Exhibit 10.2
EXHIBIT A TO THE
SECURITIES PURCHASE AGREEMENT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR
SALE, SOLD OR TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR
TRANSFER. SUBJECT TO COMPLIANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE PLEDGED OR HYPOTHECATED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS
WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT.
SERIES C WARRANT
TO
PURCHASE COMMON STOCK
OF
APPLIED DIGITAL SOLUTIONS, INC.
ISSUE DATE: OCTOBER 21, 2004 WARRANT NO. C-1
THIS CERTIFIES that SATELLITE STRATEGIC FINANCE ASSOCIATES, LLC, a
Delaware limited liability company or any subsequent holder hereof (the
"Holder"), has the right to purchase from APPLIED DIGITAL SOLUTIONS, INC., a
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Missouri corporation (the "Company"), up to one million five hundred
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thousand (1,500,000) fully paid and nonassessable shares of the Company's
common stock, par value $0.01 per share (the "Common Stock"), subject to
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adjustment as provided herein, at a price per share equal to the Exercise
Price (as defined below), at any time beginning on the date on which this
Warrant is issued (the "Issue Date") and ending at 5:00 p.m., eastern time,
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on the one hundred and fiftieth (150th) day following the Effective Date
(the "Expiration Date"). This Warrant is issued pursuant to a Securities
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Purchase Agreement, dated as of October 21, 2004 (the "Securities Purchase
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Agreement"). Capitalized terms used herein and not otherwise defined shall
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have the respective meanings set forth in the Securities Purchase Agreement.
1. Exercise.
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(a) Right to Exercise; Exercise Price. The Holder shall have the
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right to exercise this Warrant at any time and from time to time during the
period beginning on the Issue Date and ending on the Expiration Date as to
all or any part of the shares of Common Stock covered hereby (the "Warrant
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Shares"). The "Exercise Price" for each Warrant Share purchased by the
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Holder upon the exercise of this Warrant shall be equal to $4.33, subject to
adjustment for the events specified in Section 4 below.
(b) Exercise Notice. In order to exercise this Warrant, the Holder
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shall (i) send by facsimile transmission, at any time prior to 5:00 p.m.,
eastern time, on the Business Day on which the Holder wishes to effect such
exercise (the "Exercise Date"), to the Company an executed copy of the
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notice of exercise in the form attached hereto as Exhibit A (the "Exercise
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Notice"), and (ii) deliver the original Warrant and the Exercise Price to
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the Company. The Exercise Notice shall also state the name or names (with
address) in which the shares of Common Stock that are issuable on such
exercise shall be issued. If shares are to be issued in the name of a person
other than the Holder, the Holder will pay all transfer taxes payable with
respect thereto.
(c) Holder of Record. The Holder shall, for all purposes, be deemed
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to have become the holder of record of the Warrant Shares specified in an
Exercise Notice on the Exercise Date specified therein, irrespective of the
date of delivery of such Warrant Shares. Except as specifically provided
herein, nothing in this Warrant shall be construed as conferring upon the
Holder hereof any rights as a shareholder of the Company, including, without
limitation, the right to vote, the right to receive dividends or other
distributions made to shareholders of the Company, and the right to exercise
preemptive rights, prior to the Exercise Date.
(d) Cancellation of Warrant. This Warrant shall be canceled upon
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its exercise and, if this Warrant is exercised in part, the Company shall,
at the time that it delivers Warrant Shares to the Holder pursuant to such
exercise as provided herein, issue a new Warrant, and deliver to the Holder
a certificate representing such new Warrant, with terms identical in all
respects to this Warrant (except that such new Warrant shall be exercisable
into the number of shares of Common Stock with respect to which this Warrant
shall remain unexercised); provided, however, that the Holder shall be
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entitled to exercise all or any portion of such new Warrant at any time
following the time at which this Warrant is exercised, regardless of whether
the Company has actually issued such new Warrant or delivered to the Holder
a certificate therefor.
2. Delivery of Warrant Shares Upon Exercise. Upon receipt of an
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Exercise Notice pursuant to paragraph 1 above, the Company shall, no later
than the close of business on the later to occur of (i) the third (3rd)
Business Day following the Exercise Date set forth in such Exercise Notice
and (ii) the date on which the Company has received payment of the Exercise
Price (the "Delivery Date"), issue and deliver or caused to be delivered to
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the Holder the number of Warrant Shares as shall be determined as provided
herein. The Company shall effect delivery of
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Warrant Shares to the Holder by, as long as the Transfer Agent participates
in the Depository Trust Company ("DTC") Fast Automated Securities Transfer
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program ("FAST"), crediting the account of the Holder or its nominee at DTC
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(as specified in the applicable Exercise Notice) with the number of Warrant
Shares required to be delivered, no later than the close of business on such
Delivery Date. In the event that the Transfer Agent is not a participant in
FAST, or if the Warrant Shares are not otherwise eligible for delivery
through FAST, or if the Holder so specifies in an Exercise Notice or
otherwise in writing on or before the Exercise Date, the Company shall
effect delivery of Warrant Shares by delivering to the Holder or its nominee
physical certificates representing such Warrant Shares, no later than the
close of business on such Delivery Date.
3. Failure to Deliver Warrant Shares.
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(a) In the event that the Company fails for any reason (other than
as a result of the Holder's failure to pay the aggregate Exercise Price for
the Warrant Shares being purchased or to deliver the original Warrant to the
Company) to deliver to the Holder the number of Warrant Shares specified in
a duly tendered Exercise Notice on or before the Delivery Date therefor (an
"Exercise Default"), and such default continues for five (5) Business Days
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following delivery of a written notice of such default by the Holder to the
Company, the Company shall pay to the Holder payments ("Exercise Default
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Payments") in the amount of (i) (N/365) multiplied by (ii) the aggregate
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Exercise Price of the Warrant Shares which are the subject of such Exercise
Default multiplied by (iii) the lower of fifteen percent (15%) and the
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maximum rate permitted by applicable law (the "Default Interest Rate"),
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where "N" equals the number of days elapsed between the original Delivery
Date of such Warrant Shares and the date on which all of such Warrant Shares
are issued and delivered to the Holder. Cash amounts payable hereunder shall
be paid on or before the fifth (5th) Business Day of the calendar month
following the calendar month in which such amount has accrued.
(b) The Holder's rights and remedies hereunder are cumulative, and
no right or remedy is exclusive of any other. The Holder shall have the
right to pursue all other remedies available to it at law or in equity
(including, without limitation, a decree of specific performance and/or
injunctive relief). Nothing herein shall limit the Holder's right to pursue
actual damages for the Company's failure to issue and deliver Warrant Shares
on the applicable Delivery Date (including, without limitation, damages
relating to any purchase of Common Stock by the Holder to make delivery on a
sale effected in anticipation of receiving Warrant Shares upon exercise,
such damages to be in an amount equal to (A) the aggregate amount paid by
the Holder for the Common Stock so purchased minus (B) the aggregate amount
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of net proceeds, if any, received by the Holder from the sale of the Warrant
Shares issued by the Company pursuant to such exercise).
4. Adjustments to Exercise Price.
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(a) Adjustment upon Subdivision or Combination of Common Stock. If
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the Company, at any time after the Issue Date, subdivides (by any stock
split, stock dividend, recapitalization, reorganization, reclassification or
otherwise) its shares of Common Stock into a greater number of shares, then
after the date of record for effecting such subdivision, the
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Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company, at any time after the Issue Date,
combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) its shares of Common Stock into a smaller
number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such
combination will be proportionally increased.
(b) Distributions. If the Company shall declare or make any
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distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend or otherwise (including
without limitation any dividend or distribution to the Company's
stockholders in cash or shares (or rights to acquire shares) of capital
stock of a subsidiary) (a "Distribution"), the Company shall deliver written
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notice of such Distribution (a "Distribution Notice") to the Holder at least
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ten (10) Business Days prior to the earlier to occur of (i) the record date
for determining stockholders entitled to such Distribution (the "Record
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Date") and (ii) the date on which such Distribution is made (the
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"Distribution Date"). The Holder shall be entitled, at its option (to be
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exercised by written notice delivered to the Company on or before the tenth
(10th) Business Day following the date on which a Distribution Notice is
delivered to the Holder), either (A) upon any exercise of this Warrant on or
after the Record Date, to be entitled to receive on the Distribution Date
(for any exercise effected on or prior to the Distribution Date) or the
applicable Delivery Date (for any exercise effected after the Distribution
Date), the amount of such assets which would have been payable to the holder
with respect to the shares of Common Stock issuable upon such exercise had
the Holder been the holder of such shares of Common Stock on the Record Date
or (B) upon any exercise of this Warrant on or after the Record Date, to
reduce the Exercise Price applicable to such exercise by reducing the
Exercise Price in effect on the Business Day immediately preceding the
Record Date by an amount equal to the fair market value of the assets to be
distributed divided by the number of shares of Common Stock as to which such
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Distribution is to be made, such fair market value to be reasonably
determined in good faith by the independent members of the Board of
Directors of the Company.
(c) Major Transactions. In the event of a merger, consolidation,
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business combination, tender offer, exchange of shares, recapitalization,
reorganization, redemption or other similar event, as a result of which
shares of Common Stock of the Company shall be changed into the same or a
different number of shares of the same or another class or classes of stock
or securities or other assets of the Company or another entity or the
Company shall sell all or substantially all of its assets (each of the
foregoing being a "Major Transaction"), the Company will give the Holder at
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least ten (10) Business Days written notice prior to the closing of such
Major Transaction; provided, however, that the Company shall publicly
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disclose the terms of any such Major Transaction on or before the date on
which it delivers notice of a Major Transaction to the Holder. Upon the
occurrence of a Major Transaction, (i) the Holder shall be permitted to
exercise this Warrant in whole or in part at any time prior to the record
date for the receipt of such consideration and shall be entitled to receive,
for each share of Common Stock issued to Holder for such exercise, the same
per share consideration paid to the other holders of Common Stock in
connection with such Major Transaction, and (ii) if and to the extent that
the Holder retains any portion of this Warrant following such record date,
the Company will cause the surviving or, in the event of a sale of assets,
purchasing entity, as a condition precedent to such Major Transaction, to
assume the obligations of the Company under this Warrant, with such
adjustments to the Exercise Price and the securities covered hereby as are
deemed appropriate by
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the Company's Board of Directors in order to preserve the economic benefits
of this Warrant to the Holder.
(d) Adjustments; Additional Shares, Securities or Assets. In the
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event that at any time, as a result of an adjustment made pursuant to this
paragraph 4, the Holder of this Warrant shall, upon exercise of this
Warrant, become entitled to receive securities or assets (other than Common
Stock) then, wherever appropriate, all references herein to shares of Common
Stock shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares and/or other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions
of this paragraph 4. Any adjustment made herein that results in a decrease
in the Exercise Price shall also effect a proportional increase in the
number of shares of Common Stock into which this Warrant is exercisable.
5. Fractional Interests.
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No fractional shares or scrip representing fractional
shares shall be issuable upon the exercise of this Warrant. If, on exercise
of this Warrant, the Holder hereof would be entitled to a fractional share
of Common Stock or a right to acquire a fractional share of Common Stock,
the Company shall, in lieu of issuing any such fractional share, pay to the
Holder an amount in cash equal to the product resulting from multiplying
such fraction by the Market Price (as defined in the Series B Warrants) as
of the Exercise Date.
6. Transfer of this Warrant.
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The Holder may sell, transfer, assign or otherwise dispose
of this Warrant, in whole or in part, as long as such sale or other
disposition is made pursuant to an effective registration statement or an
exemption from the registration requirements of the Securities Act, and
applicable state securities laws, and is otherwise made in accordance with
the applicable provisions of the Securities Purchase Agreement. Upon such
transfer or other disposition, the Holder shall deliver this Warrant to the
Company together with a written notice to the Company, substantially in the
form of the Transfer Notice attached hereto as Exhibit B (the "Transfer
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Notice"), indicating the person or persons to whom this Warrant shall be
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transferred and, if less than all of this Warrant is transferred, the number
of Warrant Shares to be covered by the part of this Warrant to be
transferred to each such person. Within ten (10) Business Days of receiving
a Transfer Notice, an executed Investment Certificate and the original of
this Warrant, the Company shall deliver to the each transferee designated by
the Holder a Warrant or Warrants of like tenor and terms for the appropriate
number of Warrant Shares and, if less than all this Warrant is transferred,
shall deliver to the Holder a Warrant for the remaining number of Warrant
Shares.
7. Benefits of this Warrant.
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This Warrant shall be for the sole and exclusive benefit
of the Holder of this Warrant and nothing in this Warrant shall be construed
to confer upon any person other than the Holder of this Warrant any legal or
equitable right, remedy or claim hereunder.
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8. Loss, theft, destruction or mutilation of Warrant.
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Upon receipt by the Company of evidence of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) of indemnity reasonably satisfactory to the Company,
and upon surrender of this Warrant, if mutilated, the Company shall execute
and deliver a new Warrant of like tenor and date in replacement for the
lost, stolen, destroyed or mutilated Warrant.
9. Notice or Demands.
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Any notice, demand or request required or permitted to be
given by the Company or the Holder pursuant to the terms of this Warrant
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:
Applied Digital Solutions, Inc.
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx
Tel: 000-000-0000
Fax: 000-000-0000
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 the Holder, to such address as shall be designated by the Holder
in writing to the Company.
10. Taxes.
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(a) The issue of stock certificates on exercises of this
Warrant shall be made
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without charge to the exercising Holder for any tax in respect of the issue
thereof. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery
of stock in any name other than that of the Holder of any Warrant exercised,
and the Company shall not be required to issue or deliver any such stock
certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the reasonable satisfaction of the Company that such tax has
been paid.
(b) Notwithstanding any other provision of this Warrant or
any other Transaction Document, for income tax purposes, any assignee or
transferee shall agree that the Company and the Transfer Agent shall be
permitted to withhold from any amounts payable to such assignee or
transferee any taxes required by law to be withheld from such amounts.
Unless exempt from the obligation to do so, each assignee or transferee
shall, upon request, execute and deliver to the Company or the Transfer
Agent, as applicable, a properly completed Form W-8 or W-9, indicating that
such assignee or transferee is not subject to back-up withholding for United
States Federal income tax purposes.
11. Applicable Law.
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This Warrant is issued under and shall for all purposes 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.
12. Amendments.
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No amendment, modification or other change to, or waiver
of any provision of, this Warrant may be made unless such amendment,
modification or change is (A) set forth in writing and is signed by the
Company and the Holder and (B) agreed to in writing by the holders of at
least sixty-six percent (66%) of the number of shares into which the
Warrants are exercisable, it being understood that upon the satisfaction of
the conditions described in (A) and (B) above, each Warrant (including any
Warrant held by a Holder who did not execute the agreement specified in (B)
above) shall be deemed to incorporate any amendment, modification, change or
waiver effected thereby as of the effective date thereof.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the Company has duly executed and delivered
this Warrant as of the Issue Date.
APPLIED DIGITAL SOLUTIONS, INC.
By: /s/ Xxxxx Xxxxxxxxx
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Name: Xxxxx Xxxxxxxxx
Title: CEO
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EXHIBIT A to WARRANT
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EXERCISE NOTICE
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The undersigned Holder hereby irrevocably exercises the right to
purchase ___________ of the shares of Common Stock ("Warrant Shares") of
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APPLIED DIGITAL SOLUTIONS, INC. evidenced by the attached Warrant (the
"Warrant"). Capitalized terms used herein and not otherwise defined shall
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have the respective meanings set forth in the Warrant.
Number of Warrant Shares:
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Exercise Price: $
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Date:
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Name of Registered Holder
By:
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Name:
Title:
By tendering this Exercise Notice, the Holder represents to the
Company that it is an "accredited investor" as that term is defined in Rule
501 of Regulation D, and that it is acquiring the Warrants Shares solely for
its own account, and not with a present view to the public resale or
distribution of all or any part thereof, except pursuant to sales that are
registered under the Securities Act or are exempt from the registration
requirements of the Securities Act; provided, however, that, in making such
representation, the Holder does not agree to hold the Warrants Shares for
any minimum or specific term and reserves the right to sell, transfer or
otherwise dispose of the Warrants Shares at any time in accordance with the
provisions of the Warrant and with Federal and state securities laws
applicable to such sale, transfer or disposition.
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EXHIBIT B to WARRANT
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TRANSFER NOTICE
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FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers unto the person or persons named below the
right to purchase ________ shares of the Common Stock of APPLIED DIGITAL
SOLUTIONS, INC. evidenced by the attached Warrant.
Date:
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Name of Registered Holder
By:
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Name:
Title:
Transferee Name and Address:
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