SATISFACTION OF LOAN AGREEMENT
Exhibit
10.1
This
Satisfaction of Loan Agreement (this “Agreement”) is made and entered into as of
May 15, 2007, between APPLIED DIGITAL SOLUTIONS, INC., a Missouri corporation
(“Borrower”), and INFOTECH USA, INC., a Delaware corporation (“Lender”).
Recitals
A. On
or about June 27, 2003, Lender made a loan to Borrower in the original principal
amount of $1,000,000 (the "Loan").
B. The
Loan is evidenced and secured by the following loan documents, all of which
are
dated June 27, 2003, and all of which were amended by that certain First
Amendment to Loan Documents dated June 29, 2004, that certain Second Amendment
to Loan Documents dated June 28, 2005 and that certain Third Amendment to Loan
Documents dated June 23, 2006 (collectively, the "Loan Documents"):
(i)
Commercial
Loan Agreement between Borrower and Lender;
(ii)
Term
Note from Borrower to Lender (the "Note"); and
(iii)
Stock
Pledge Agreement between Borrower and Lender (the "Pledge Agreement").
C. Borrower
desires to repay the Loan in full and Lender agrees to the repayment of the
Loan
pursuant to the terms herein.
NOW,
THEREFORE,
in consideration of the foregoing and other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Satisfaction
of Loan.
In full satisfaction of Borrower's obligations under the Loan Agreement and
subject to the conditions precedent set forth herein, including the provisions
of Section 3 below, Borrower agrees to issue and deliver to Lender, on the
date
hereof, that number of shares of Borrower's common stock that it believes in
good faith equals $1,000,000, or Eight Hundred Thirty Three Thousand, Three
Hundred and Thirty Three (833,333) shares of common stock (the "Shares"). In
consideration of the Shares and subject to the conditions precedent set forth
herein, including the terms and conditions set forth in Section 6(b) of this
Agreement, Lender hereby acknowledges that it is entering into this Agreement
in
full satisfaction of all principal, interest and other monies owed under the
Loan Documents and any obligations arising under Loan Documents and any
documents and instruments evidencing same. Following its receipt of the legal
opinion of Borrower described in Section 6(b) below, Lender shall surrender
the
Note marked cancelled within three (3) business days after effectiveness of
the
Registration Statement as set forth in Section 2 of this Agreement. So long
as
Borrower is not in breach of this Agreement, any and all obligations under
the
Loan Documents, including the payment of
principal
on the Maturity Date, shall be stayed until such time as the conditions set
forth in Section 6(b) of this Agreement are satisfied. In the event Borrower
does not fully satisfy its obligations under Section 6(b), upon written notice
from Borrower to Lender which sets forth the breach and, following a thirty
(30)
day period to cure any such breach capable of being cured by Borrower, the
provisions of this Agreement shall be of no further force and effect and the
Lender shall be entitled to enforce all of the terms and provisions of the
Note,
the Loan Agreement and Pledge Agreement.
2. Registration
Rights.
Within sixty (60) days following the issuance of the Shares, Borrower
agrees
to prepare and file with the Securities and Exchange Commission (the
"Commission") a
Registration Statement covering the Shares. The Registration Statement shall
be
on Form S-3 (except if Borrower is not then eligible to register for resale
the
Shares on Form S-3, in which case such registration shall be on another
appropriate form in accordance herewith). Borrower shall use commercially
reasonable efforts to cause the Registration Statement to be declared effective
under the Securities Act of 1933, as amended (the "Securities Act"), as promptly
as possible after the filing thereof. Borrower shall use commercially reasonable
efforts to keep the Registration Statement continuously effective under the
Securities Act, until the date which is the earlier date of when (i) all Shares
covered by such Registration Statement have been sold or (ii) all Shares covered
by such Registration Statement may be sold immediately without registration
under the Securities Act and without volume restrictions pursuant to Rule
144(k), as determined by the counsel to Borrower pursuant to a written opinion
letter to such effect, addressed and acceptable to Borrower's transfer agent
and
Lender. In no event will Borrower be required (i) to pay a penalty for failure
to cause each Registration Statement to be declared effective or for failure
to
cause each Registration Statement to remain effective; (ii) to pay liquidating
damages in connection with the Shares; or (iii) to make a cash payment in
connection with the settlement of the Shares. Borrower shall continue to pay
Lender interest in cash on the sum of $1,000,000.00 at the existing rate per
annum under the Note until the date the Shares are registered and the legal
opinion is received. Within three (3) business days following the effective
date
of the Registration Statement for the correct number of Shares (as determined
under Section 3 below) (and payment of cash, if applicable, thereunder) and
subject to compliance by Borrower of its obligations hereunder, Lender will
return to Borrower the 750,000 shares of Digital Angel Corporation common stock
pledged to Lender pursuant to the Pledge Agreement and each of the Pledge
Agreement, Loan Agreement and Note shall be terminated and of no further force
and effect. Lender will execute any and all Uniform Commercial Code financing
statement terminations, mortgage releases and other such lien release documents
as Borrower may request in order to evidence or otherwise give public notice
of
the termination of such security interest.
3. Additional
Obligations.
The number of Shares issued to Lender may be more or less than the number of
Shares that Lender is due pursuant to Section 1. On
the effective date of the Registration Statement, Borrower shall determine
the
exact number of shares to be delivered to Lender by
dividing the outstanding principal amount of the Note of $1,000,000 by the
average of the daily closing prices for a share of Borrower's common stock
on
each Trading Day occurring during the ten (10) Trading Day period ending on
(and
including) the Trading Day immediately preceding the effective
date of the Registration Statement (the “Registration Shares”). In
the event the number of Shares issued in the name of Lender pursuant to Section
1 exceeds the Registration Shares, Lender agrees to promptly return the excess
shares to Borrower,
2
including
the execution of any stock transfer powers or other necessary documentation.
In
the event the number of Registration Shares is less than the amount of the
obligations under Section 1 hereof on the date the Shares are registered,
Borrower shall, in it sole discretion, within 5 business days following such
date either (i) issue additional shares to
Lender which it will subsequently register within the Commission on the same
registration statement as provided in Section 2 above, to the extent available
or if not available, within 60 days thereafter or (ii) pay
the remaining obligation in cash. “Trading Day” means any day on which
Borrower's common stock is purchased and sold on the Nasdaq Capital Market.
Should the cumulative number of shares calculated pursuant to Section 1 exceed
19.9% of the current shares outstanding of Borrower, then Borrower shall not
issue more than 19.9% of the current shares outstanding and shall satisfy the
remaining obligation in cash.
4. Representations
and Warranties of Lender.
a. Except
as contemplated hereunder, the Shares to be received hereunder by Lender will
be
acquired for its own account, not as nominee or agent, for investment purposes
and not with a current view to, or for their current offer or sale in connection
with directly or indirectly, any distribution in violation of the Securities
Act
of 1933, as amended or any other applicable securities law (the “Securities
Act”) and with no intention of participating in the formulation, determination
of direction of the basic business decisions of Borrower;
b. Lender
is not a registered broker dealer or engaged in the business of being a broker
dealer;
c. Lender
(i) has such knowledge and experience in financial or business matters that
it
is capable of evaluating the merits and risks of the investment contemplated
hereby, (ii) that there may be material adverse nonpublic information regarding
Borrower that could affect the value of the Shares; and (iii) it is not in
possession of material nonpublic information in connection with the
investment.
d. Lender
has had access to such financial and other information concerning Borrower
and
the Shares as it deems necessary in order to make a decision regarding the
consideration to be received hereunder, including an opportunity to ask
questions of and receive information from management of Borrower;
and
e. Lender
is not acting as an underwriter on behalf of Borrower, is not acting as a
conduit for a public distribution of shares, and has no prearrangement with
Borrower in connection with a sale of the Shares.
5. Representations
and Warranties of Borrower.
a.
Reporting
Company.
Borrower is a publicly-held company subject to reporting obligations pursuant
to
Section 13 of the Securities Exchange Act of 1934, as amended (the “1934
Act”)
and has a class of common shares registered pursuant to Section 12(g) of the
1934 Act. Pursuant to the provisions of the 1934 Act, Borrower has timely filed
all reports and other materials required to be filed thereunder with the
Commission during the preceding twelve months.
3
b.
No
Integrated Offering.
Neither Borrower, nor any of its affiliates, 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 offer of the Shares pursuant to this Agreement to be integrated
with prior offerings by the Borrower for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation,
under
the rules and regulations of the Nasdaq Capital Market. Nor will Borrower or
any
of its affiliates or subsidiaries take any action or steps that would cause
the
offer or issuance of the Shares to be integrated with other offerings. Borrower
will not conduct any offering other than the transactions contemplated hereby
that will be integrated with the offer or issuance of the Shares. Borrower
is
eligible to use Form S-3 for the registration of the Shares.
c.
Freely
Tradeable Shares.
The Shares will be free-trading, and freely transferable, and will not contain
a
legend restricting the resale or transferability of the Shares provided
that the
Shares are being sold pursuant to an effective registration statement covering
the Shares or are otherwise exempt from registration.
d.
Listing.
Borrower shall promptly secure the listing of the Shares upon each national
securities exchange, or automated quotation system upon which they are or become
eligible for listing (subject to official notice of issuance) and shall maintain
such listing so long as any Shares are outstanding. Borrower will maintain
the
listing of its common stock on the American Stock Exchange, Nasdaq Global
Market, Nasdaq Capital Market, OTC Bulletin Board, or New York Stock Exchange
(whichever of the foregoing is at the time the principal trading exchange or
market for the Common Stock (the “Principal
Market”)),
and will comply in all respects with the reporting, filing and other obligations
under the bylaws or rules of the Principal Market, as applicable.
e.
Non-Public
Information.
Borrower represents, warrants, covenants and agrees that neither it nor any
other person acting on its behalf will provide Lender or its agents or counsel
with any information that it believes constitutes material non-public
information, unless prior thereto Lender shall have agreed in writing to receive
such information. Borrower understands and confirms that Lender shall be relying
on the foregoing representations in effecting transactions in securities of
the
Company.
6. Obligations
of Borrower.
a. Borrower
shall permit
counsel for Lender to review the Registration Statement and all amendments
and
supplements thereto, and any comments made by the staff of the Commission
concerning the Lender and/or the transactions contemplated hereby and the
Borrower's responses thereto, within a reasonable period of time 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 Borrower); and
b. Within
three (3) business days of the effective date of the Registration Statement,
Borrower shall cause its counsel to issue a blanket opinion to the transfer
agent stating that the shares are registered under an effective registration
statement, are freely tradable without restriction, and can be reissued free
of
restrictive legend upon notice of a sale by Lender
4
and
confirmation by Lender that it has complied with the prospectus delivery
requirements In the event this opinion is not delivered or is withdrawn,
Borrower shall be deemed in breach hereof and Lender shall be entitled to
enforce all of its rights and remedies hereunder, including, without limitation,
those set forth in Section 1 of this Agreement.
7. Disclosure
of Agreement.
Borrower will, at its option, timely file a Form 8-K disclosing the material
terms of this Agreement or include such disclosure in Item 5 of its Form 10-Q
to
be filed on or before May 10, 2007.
8. Amendments
and Waivers.
The provisions of this Agreement, including the provisions of this sentence,
may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the same shall be in writing
and signed by Borrower and Lender.
9. Successors
and Assigns.
This Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties and shall inure to the benefit of Lender.
10. Execution
and Counterparts.
This Agreement may be executed in any number of counterparts, each of which
when
so executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
11. Headings.
The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.
12. Governing
Law.
This Agreement shall be governed by and construed in accordance with the laws
of
the State of Florida.
13. Xxxxx
Fargo.
Notwithstanding anything to the contrary contained in this Agreement, it is
understood and agreed that this Agreement is expressly conditioned and
contingent upon the prior written consent of Xxxxx Fargo Business Credit, Inc.
In the event such consent is not obtained on or before the date hereof, this
Agreement shall be void and no effect as if never executed and delivered.
[Balance
of page intentionally left blank; signature page follows]
5
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
|
|
APPLIED
DIGITAL SOLUTIONS, INC.
|
|
|
By:
/s/
Xxxxxxx Xxxxxxx
|
||
|
|
Name:
Xxxxxxx
Xxxxxxx
|
|
|
|
Title:
CEO
|
|
|
|
INFOTECH
USA, INC.
|
|
|
|
By:
/s/
Xxxxxxxx XxXxxxx
|
|
|
|
Name:
Xxxxxxxx
XxXxxxx
|
|
|
|
Title:
President
& CEO
|
|
6
