”
means
the thirtieth (30th) calendar day following the Closing Date;
(e) “Initial Registration
Deadline”
means
the earlier of (i) the ninetieth (90th)
calendar day following the Closing Date or, if the Registration Statement
is
subject to a full review by the Commission, the one hundred and twentieth
(120th)
calendar day following the Closing Date and (ii) the fifth (5th)
Business Day after the Company learns that no review of the Registration
Statement will be made by the staff of the Commission or that the staff of
the
Commission has no further comments on the Registration Statement;
(f)
“Outstanding
Registrable Securities”
means,
at any time, all Registrable Securities that at such time are either issued
and
outstanding or issuable upon conversion of the Preferred Shares or exercise
of
the Warrants (without regard to any limitation on such conversion or exercise);
(g) “Registrable
Securities”
means
the Conversion Shares and the Warrant Shares and any other shares of Common
Stock issuable pursuant to the conversion of the Preferred Shares or exercise
of
the Warrants (without regard to any limitation on such conversion or exercise),
and any shares of capital stock issued or issuable from time to time (with
any
adjustments) in replacement of, in exchange for or otherwise in respect of
the
Conversion Shares or the Warrant Shares; provided,
however,
that
“Registrable Securities” shall not include any such shares that have been sold
to the public pursuant to the Registration Statement or Rule 144;
(h) “Registration
Deadline”
means
each of the Initial Registration Deadline and the Subsequent Registration
Deadline;
(i) “Registration
Period”
means
the period beginning on the Initial Registration Deadline (or such earlier
date
on which the Registration Statement may have been declared effective by the
Commission) and ending on the earlier to occur of (A) the date on which all
Registrable Securities have been sold under the Registration Statement or
Rule
144 and (B) the date on which any Registrable Securities (in the reasonable
opinion of counsel to the Company or any Holder) may be sold to the public
under
Rule 144(k) or any successor provision by a Person that is not an Affiliate
of
the Company at the time of such sale or during the period of ninety (90)
days
prior thereto;
(j) “Registration
Statement”
means
the Registration Statement(s) to be filed hereunder relating to resales of
the
Registrable Securities;
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(k) “Restricted
Period”
means
each of (i) the period beginning on the Initial Filing Deadline and ending
on
the date on which the Initial Registration Statement is declared effective
by
the Commission and (ii) the period beginning on Subsequent Filing Deadline
and
ending on the date on which the Subsequent Registration Statement is declared
effective by the Commission.
(l) “Subsequent
Effective Date”
means
the date on which the Registration Statement relating to the Subsequent
Preferred Shares is declared effective by the Securities and Exchange Commission
(the “Commission”);
(m) “Subsequent
Filing Deadline”
means
the thirtieth (30th) calendar day following the Exchange Date (as defined
in the
Notes); and
(n) “Subsequent
Registration Deadline”
means
the earlier of (i) the ninetieth (90th)
calendar day following the Exchange Date (as defined in the Notes) or, if
the
Registration Statement is subject to a full review by the Commission, the
one
hundred and twentieth (120th)
calendar day following the Exchange Date and (ii) the fifth (5th)
Business Day after the Company learns that no review of the Registration
Statement will be made by the staff of the Commission or that the staff of
the
Commission has no further comments on the Registration Statement;
2. REGISTRATION.
(a) Registration
Statement.
On or
before the Initial Filing Deadline, the Company shall use reasonable best
efforts to prepare and file with the Commission a Registration Statement
on Form
S-3 as a “shelf” registration statement under Rule 415 under the Securities Act
(“Rule
415”)
covering the resale of a number of shares of common stock equal to the number
of
shares required to be reserved pursuant to the Securities Purchase Agreement
as
of the Closing Date. On or before the Subsequent Filing Deadline, the Company
shall use reasonable best efforts to prepare and file with the Commission
a
Registration Statement on Form S-3 as a “shelf” registration statement under
Rule 415 covering the resale of 125% of the aggregate number of shares of
Common
Stock issuable on conversion of the Preferred Shares for which the Notes
are
exchangeable (without regard to any restriction on such conversion). Each
Registration Statement shall state, to the extent permitted by Rule 416 under
the Securities Act, that it also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon the conversion of the
Preferred Shares or exercise of the Warrants in order to prevent dilution
resulting from stock splits, stock dividends or similar events. In the event
that the Company is at any time not eligible to use Form S-3 to register
the
resale of Registrable Securities by the Holders, the Company shall file a
Registration Statement on such form as may then be available to the Company,
and
thereafter shall use its reasonable best efforts, as soon as reasonably
practicable following the date on which it becomes eligible to use Form S-3
(but
in no event later than the thirtieth (30th)
day
after such date), to convert such Registration Statement to a Form S-3, or
file
a new registration statement on such form, covering the greater of (i) the
number of shares of Common Stock covered by such Registration Statement and
remaining unsold thereunder and (ii) the number of Outstanding Registrable
Securities. The Company shall not permit (x) a registration statement pertaining
to any
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securities
other than Registrable Securities to be filed during a Restricted Period
(other
than a registration statement on Form S-8 with respect to stock option plans
and
agreements and stock plans currently in effect and disclosed in the Securities
Purchase Agreement or the schedules thereto) or (y) any securities other
than
Registrable Securities to be included in any registration statement or amendment
to any registration statement required to be filed hereunder.
(b) Effectiveness.
The
Company shall use its reasonable best efforts to cause each Registration
Statement to become effective as soon as practicable following the filing
thereof, but in no event later than the applicable Registration Deadline.
The
Company shall respond promptly to any and all comments made by the staff
of the
Commission on a Registration Statement, and shall promptly submit to the
Commission, within two (2) Business Days after the Company learns that no
review
of such Registration Statement will be made by the staff of the Commission
or
that the staff of the Commission has no further comments on such Registration
Statement, as the case may be, a request for acceleration of the effectiveness
of such Registration Statement to a time and date not later than two (2)
Business Days following the submission of such request. The Company shall
use
its reasonable best efforts to maintain the effectiveness of each Registration
Statement during the Registration Period.
(c) Registration
Default.
If (A)
the Registration Statement is not filed in the form required hereby on or
before
the applicable Filing Deadline or declared effective by the Commission on
or
before the applicable Registration Deadline, (B) after a Registration Statement
has been declared effective by the Commission and other than during a period
in
which an Allowed Delay (as hereinafter defined) is in effect, sales of
Registrable Securities cannot be made by a Holder under a Registration Statement
for any reason not within the exclusive control of such Holder, (C) trading
in
the Common Stock on the Principal Exchange is suspended or restricted, or
(D) an
amendment to a Registration Statement, or a new registration statement, required
to be filed pursuant to the terms of paragraph 4(k) below is not filed on
or
before the date required by such paragraph, (each of (A), (B), (C) and (D)
being
referred to herein as a “Registration
Default”),
the
Company shall make cash payments to each Holder equal to one percent (1.0%)
of
the Purchase Price for the Securities then held by such Holder for each thirty
(30) day period until such Registration Default is cured (such payment to
be
prorated for any period in which a Registration Default continues for less
than
thirty days). Each such payment shall be made in immediately available funds
within five (5) Business Days following the last day of the calendar month
in
which a Registration Default occurs or is continuing. Any such payment shall
be
in addition to any other remedies available to each Holder at law or in equity,
whether pursuant to the terms hereof, the Securities Purchase Agreement,
or
otherwise.
(d) Allowed
Delay.
The
Company may delay the disclosure of material non-public information, and
suspend
the availability of the Registration Statement, for a period not to exceed
(i)
five (5) consecutive Business Days at any one time (each such five Business
Day
period to be separated by at least ten (10) Business Days from the next such
period) or (ii) twenty (20) calendar days in any twelve (12) month period;
provided,
however,
that
the Company may delay such disclosure only in the event of a proposed merger,
reorganization or similar transaction involving the Company where its board
of
directors (A) has determined, upon the advice of counsel,
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that
such
information would be required to be disclosed in an offering registered under
the Securities Act and (B) reasonably deems it in the best interests of the
Company and its shareholders not to disclose such information publicly (an
“Allowed
Delay”).
The
Company shall promptly (i) notify each Holder in writing of the existence
of
information giving rise to an Allowed Delay (but in no event, without the
prior
written consent of such Holder, shall the Company disclose to such Holder
any
material non-public information), (ii) advise each Holder in writing to cease
all sales under the Registration Statement until the termination of the Allowed
Delay and (iii) notify each Holder in writing immediately upon the termination
or expiration of an Allowed Delay.
(e) Allocation
of Warrant Shares.
The
initial number of Registrable Shares included in any Registration Statement
and
each increase in the number thereof included therein shall be allocated
pro
rata
among
the Holders based on the aggregate number of Outstanding Registrable Securities
held by each Holder at the time the Registration Statement covering such
initial
number of Registrable Securities or increase thereof is declared effective
by
the Commission (without regard to any restriction on the ability of a Holder
to
exercise such Holder’s Warrants as of such date). In the event that a Holder
sells or otherwise transfers any of such Holder’s Registrable Securities, each
transferee shall be allocated the portion of the then remaining number of
Registrable Securities included in such Registration Statement allocable
to the
transferor.
Any
portion of the Registrable
Securities included in such Registration Statement and allocated
to a Holder or other Person which no longer holds any Registrable Securities
shall be reallocated to the remaining Holders pro
rata
based on
the number of Outstanding Registrable
Securities.
3. PIGGYBACK
REGISTRATION.
If
at any
time prior to the expiration of the Registration Period, (i) the Company
proposes to register shares of Common Stock under the Securities Act in
connection with the public offering of such shares for cash (a “Proposed
Registration”)
other
than a registration statement on Form S-8 or Form S-4 or any successor or
other
forms promulgated for similar purposes and (ii) a Registration Statement
covering the sale of all of the Registrable Securities is not then effective
and
available for sales thereof by the Holders, the Company shall, at such time,
promptly give each Holder written notice of such Proposed Registration. Each
Holder shall have ten (10) Business Days from its receipt of such notice
to
deliver to the Company a written request specifying the amount of Registrable
Securities that such Holder intends to sell and such Holder’s intended method of
distribution. Upon receipt of such request, the Company shall use its
commercially reasonable efforts to cause all Registrable Securities which
the
Company has been requested to register to be registered under the Securities
Act
to the extent necessary to permit their sale or other disposition in accordance
with the intended methods of distribution specified in the request of such
Holder; provided,
however,
that
the Company shall have the right to postpone or withdraw any registration
effected pursuant to this Section 3 without obligation to the Holder. If,
in
connection with any underwritten public offering for the account of the Company
or for stockholders of the Company that have contractual rights to require
the
Company to register shares of Common Stock, the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may
be
included in a registration statement because, in the judgment of such
underwriter(s), marketing or other factors dictate such limitation is necessary
to facilitate such
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offering,
then the Company shall be obligated to include in the registration statement
only such limited portion of the Registrable Securities with respect to which
each Holder has requested inclusion hereunder as such underwriter(s) shall
permit. Any exclusion of Registrable Securities shall be made pro
rata
among
the Holders seeking to include Registrable Securities in a registration
statement, in proportion to the number of Registrable Securities sought to
be
included by such Holders; provided, however, that the Company shall not exclude
any Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in the registration statement or are not entitled to pro
rata
inclusion with the Registrable Securities; and provided, further, that, after
giving effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro
rata
with
holders of other securities having the right to include such securities in
the
registration statement.
4. OBLIGATIONS
OF THE COMPANY.
In
addition to performing its obligations hereunder, including without limitation
those pursuant to paragraphs 2(a), (b) and (c) above, the Company
shall:
(a) prepare
and file with the Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to comply with the provisions of the Securities Act or
to
maintain the effectiveness of the Registration Statement during the Registration
Period (subject to any Allowed Delays), or as may be reasonably requested
by a
Holder in order to incorporate information concerning such Holder or such
Holder’s intended method of distribution;
(b)
use
commercially reasonable efforts to secure the listing of all Registrable
Securities on the Principal Market, and provide each Holder with reasonable
evidence thereof;
(c) upon
the
effectiveness of the Registration Statement, furnish to each Holder such
number
of copies of the prospectus included in the Registration Statement, including
a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such Holder may reasonably request in order
to
facilitate the disposition of such Holder’s Registrable Securities;
(d) use
all
commercially reasonable efforts to register or qualify the Registrable
Securities under the securities or “blue sky” laws of such jurisdictions within
the United States as shall be reasonably requested in writing from time to
time
by a Holder, and do any and all other acts or things which may be necessary
or
advisable to enable such Holder to consummate the public sale or other
disposition of the Registrable Securities in such jurisdictions; provided
that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service
of
process in any such jurisdiction;
(e) in
the
event of an underwritten public offering of the Registrable Securities, enter
into (together with all Holders proposing to distribute Registrable Securities
through such underwriting) and perform its obligations under an underwriting
agreement, in usual and customary
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form
reasonably acceptable to the Company, with the managing underwriter of such
offering;
(f) notify
each Holder immediately after becoming aware of the occurrence of any event
(but
shall not, without the prior written consent of such Holder, disclose to
such
Holder any facts or circumstances constituting material non-public information)
as a result of which the prospectus included in the Registration Statement,
as
then in effect, contains an untrue statement of material fact or omits to
state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and (except during an Allowed Delay) as promptly as practicable prepare,
and
file with the Commission and furnish to each Holder a reasonable number of
copies of a supplement or an amendment to such prospectus as may be necessary
so
that such prospectus does not contain an untrue statement of material fact
or
omit to state a material fact required to be stated therein or necessary
to make
the statements therein not misleading in light of the circumstances then
existing;
(g) use
all
commercially reasonable efforts to prevent the issuance of any stop order
or
other order suspending the effectiveness of the Registration Statement and,
if
such an order is issued, to obtain the withdrawal thereof at the earliest
possible time and to notify each Holder of the issuance of such order and
the
resolution thereof;
(h) furnish
to each Holder, within two (2) Business Days following the date on which
the
Registration Statement, or any successor registration statement, becomes
effective, (x) a letter, dated such date, from the Company addressed to such
Holder, confirming such effectiveness and, to the knowledge of the Company,
the
absence of any stop order, and (y) in the case of an underwriting, (A) a
copy of
an opinion, dated such date, of such outside counsel, in such form and substance
as is required to be given to the underwriters, and (B) a copy of a letter,
dated such date, from the Company’s independent certified public accountants, in
such form and substance as is required to be given by the Company’s independent
certified public accountants to such underwriters;
(i) during
the Registration Period or at any other time when a Registration Statement
is
effective and available to the Holders for the resale of Registrable Securities,
provide to each Holder and its representatives, upon reasonable prior notice
and
execution of a reasonable non-disclosure agreement by such Holder, the
opportunity to conduct a reasonable inquiry of the Company’s financial and other
records during normal business hours and make available its officers for
questions regarding information which such Holder may reasonably request
in
order to fulfill any due diligence obligation on its part;
(j) permit
counsel for each Holder to review the Registration Statement and all amendments
and supplements thereto, and any comments made by the staff of the Commission
concerning such Holder and/or the transactions contemplated by the Transaction
Documents and the Company’s responses thereto, within a reasonable period of
time (but in no event less than three (3) Business Days after such Holder
has
received such documents) prior to the filing thereof with the Commission
(or, in
the case of comments made by the staff of the Commission, within a reasonable
period of time following the receipt thereof by the Company); and
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(k) in
the
event that, at any time, the number of shares available under the Registration
Statement is insufficient to cover one hundred and ten percent (110%) of
the
number of Outstanding Registrable Securities, the Company shall promptly
amend
the Registration Statement or file a new registration statement under Rule
415,
in any event as soon as practicable, but not later than the thirtieth (30th)
day
following notice from a Holder of the occurrence of such event, so that the
Registration Statement or such new registration statement, or both, covers
no
less than (i) one hundred and twenty five percent (125%) of the Outstanding
Registrable Securities. The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. Any Registration Statement filed
pursuant to this paragraph 4(k) shall state that, to the extent permitted
by
Rule 416 under the Securities Act, such Registration Statement also covers
such
indeterminate number of additional shares of Common Stock as may become issuable
upon exercise of the Warrants in order to prevent dilution resulting from
stock
splits, stock dividends or similar events. Unless and until such amendment
or
new Registration Statement becomes effective, each Holder shall have the
rights
described in Section 2(c) above.
5. OBLIGATIONS
OF EACH HOLDER.
In
connection with the registration of Registrable Securities pursuant to a
Registration Statement, each Holder shall:
(a)
timely
furnish to the Company in writing such information regarding itself and the
intended method of disposition of such Registrable Securities as the Company
shall reasonably request in order to effect the registration thereof;
(b)
upon
receipt of any notice from the Company of the happening of any event of the
kind
described in paragraphs 4(f) or 4(g), immediately discontinue any sale or
other
disposition of such Registrable Securities pursuant to such Registration
Statement until the filing of an amendment or supplement as described in
paragraph 4(f) or withdrawal of the stop order referred to in paragraph 4(g),
and, if such Holder has agreed in writing to receive material, non-public
information, to use commercially reasonable efforts to maintain the
confidentiality of such notice and its contents;
(c)
in the
event of an underwritten offering of such Registrable Securities in which
such
Holder participates pursuant to Section 3 hereof, enter into a customary
and
reasonable underwriting agreement and execute such other documents (including
without limitation “lock-up” and indemnity agreements) as the Company and the
managing underwriter for such offering may reasonably request;
(d)
to the
extent required by applicable law, deliver a preliminary and definitive
prospectus to the purchaser of Registrable Securities sold under the
Registration Statement;
(e)
notify
the Company when it has sold all of the Registrable Securities held by it;
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(f)
notify the Company promptly in the event that any information supplied by
such
Holder in writing for inclusion in such Registration Statement or related
prospectus is untrue or omits to state a material fact required to be stated
therein or necessary to make such information not misleading in light of
the
circumstances then existing; immediately discontinue any sale or other
disposition of such Registrable Securities pursuant to such Registration
Statement until the filing of an amendment or supplement to such prospectus
as
may be necessary so that such prospectus does not contain an untrue statement
of
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein not misleading in light of the
circumstances then existing; and provide the Company with updates on such
information as may be appropriate to make such amendment or supplement effective
for such purpose; and
(g)
otherwise use commercially reasonable efforts to assist the Company and the
underwriters, if any, in the preparation of documentation reasonably necessary
or desirable to effectuate the resale of Registrable Securities pursuant
to any
Registration Statement filed in accordance herewith.
6. INDEMNIFICATION.
In
the
event that any Registrable Securities are included in a Registration Statement
under this Agreement:
(a) To
the
extent permitted by law, the Company shall indemnify and hold harmless each
Holder, the officers, directors, employees, agents and representatives of
such
Holder, and each person, if any, who controls such Holder within the meaning
of
the Securities Act or the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”),
against any losses, claims, damages, liabilities or reasonable out-of-pocket
expenses (whether joint or several) (collectively, including legal or other
expenses reasonably incurred in connection with investigating or defending
same,
“Losses”),
insofar as any such Losses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in such
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or (ii) the omission
or alleged omission to state therein 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. Subject to the
provisions of paragraph 6(c) below, the Company will reimburse such Holder,
and
each such officer, director, employee, agent, representative or controlling
person, for any legal or other out-of-pocket expenses as reasonably incurred
by
any such entity or person in connection with investigating or defending any
Loss; provided, however, that the foregoing indemnity shall not apply to
amounts
paid in settlement of any Loss if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld),
nor
shall the Company be obligated to indemnify any person for any Loss to the
extent that such Loss is (i) based upon and is in conformity with written
information furnished by such person expressly for use in such Registration
Statement or (ii) based on a failure of such person to deliver or cause to
be
delivered the final prospectus contained in the Registration Statement and
made
available by the Company, if such delivery is required by applicable
law.
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(b) To
the
extent permitted by law, each Holder who is named in such Registration Statement
as a selling stockholder, acting severally and not jointly, shall indemnify
and
hold harmless the Company, the officers, directors, employees, agents and
representatives of the Company, and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, against
any Losses arising out of (i) any untrue statement or alleged untrue statement
of a material fact contained in such Registration Statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or (ii) the omission or alleged omission to state
therein 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, to the extent (and only to the extent) that any such statement
or omission is based upon and in conformity with written information furnished
by such Holder expressly for use in such Registration Statement. Subject
to the
provisions of paragraph 6(c) below, such Holder will reimburse any legal
or
other expenses as reasonably incurred by the Company and any such officer,
director, employee, agent, representative, or controlling person, in connection
with investigating or defending any such Loss; provided,
however,
that
the foregoing indemnity shall not apply to amounts paid in settlement of
any
such Loss if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld); and provided,
further,
that,
in no event shall any indemnity under this subsection 6(b) exceed the net
proceeds resulting from the sale of the Registrable Securities sold by such
Holder under such Registration Statement.
(c) Promptly
after receipt by an indemnified party under this Section 6 of notice of the
commencement of any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have
the
right to participate in and to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
shall
have the right to retain its own counsel, with the reasonably incurred fees
and
expenses of one such counsel for all indemnified parties to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate under applicable
standards of professional conduct due to actual or potential conflicting
interests between such indemnified party and any other party represented
by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party
under
this Section 6 with respect to such action, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
6 or
with respect to any other action unless the indemnifying party is materially
prejudiced as a result of not receiving such notice.
(d) In
the
event that the indemnity provided in paragraph (a) or (b) of this Section
6 is
unavailable or insufficient to hold harmless an indemnified party for any
reason, the Company and each Holder agree, severally and not jointly, to
contribute to the aggregate Losses to which the Company or such Holder may
be
subject in such proportion as is appropriate to reflect the
relative
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fault
of
the Company and such Holder in connection with the statements or omissions
which
resulted in such Losses; provided, however, that in no case shall such Holder
be
responsible for any amount in excess of the net proceeds resulting from the
sale
of the Registrable Securities sold by it under the Registration Statement.
Relative fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the Company or by
such
Holder. The Company and each Holder agree that it would not be just and
equitable if contribution were determined by pro
rata
allocation or any other method of allocation which does not take account
of the
equitable considerations referred to above. Notwithstanding the provisions
of
this paragraph (d), no person guilty of fraudulent misrepresentation (within
the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person who controls
a
Holder within the meaning of either the Securities Act or the Exchange Act
and
each officer, director, employee, agent or representative of such Holder
shall
have the same rights to contribution as such Holder, and each person who
controls the Company within the meaning of either the Securities Act or the
Exchange Act and each officer, director, employee, agent or representative
of
the Company shall have the same rights to contribution as the Company, subject
in each case to the applicable terms and conditions of this paragraph
(d).
(e) Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in an underwriting agreement entered into in connection
with an underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
(f) Unless
otherwise superceded by an underwriting agreement entered into in connection
with an underwritten public offering, the obligations of the Company and
each
Holder under this Section 6 shall survive the exercise of the Warrants
in
full, the completion of any offering or sale of Registrable Securities pursuant
to a Registration Statement under this Agreement, or otherwise.
7. REPORTS.
For
such
time as any Registrable Securities are outstanding, with a view to making
available to each Holder the benefits of Rule 144 under the Securities Act
(“Rule
144”)
and
any other similar rule or regulation of the Commission that may at any time
permit such Holder to sell securities of the Company to the public without
registration, the Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
(b) file
with
the Commission in a timely manner all reports and other documents required
of
the Company under the Securities Act and the Exchange Act;
(c) furnish
to such Holder, so long as such Holder owns any Registrable Securities, promptly
upon written request (i) a written statement by the Company, if true, that
it
has
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complied
with the reporting requirements to enable such Holder to rely on Rule 144(c),
and that it has also complied with the reporting requirements of the Securities
Act and the Exchange Act, (ii) to the extent not publicly available through
the
Commission’s XXXXX database, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested
by such
Holder in connection with such Holder’s compliance with any rule or regulation
of the Commission which permits the selling of any such securities without
registration; and
(d)
not
at
any time disclose material non-public information to such Holder without
first
receiving such Holder’s written consent to such disclosure.
8. MISCELLANEOUS.
(a) Expenses
of Registration.
Except
as otherwise provided in the Securities Purchase Agreement, all reasonable
expenses, other than underwriting discounts and commissions and fees and
expenses of counsel and other advisors to each Holder, incurred in connection
with the registrations, filings or qualifications described herein, including
(without limitation) all registration, filing and qualification fees, printers’
and accounting fees, the fees and disbursements of counsel for the Company,
and
the fees and disbursements incurred in connection with the opinion and letter
described in paragraph 4(h) hereof, shall be borne by the Company.
(b) Amendment;
Waiver.
Except
as
expressly provided herein, neither this Agreement nor any term hereof may
be
amended or waived except pursuant to a written instrument executed by the
Company and the Holders of at least two-thirds (2/3) of the number of
Outstanding Registrable
Securities.
Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each Holder, each future Holder and the Company, provided,
however,
that
any such waiver or consent shall be effective only in the specific instance
and
for the specific purpose for which given.
(c) Notices.
Any
notice, demand or request required or permitted to be given by the Company
or an
Investor pursuant to the terms of this Agreement shall be in writing and
shall
be deemed delivered (i) when delivered personally or by verifiable facsimile
transmission, unless such 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
Xxxxxx
Xxxxx, XX 00000
Attn:
Xxxxx
X.
Xxxxxxxxx
Tel:
000-000-0000
Fax:
000-000-0000
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with
a copy to:
Holland
& Knight LLP
000
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx,
Xxxxxxx 00000
Mailing
Address: X.X. Xxx 000000, Xxxxxxx, 00000
Attn:
Xxxxxx
X.
Xxxxxxx, Esq.
Tel:
000-000-0000
Fax: 000-000-0000
and
if to
a Holder, to such address as shall be designated by such Holder in writing
to
the Company.
(d) Assignment.
Upon
the transfer of any Preferred Shares, Warrants or Registrable Securities
by a
Holder, the rights and obligations of such Holder hereunder with respect
to such
securities so transferred shall be assigned and delegated automatically to
the
transferee thereof, and such transferee shall thereupon be deemed to be a
“Holder” for purposes of this Agreement, as long as: (i) the Company is, within
a reasonable period of time following such transfer, furnished with written
notice of the name and address of such transferee, (ii) the transferee agrees
in
writing with the Company to be bound by all of the provisions hereof, and
(iii)
such transfer is made in accordance with the applicable requirements of the
Securities Purchase Agreement; provided,
however,
that
the registration rights granted in this Agreement shall not be transferred
to
any person or entity that receives any Warrant or Registrable Securities
in a
public transaction pursuant to an effective registration statement under
the
Securities Act or pursuant to Rule 144.
(e) Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed
an
original, and all of which together shall be deemed one and the same instrument.
This Agreement, once executed by a party, may be delivered to any other party
hereto by facsimile transmission.
(f) Governing
Law.
This
Agreement 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) Holder
of Record.
A
person is deemed to be a Holder whenever such person owns or is deemed to
own of
record any Warrant or Registrable Securities.
(h)
Entire
Agreement.
This
Agreement, the Securities Purchase Agreement, the Certificate of Designation,
the Warrants, and the other Transaction Documents constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and
thereof. There are no restrictions, promises, warranties or undertakings,
other
than those set forth or referred to herein and therein. This Agreement, the
Securities Purchase Agreement, the Certificate of Designation, the
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Warrants,
and the other Transaction Documents supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
(i)
Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(j) Third
Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may
any
provision hereof be enforced by, any other person.
[Signature
Pages to Follow]
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IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first-above written.
APPLIED
DIGITAL SOLUTIONS, INC.
By:
/s/
Xxxx
X. XxXxxxx
Name:
Xxxx X. XxXxxxx
Title:
SVP, CFO
SATELLITE
STRATEGIC FINANCE ASSOCIATES, LLC
By:
Satellite
Asset Management, L.P., its Manager
By: /s/
Xxxxx
Xxxxxxx
Xxxxx
Xxxxxxx
General
Counsel
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IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first-above written.
APPLIED
DIGITAL SOLUTIONS, INC.
By:
/s/ Xxxx
X. XxXxxxx
Name:
Xxxx X. XxXxxxx
Title:
SVP, CFO
SATELLITE
STRATEGIC FINANCE PARTNERS, LTD.
By:
Satellite
Asset Management, L.P., its Manager
By:
/s/
Xxxxx Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
General Counsel
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