EXCHANGE AGREEMENT
Exhibit
10.4
This
EXCHANGE AGREEMENT (this “Agreement”), dated as of June 9, 2005, by and between
Applied Digital Solutions, Inc., a Missouri corporation (the “Company”) and
VeriChip Corporation, a Delaware corporation (“VeriChip”).
WITNESSETH
:
WHEREAS,
the Company is engaged in the business of developing innovative security
products for consumer, commercial and government sectors worldwide;
WHEREAS,
VeriChip, a subsidiary of the Company, is engaged in the business of developing
and marketing VeriChipTM,
a
sub-dermal radio frequency identification micro transponder that can be used
in
a variety of security, financial, emergency identification and healthcare
applications (the “VeriChip Business”);
WHEREAS,
Digital Angel Corporation, a Delaware corporation (“Digital Angel”), a
majority-owned subsidiary of the Company, is an advanced technology company
in
the field of rapid and accurate identification, location tracking, and condition
monitoring of high-value assets (the “Digital Angel Business”);
WHEREAS,
VeriChip and Digital Angel are parties to that certain Supply and License
Agreement dated March 4, 2002, as amended from time to time (the “Supply and
License Agreement”), whereby Digital Angel granted VeriChip the exclusive right
to market and sell injectable radio frequency transponders for use on or
in
humans, and the reading equipment relating thereto (the “Developed
Products”);
WHEREAS,
VeriChip is currently negotiating an amendment to the Supply and License
Agreement with Digital Angel whereby VeriChip shall have the right to assign
its
rights under the Supply and License Agreement to the Company and the Company
shall have the right to sublicense the Supply and License Agreement to VeriChip
(the “Amended Supply and License Agreement”);
WHEREAS,
on March 31, 2005, the Company acquired all of the outstanding capital stock
of
VeriChip Inc. f/k/a eXI Wireless Inc., a Canadian company (“eXI”) (the “eXI
Transaction”);
WHEREAS,
the Company believes eXI will be able to provide VeriChip with access to
hospitals and other medical facilities through eXI’s existing distribution
channels, which may open up opportunities for VeriChip revenue
generation;
WHEREAS,
the Company desires to transfer its ownership in eXI to VeriChip pursuant
to the
terms and conditions contained herein so that eXI will become a wholly-owned
subsidiary of VeriChip (the “Transfer”); and
WHEREAS,
as consideration for the Transfer, VeriChip will give the Company five million
newly issued shares of its common stock (the “VeriChip Stock”) and will consent
to the assignment of the Amended Supply and License Agreement to the
Company;
WHEREAS,
upon the assignment of the Amended Supply and License Agreement to the Company,
the Company agrees to sublicense all of the right, title, and interest in
and to
the Developed Products as reflected on Exhibit
A
(the
“Intellectual Property”) to VeriChip, and VeriChip agrees to license the use of
the Intellectual Property from the Company pursuant to the terms of a sublicense
agreement to be entered into by the parties.
NOW,
THEREFORE,
for and
in consideration of the premises, the mutual covenants and agreements contained
in this Agreement, and for other good and valuable consideration, the receipt,
legal sufficiency, and reasonably equivalent value of which, are hereby mutually
acknowledged, the parties, intending to be legally bound, agree as
follows:
1. Transfer
of eXI Stock.
Subject
to the terms and conditions set forth in this Agreement, after the closing
of
the eXI Transaction (the “Exchange Date”), the Company agrees to transfer all of
the issued and outstanding capital stock of eXI (the “Shares”) to VeriChip,
whereby eXI will become a wholly-owned subsidiary of VeriChip. On the Exchange
Date, the
Company shall transfer and deliver to VeriChip good and valid title to
the
Shares, free and clear of all claims, liens, agreements, restrictions,
and
encumbrances, and the Company shall deliver to VeriChip stock certificates
representing the Shares duly endorsed to VeriChip.
2. Transfer
of the VeriChip Stock.
On the
Exchange Date, VeriChip
shall transfer and deliver to the Company good and valid title to the VeriChip
Stock, free and clear of all claims, liens, agreements, restrictions, and
encumbrances.
3. Sublicense
Agreement.
VeriChip agrees to negotiate in good faith and enter into the Amended Supply
and
License Agreement within 14 days of the Exchange Date. Upon VeriChip’s
assignment of the Amended Supply and License Agreement to the Company,
the
Company agrees to grant VeriChip a sublicense to use the Intellectual Property,
and VeriChip agrees to license the use of the Intellectual Property from
the
Company pursuant to the terms of a sublicense agreement to be entered into
by
the parties. The parties agree to negotiate in good faith and enter into
the
sublicense agreement within 14 days of the Exchange Date.
4. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to VeriChip that:
a. Ownership
of the Shares.
The
Company is the record and beneficial owner of the Shares, free and clear
of any
claims, liens or encumbrances. The Shares represent one hundred percent (100%)
of the issued and outstanding shares of capital stock of eXI.
b. Execution
and Effect of Agreement.
The
Company has the full right, power and authority to enter into and perform
this
Agreement. This Agreement has been duly authorized, executed and delivered
by
the Company, and is a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
c. No
Breach.
The
execution, delivery and performance of this Agreement will not conflict with
or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default under any indenture, mortgage, deed of trust, agreement
or
other instrument to which the Company is a party or its properties may be
bound
or affected, or any law, statute, rule, ordinance or governmental
regulation.
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| 5. |
Representations
and Warranties of VeriChip.
VeriChip represents, warrants and agrees
that:
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a. Execution
and Effect of Agreement.
VeriChip has the full right, power and authority to enter into and perform
this
Agreement. This Agreement has been duly authorized, executed and delivered
by
VeriChip, and is a legal, valid and binding obligation of VeriChip, enforceable
in accordance with its terms.
b. Capitalization.
The
authorized capital stock of VeriChip consists of 35,000,000 shares of common
stock, par value $.001 per share, 20,000,000 of which are duly authorized,
validly issued and outstanding, fully paid and nonassessable and were issued
free of preemptive rights in compliance with applicable corporate and securities
laws and all of which are owned by the Company. Except for 8,280,000 stock
options granted to officers, directors, employees, and consultants of VeriChip,
8,080,000 of which were granted pursuant to the VeriChip 2002
Flexible Stock Option Plan and 200,000 of which were granted outside of
a
plan,
and
1,849,000 warrants granted to IBM Credit LLC, there are no options, warrants
or
other rights, agreements, arrangements or commitments of any character
relating
to the issued or unissued capital stock of Verchip or obligating VeriChip
to
issue or sell any shares of capital stock of, or other equity interests
in
VeriChip. The VeriChip Stock, when issued to the Company, will be duly
authorized, validly issued, fully paid and non-assessable.
c. No
Breach.
The
execution, delivery and performance of this Agreement will not conflict
with or
result in any breach of any of the terms, conditions or provisions of,
or
constitute a default under any indenture, mortgage, deed of trust, agreement
or
other instrument to which VeriChip is a party or its properties may be
bound or
affected, or any law, statute, rule, ordinance or governmental
regulation.
d. Compliance
with Laws.
VeriChip is and has been in substantial compliance with all laws, regulations
and orders applicable to it, its properties and assets (in each case, owned
or
used by it now or in the past) and the Verichp Business and operations
(as
conducted by it now and in the past).
e.
Licenses and Permits.
VeriChip possesses all licenses and required governmental or official approvals,
permits or authorizations (the “Permits”) for the VeriChip Business and
operations. All such Permits are valid and in full force and effect, and
VeriChip is in compliance in all material respects with the respective
requirements thereof and no proceeding is pending or threatened to revoke
or
amend any of them. None of the Permits is or will be impaired or in any
way
affected by the execution and delivery of this Agreement or the consummation
of
the transactions contemplated hereby.
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Conveyances
on the Exchange Date.
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a. Deliveries
by VeriChip.
On the
Exchange Date, VeriChip shall deliver or cause to be delivered to the Company
and/or VeriChip, as applicable, the following:
(i) a
stock
certificate representing the VeriChip Stock; and
(ii) copies
of
resolutions adopted by the independent members of the Board of Directors
of
VeriChip authorizing the transactions contemplated by this
Agreement.
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b. Deliveries
by the Company.
On the
Exchange Date, the Company shall deliver or cause to be delivered to
VeriChip,
as applicable, the following:
(i)
stock
certificates representing the Shares, together with a stock power, duly endorsed
to VeriChip;
(ii) copies
of
resolutions adopted by the independent members of the Board of Directors
of the
Company authorizing the transactions contemplated by this Agreement;
and
(iii)
such
other instruments of transfer reasonably requested by VeriChip to transfer
to
and vest in VeriChip all of the Company’s right, title and interest in and to
the Shares.
7. Notices.
All
notices and other communications provided for herein shall be in writing
and
shall be deemed to have been duly given when delivered personally or sent
by
telex or telecopy or three business days after being mailed by registered
or
certified mail, return receipt requested, postage prepaid, to the party
to whom
it is directed or one business day after being sent via a nationally recognized
courier service for next business day delivery, to the party to whom it
is
directed at the following addresses (or such other addresses as shall be
subsequently provided in writing to the other parties):
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To
the Company:
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Applied
Digital Solutions, Inc.
0000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx
Xxxxx, Xxxxxxx 00000
Fax:
(000) 000-0000
Attention:
Xxxxxxx Xxxxxxx
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With
a copy to:
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Holland
& Knight LLP
000
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx,
Xxxxxxx 00000
Fax:
000-000-0000
Attention:
Xxxxxx Xxxxxxx
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To
VeriChip:
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VeriChip
Corporation
0000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx
Xxxxx, Xxxxxxx 00000
Fax:
000-0000
Attention:
Xxxxxxx
Xxxxxxx
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8. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original, but such counterparts together shall constitute one and
the
same instrument.
9. Section
Headings.
The
section headings of this Agreement are for convenience of reference only
and
shall not be deemed to limit or affect any of the provisions
hereof.
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10. Further Assurances.
The
parties shall cooperate and take such actions, and execute such other
documents,
as either may reasonably request in order to carry out the provisions
or purpose
of this Agreement.
11. Amendments;
No Waivers.
Any
provision of this Agreement may be waived or amended if, and only if, such
amendment or waiver is in writing and signed by all of the parties. No
failure
by any party hereto to insist upon the strict performance of any covenant,
duty,
agreement or condition of this Agreement, or to exercise any right or remedy
consequent upon a breach hereof, shall constitute a waiver of any such
breach or
any other covenant, duty, agreement or condition hereof.
12. Entire
Agreement.
This
Agreement (including the Exhibits hereto and any amendments
hereto) constitutes the entire Agreement and understanding of the
parties
hereto and supersedes all prior agreements and understandings, both written
and
oral, among the parties hereto with respect to the subject matter hereof.
13. Governing
Law; Venue.
This
Agreement shall be governed by and construed in accordance with the Laws
of the
State of Florida (without regard to the choice of law provisions thereof).
The
parties hereto agree that any action, proceeding or lawsuit arising under
or in
connection with this Agreement shall be brought solely and exclusively
in the
court of Palm Beach County, Florida, and each of the parties hereto consents
to
personal jurisdiction is such sole and exclusive forums.
14. Severability.
If it
is determined by a court of competent jurisdiction that any provision of
this
Agreement is invalid under applicable law, such provision shall be ineffective
only to the extent of such invalidity, without invalidating the remainder
of
this Agreement.
15. Parties
in Interest.
This
Agreement shall be binding upon and inure to the benefit of each party
hereto,
and nothing in this Agreement, express or implied, is intended to confer
upon
any other Person any rights or remedies of any nature whatsoever under
or by
reason of this Agreement.
16. Fees
and Expenses.
Except
as expressly set forth herein, each party shall be responsible for its
own
legal, accounting, and other fees and expenses incurred in connection with
the
Agreement.
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of page intentionally left blank]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written:
APPLIED
DIGITAL SOLUTIONS, INC.
By:
/s/
Xxxx X. XxXxxxx
Name:
Xxxx X. XxXxxxx
Title:
SVP, CFO
VERICHIP
CORPORATION
By:/s/
Xxxxx XxXxxxxxxx
Name:
Xxxxx XxXxxxxxxx
Title:
CEO
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