FORM OF SERIES E WARRANT TO PURCHASE COMMON STOCK OF APPLIED DIGITAL SOLUTIONS, INC.
Exhibit
10.8
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.
FORM
OF
SERIES E WARRANT
TO
PURCHASE COMMON STOCK
OF
APPLIED
DIGITAL SOLUTIONS, INC.
Issue
Date: June 10, 2005 Warrant
No.
THIS
CERTIFIES that _____________________
or
any
subsequent holder hereof (the “Holder”),
has
the right to purchase from APPLIED DIGITAL SOLUTIONS, INC., a Missouri
corporation (the “Company”),
up to
______________ fully paid and nonassessable shares of the Company’s common
stock, par value $0.01 per share (the “Common
Stock”),
subject to adjustment as provided herein, at a price per share equal to the
Exercise Price (as defined below), at any time and from time to time beginning
on the date on which this Warrant is issued (the “Issue
Date”)
and
ending at 5:00 p.m., eastern time, on the fifth (5th)
anniversary of the Issue Date (the “Expiration
Date”).
This
Warrant is issued pursuant to a Securities Purchase Agreement, dated as of
June
9, 2005 (the “Securities
Purchase Agreement”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Securities Purchase Agreement.
1. Exercise.
(a) Right
to Exercise; Exercise Price.
The
Holder shall have the 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
Shares”).
The
“Exercise
Price”
for
each Warrant Share purchased by the Holder upon the exercise of this Warrant
shall be equal to $[110%
of the Market Price on the Closing Date],
subject to adjustment for the events specified in Section 6 below.
(b) Exercise
Notice.
In
order to exercise this Warrant, the Holder 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 notice of exercise in the form attached
hereto as Exhibit
A
(the
“Exercise
Notice”),
(ii)
deliver the original Warrant and, in the case of a Cash Exercise (as defined
below), the Exercise Price to 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. In
the
case of a dispute as to the calculation of the Exercise Price or the number
of
Warrant Shares issuable hereunder (including, without limitation, the
calculation of any adjustment pursuant to Section 6 below), the Company shall
promptly issue to the Holder the number of Warrant Shares that are not disputed
and shall submit the disputed calculations to a certified public accounting
firm
of national recognition (other than the Company’s independent accountants)
within two (2) Business Days following the date on which the Exercise Notice
is
delivered to the Company. The Company shall cause such accountant to calculate
the Exercise Price and/or the number of Warrant Shares issuable hereunder
and to
notify the Company and the Holder of the results in writing no later than
three
(3) Business Days following the day on which such accountant received the
disputed calculations (the “Dispute
Procedure”).
Such
accountant’s calculation shall be deemed conclusive absent manifest error. The
fees of any such accountant shall be borne by the party whose calculations
were
most at variance with those of such accountant.
(c) Holder
of Record.
The
Holder shall, for all purposes, be deemed 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,
subject to, in the case of a Cash Exercise (as defined below), payment of
the
Exercise Price. 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 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,
2
however,
that
the Holder shall be 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 Exercise Notice pursuant to paragraph 1 above, the Company
shall,
(A) in the case of a Cash Exercise (as defined below) 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 and the taxes specified
in
paragraph 1(b) above, if any, are paid in full, (B) in the case of a Cashless
Exercise (as defined below), no later than the close of business on the third
(3rd) Business Day following the Exercise Date set forth in such Exercise
Notice, and (C) with respect to Warrant Shares that are the subject of a
Dispute
Procedure, the close of business on the third (3rd)
Business Day following the determination made pursuant to paragraph 1(b)
(each
of the dates specified in (A), (B) or (C) being referred to as a “Delivery
Date”),
issue
and deliver or cause to be delivered to the Holder the number of Warrant
Shares
as shall be determined as provided herein. The Company shall effect delivery
of
Warrant Shares to the Holder by, as long as the Transfer Agent participates
in
the Depository Trust Company (“DTC”)
Fast
Automated Securities Transfer program (“FAST”),
crediting the account of the Holder or its nominee at DTC (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.
(a) In
the
event that the Company fails for any reason (other than as a result of the
Holder’s failure to deliver the original Warrant to the Company or, in the case
of a Cash Exercise (as defined below), to pay the aggregate Exercise Price
for
the Warrant Shares being purchased) to deliver to the Holder the number of
Warrant Shares specified in the applicable Exercise Notice on or before the
Delivery Date therefor (an “Exercise
Default”),
and
such default continues for five (5) Business Days 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 Payments”)
in the
amount of (i) (N/365) multiplied
by
(ii) the
aggregate 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 maximum rate permitted by applicable
law (the “Default
Interest Rate”),
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 each 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. In addition to the amounts specified herein, the
Holder
shall
3
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 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. Exercise
Limitations.
(A)
In
no
event shall the Holder be permitted to exercise this Warrant, or part thereof,
if, upon such exercise, the number of shares of Common Stock beneficially
owned
by the Holder (other than shares which would otherwise be deemed beneficially
owned except for being subject to a limitation on conversion or exercise
analogous to the limitation contained in this paragraph 4(a)), would
exceed 4.99% of the number of shares of Common Stock then issued and
outstanding. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder. To the extent that the limitation contained
in this paragraph 4(a) applies, the submission of an Exercise Notice by the
Holder shall be deemed to be the Holder’s representation that this Warrant is
exercisable pursuant to the terms hereof and the Company shall be entitled
to
rely on such representation without making any further inquiry as to whether
this Section 4(a) applies. The
Company shall have no liability to any person if the Holder’s determination of
whether this Warrant is convertible pursuant to the terms hereof is incorrect.
Nothing
contained herein shall be deemed to restrict the right of a Holder to exercise
this Warrant, or part thereof, at such time as such exercise will not violate
the provisions of this Section 4(a). This Section 4(a) may not be amended
unless
such amendment is agreed to in writing by the Holder and approved by the
holders
of a majority of the Common Stock then outstanding; provided,
however,
that
the
Holder shall have the right to waive the provisions of this Section
4(a)
upon
prior written notice to the Company following the announcement of a Major
Transaction (as defined below), or otherwise upon sixty (60) days’ prior written
notice to the Company.
(B)
Until
Shareholder Approval (as defined below) is obtained, or the Holder obtains
an
opinion of counsel reasonably satisfactory to the Company and its counsel
that
such approval is not required, the Holder shall be prohibited from exercising
this Warrant if, as a result of such exercise, the number of (i) Warrant
Shares
issued pursuant to all exercises of the Warrants plus (ii) the number of
shares
of Common Stock issued pursuant to all conversions of the Preferred Stock
plus
(iii)
the number of the shares of Common Stock issued by the Company to Perceptis,
L.P. in connection with the acquisition of Instantel Inc. would
exceed the Cap Amount (as defined below). If at any time the number of shares
issued and issuable pursuant to this Warrant exceeds the Cap Amount, the
Company
shall, upon the written request of the Holder, hold a meeting of its
shareholders within sixty (60) days following such request, and use its best
efforts to obtain the approval of its shareholders for the transactions
described herein and the other Transaction Documents (“Shareholder
Approval”).
In
the event that Shareholder Approval is not obtained at a shareholder meeting
held after such request by the Holder, the Company shall continue to
use
4
its
best
efforts to seek Shareholder Approval as soon as practicable after such meeting
but no less frequently than quarterly thereafter. For purposes hereof,
“Cap
Amount”
means
19.99% of the Common Stock outstanding on the Initial Issue Date (subject
to
adjustment upon a stock split, stock dividend or similar event). In the event
that the Holder shall sell or otherwise transfer all or any portion of this
Warrant, the transferee shall be deemed to have been allocated a pro rata
share
of the Cap Amount.
5.
Payment
of the Exercise Price; Cashless Exercise.
The
Holder may pay the Exercise Price in either of the following forms or, at
the
election of Holder, a combination thereof:
(a) through
a
cash exercise (a “Cash
Exercise”)
by
delivering immediately available funds, or
(b) if,
following the one-year anniversary of the Issue Date, an effective Registration
Statement is not available for the resale of all of the Warrant Shares issuable
hereunder at the time an Exercise Notice is delivered to the Company, through
a
cashless exercise (a “Cashless
Exercise”).
The
Holder may effect a Cashless Exercise by surrendering this Warrant to the
Company and noting on the Exercise Notice that the Holder wishes to effect
a
Cashless Exercise, upon which the Company shall issue to the Holder a number
of
Warrant Shares determined as follows:
X
=
Y x (A-B)/A
where:
X
= the
number of Warrant Shares to be issued to the Holder;
|
Y
=
the number of Warrant Shares with respect to which this Warrant
is being
exercised;
|
|
A
=
the Market Price as of the Exercise Date;
and
|
|
B
=
the Exercise Price.
|
It
is
intended and acknowledged that the Warrant Shares issued in a Cashless Exercise
transaction shall be deemed to have been acquired by the Holder, and the
holding
period for the Warrant Shares required by Rule 144 shall be deemed to have
been
commenced, on the Issue Date. For purposes hereof, (A) “Market
Price”means,
as
of a particular date, the
lesser of (i) the average of the daily VWAP for such security on each Trading
Day occurring during the ten (10) Trading Day period ending on (and including)
the Trading Day immediately preceding
such
date
and (ii)
the
daily
VWAP for such security
on the
Trading Day immediately preceding such date,
and (B)
“VWAP”on
a
Trading Day means the volume weighted average price of the Common Stock for
such
Trading Day on the Principal Market as reported by Bloomberg Financial Markets
or, if Bloomberg Financial Markets is not then reporting such prices, by
a
comparable reporting service of national reputation selected by the Holders
and
reasonably satisfactory to the Company. If
VWAP
cannot be calculated for the Common Stock on such date on any of the foregoing
bases, then the Company shall submit such calculation to an independent
investment
5
banking
firm of national reputation, and shall cause such investment banking firm
to
perform such determination and notify the Company and each Investor of the
results of determination no later than two (2) Business Days from the time
such
calculation was submitted to it by the Company. Such investment banking firm’s
determination shall be deemed conclusive absent manifest error. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split or other similar transaction during such period.
6.
Anti-Dilution
Adjustments; Distributions; Other Events.
The
Exercise Price and the number of Warrant Shares issuable hereunder shall
be
subject to adjustment from time to time as provided in this Section 6.
(a) Subdivision
or Combination of Common Stock.
If 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 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 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 notice of such Distribution (a “Distribution
Notice”)
to the
Holder at least ten (10) Business Days prior to the earlier to occur of (i)
the
record date for determining stockholders entitled to such Distribution (the
“Record
Date”)
and
(ii) the date on which such Distribution is made (the “Distribution
Date”).
The
Holder shall be entitled, at its option (to be 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 (without giving effect to any
limitations on such exercise contained in this Warrant) 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 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.
6
(c) Dilutive
Issuances.
(i) Adjustment
Upon Dilutive Issuance.
If, at
any time after the Issue Date, the Company issues or sells, or in accordance
with subparagraph (iii) of this paragraph (c), is deemed to have issued or
sold,
any shares of Common Stock for no consideration or for a consideration per
share
less than the Exercise Price on the date of such issuance or sale (or deemed
issuance or sale) (a “Dilutive
Issuance”),
then
the Exercise Price shall be adjusted as follows:
(A) If
such
Dilutive Issuance occurs prior to the Effective Date (as defined in the
Registration Rights Agreement), then effective immediately upon the Dilutive
Issuance, the Exercise Price shall be adjusted so as to equal the consideration
received or receivable by the Company (on a per share basis) for the additional
shares of Common Stock so issued, sold or deemed issued or sold in such Dilutive
Issuance (which, in the case of a deemed issuance or sale, shall be calculated
in accordance with subparagraph (ii) below).
(B) If
such
Dilutive Issuance occurs on or after the Effective Date, then effective
immediately upon the Dilutive Issuance, the Exercise Price shall be adjusted
so
as to equal an amount determined by multiplying such Exercise Price by the
following fraction:
N0
+
X0
X0 +
N2
where:
N0
=
the number of shares of Common Stock outstanding immediately prior to the
issuance, sale or deemed issuance or sale of such additional shares of Common
Stock in such Dilutive Issuance (without taking into account any shares of
Common Stock issuable upon conversion, exchange or exercise of any securities
or
other instruments which are convertible into or exercisable or exchangeable
for
Common Stock (“Convertible
Securities”)
or
options, warrants or other rights to purchase or subscribe for Common Stock
or
Convertible Securities (“Purchase
Rights”),
including the Preferred Stock, Additional Investment Rights and
Warrants);
N1
=
the number of shares of Common Stock which the aggregate consideration, if
any,
received or receivable by the Company for the total number of such additional
shares of Common Stock so issued, sold or deemed issued or sold in such Dilutive
Issuance (which, in the case of a deemed issuance or sale, shall be calculated
in accordance with subparagraph (iii) below) would purchase at the Exercise
Price in effect immediately prior to such Dilutive Issuance; and
7
N2
=
the
number of such additional shares of Common Stock so issued, sold or deemed
issued or sold in such Dilutive Issuance.
Notwithstanding
the foregoing, no adjustment shall be made pursuant hereto if such adjustment
would result in an increase in the Exercise Price.
(ii) Adjustment
Upon Below Market Issuance.
If, at
any time after the Issue Date, the Company issues or sells, or in accordance
with subparagraph (iii) of this paragraph (c), is deemed to have issued or
sold,
any shares of Common Stock for no consideration or for a consideration per
share
less than the Market Price on the date of such issuance or sale (or deemed
issuance or sale) (a “Below
Market Issuance”),
then
the Exercise Price shall be adjusted so as to equal an amount determined
by
multiplying such Exercise Price by the following fraction:
N0
+
X0
X0
+
N2
where:
N0
=
the number of shares of Common Stock outstanding immediately prior to the
issuance, sale or deemed issuance or sale of such additional shares of Common
Stock in such Below Market Issuance (without taking into account any shares
of
Common Stock issuable upon conversion, exchange or exercise of any Convertible
Securities or Purchase Rights, including the Preferred Stock, Additional
Investment Rights and Warrants);
N1
=
the number of shares of Common Stock which the aggregate consideration, if
any,
received or receivable by the Company for the total number of such additional
shares of Common Stock so issued, sold or deemed issued or sold in such Below
Market Issuance (which, in the case of a deemed issuance or sale, shall be
calculated in accordance with subparagraph (iii) below) would purchase at
the
Market Price in effect on the date of such Below Market Issuance;
and
N2
=
the
number of such additional shares of Common Stock so issued, sold or deemed
issued or sold in such Below Market Issuance.
Notwithstanding
the foregoing, no adjustment shall be made pursuant to this paragraph (c)(ii)
if
such adjustment would result in an increase in the Exercise Price or if such
adjustment would lead to a higher exercise price than an adjustment pursuant
to
paragraph c(i), in which case the provisions of paragraph (c)(i) shall
apply.
(iii)
Effect
On Exercise Price Of Certain Events.
For
purposes of determining the adjusted Exercise Price under subparagraph (i)
or
(ii) of this paragraph (c), the following will be applicable:
8
(A) Issuance
Of Purchase Rights.
If the
Company issues or sells any Purchase Rights, whether or not immediately
exercisable, and the price per share for which Common Stock is issuable upon
the
exercise of such Purchase Rights (and the price of any conversion of Convertible
Securities, if applicable) is less than the Market Price in effect on the
date
of issuance or sale of such Purchase Rights, then the maximum total number
of
shares of Common Stock issuable upon the exercise of all such Purchase Rights
(assuming full conversion, exercise or exchange of Convertible Securities,
if
applicable) shall, as of the date of the issuance or sale of such Purchase
Rights, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For purposes of the preceding sentence,
the
“price per share for which Common Stock is issuable upon the exercise of such
Purchase Rights” shall be determined by dividing (x) the total amount, if any,
received or receivable by the Company as consideration for the issuance or
sale
of all such Purchase Rights, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Purchase Rights, plus,
in the
case of Convertible Securities issuable upon the exercise of such Purchase
Rights, the minimum aggregate amount of additional consideration payable
upon
the conversion, exercise or exchange thereof (determined in accordance with
the
calculation method set forth in subparagraph (iii)(B) below) at the time
such
Convertible Securities first become convertible, exercisable or exchangeable,
by
(y) the maximum total number of shares of Common Stock issuable upon the
exercise of all such Purchase Rights (assuming full conversion, exercise
or
exchange of Convertible Securities, if applicable). No further adjustment
to the
Exercise Price shall be made upon the actual issuance of such Common Stock
upon
the exercise of such Purchase Rights or upon the conversion, exercise or
exchange of Convertible Securities issuable upon exercise of such Purchase
Rights.
To the
extent that shares of Common Stock or Convertible Securities are not delivered
pursuant to such Purchase Rights, upon the expiration or termination of such
Purchase Rights, the Exercise Price shall be readjusted to the Exercise Price
that would then be in effect had the adjustments made upon the issuance of
such
Purchase Rights been made on the basis of delivery of only the number of
shares
of Common Stock actually delivered.
(B) Issuance
Of Convertible Securities.
If the
Company issues or sells any Convertible Securities, whether or not immediately
convertible, exercisable or exchangeable, and the price per share for which
Common Stock is issuable upon such conversion, exercise or exchange is less
than
the Market Price in effect on the date of issuance or sale of such Convertible
Securities, then the maximum total number of shares of Common Stock issuable
upon the conversion, exercise or exchange of all such Convertible Securities
shall, as of the date of the issuance or sale of such Convertible Securities,
be
deemed to be outstanding and to have been issued and sold by the Company
for
such price per share. If the Convertible Securities so issued or sold do
not
have a fluctuating conversion or exercise price or exchange ratio, then for
the
purposes of the immediately preceding sentence, the “price per share for which
Common Stock is issuable upon such conversion, exercise or exchange” shall be
determined by dividing (x) the total amount, if any, received or receivable
by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if
any, payable to the Company upon the conversion, exercise or exchange thereof
(determined in accordance with the calculation method set forth in
9
this
subparagraph (iii)(B)) at the time such Convertible Securities first become
convertible, exercisable or exchangeable, by (y) the maximum total number
of
shares of Common Stock issuable upon the exercise, conversion or exchange
of all
such Convertible Securities. If the Convertible Securities so issued or sold
have a fluctuating conversion or exercise price or exchange ratio (a
“Variable
Rate Convertible Security”) provided,
however, that if the conversion or exercise price or exchange ratio of a
Convertible Security may fluctuate solely as a result of provisions designed
to
protect against dilution, such Convertible Security shall not be deemed to
be a
Variable Rate Convertible Security),
then
for purposes of the first sentence of this subparagraph (B), the “price per
share for which Common Stock is issuable upon such conversion, exercise or
exchange” shall be deemed to be the lowest price per share which would be
applicable (assuming all holding period and other conditions to any discounts
contained in such Variable Rate Convertible Security have been satisfied)
if the
conversion price of such Variable Rate Convertible Security on the date of
issuance or sale thereof were seventy-five percent (75%) of the actual
conversion price on such date (the “Assumed
Variable Market Price”),
and,
further, if the conversion price of such Variable Rate Convertible Security
at
any time or times thereafter is less than or equal to the Assumed Variable
Market Price last used for making any adjustment under this paragraph (c)
with
respect to any Variable Rate Convertible Security, the Exercise Price in
effect
at such time shall be readjusted to equal the Exercise Price which would
have
resulted if the Assumed Variable Market Price at the time of issuance of
the
Variable Rate Convertible Security had been seventy-five percent (75%) of
the
actual conversion price of such Variable Rate Convertible Security existing
at
the time of the adjustment required by this sentence. No further adjustment
to
the Exercise Price shall be made upon the actual issuance of such Common
Stock
upon conversion, exercise or exchange of such Convertible
Securities.
To the
extent that shares of Common Stock are not delivered pursuant to conversion
of
such Convertible Securities, upon the expiration or termination of the right
to
convert such Convertible Securities into Common Stock, the Exercise
Price
shall be readjusted to the Exercise
Price
that would then be in effect had the adjustments made upon the issuance of
such
Convertible Securities been made on the basis of delivery of only the number
of
shares of Common Stock actually delivered.
(C) Change
In Option Price Or Conversion Rate.
If,
following an adjustment to the Exercise Price upon the issuance of Purchase
Rights or Convertible Securities pursuant to a Below Market Issuance, there
is a
change at any time in (x) the amount of additional consideration payable
to the
Company upon the exercise of any Purchase Rights; (y) the amount of additional
consideration, if any, payable to the Company upon the conversion, exercise
or
exchange of any Convertible Securities; or (z) the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for Common
Stock
(in each such case, other than under or by reason of provisions designed
to
protect against dilution), then in any such case, the Exercise Price in effect
at the time of such change shall be readjusted to the Exercise Price which
would
have been in effect at such time had such Purchase Rights or Convertible
Securities still outstanding provided for such changed additional consideration
or changed conversion, exercise or exchange rate, as the case may be, at
the
time initially issued or sold.
10
(D) Calculation
Of Consideration Received.
If any
Common Stock, Purchase Rights or Convertible Securities are issued or sold
for
cash, the consideration received therefor will be the amount received by
the
Company therefor. In case any Common Stock, Purchase Rights or Convertible
Securities are issued or sold for a consideration part or all of which shall
be
other than cash, including in the case of a strategic or similar arrangement
in
which the other entity will provide services to the Company, purchase services
from the Company or otherwise provide intangible consideration to the Company,
the amount of the consideration other than cash received by the Company
(including the net present value of the consideration expected by the Company
for the provided or purchased services) shall be the fair market value of
such
consideration, except where such consideration consists of securities, in
which
case the amount of consideration received by the Company will be the average
of
the last sale prices thereof on the principal market for such securities
during
the period of ten Trading Days immediately preceding the date of receipt.
In
case any Common Stock, Purchase Rights or Convertible Securities are issued
in
connection with any merger or consolidation in which the Company is the
surviving corporation, the amount of consideration therefor will be deemed
to be
the fair market value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock, Purchase
Rights or Convertible Securities, as the case may be. Notwithstanding anything
else herein to the contrary, if Common Stock, Purchase Rights or Convertible
Securities are issued or sold in conjunction with each other as part of a
single
transaction or in a series of related transactions, the Holder may elect
to
determine the amount of consideration deemed to be received by the Company
therefor by deducting the fair value of any type of securities (the
“Disregarded
Securities”)
issued
or sold in such transaction or series of transactions. If the holder makes
an
election pursuant to the immediately preceding sentence, no adjustment to
the
Exercise Price shall be made pursuant to this paragraph (c) for the issuance
of
the Disregarded Securities or upon any conversion, exercise or exchange thereof.
The independent members of the Company’s Board of Directors shall calculate
reasonably and in good faith, using standard commercial valuation methods
appropriate for valuing such assets, the fair market value of any consideration
other than cash or securities.
(E) Issuances
Pursuant To Existing Securities.
If the
Company issues (or becomes obligated to issue) shares of Common Stock pursuant
to any antidilution or similar adjustments (other than as a result of stock
splits, stock dividends and the like) contained in any Convertible Securities
or
Purchase Rights outstanding as of the date hereof but not included in the
Disclosure Schedule to the Securities Purchase Agreement, then all shares
of
Common Stock so issued shall be deemed to have been issued for no consideration.
If the Company issues (or becomes obligated to issue) shares of Common Stock
pursuant to any antidilution or similar adjustments contained in any Convertible
Securities or Purchase Rights disclosed in a schedule to the Securities Purchase
Agreement as a result of the issuance of the Additional Investment Rights
or
Warrants and the number of shares that the Company issues (or is obligated
to
issue) as a result of such initial issuance exceeds the amount specified
in such
schedule, such excess shares shall be deemed to have been issued for no
consideration.
(iv) Exceptions
To Adjustment Of Exercise Price.
Notwithstanding the foregoing, no adjustment to the Exercise Price shall
be made
pursuant to this paragraph (c) upon
11
the
issuance of any Excluded Securities. For purposes hereof, “Excluded
Securities”
means
(I) securities purchased under the Securities Purchase Agreement; (II)
securities issued upon conversion of the Preferred Stock or exercise of the
Warrants or the VeriChip Warrant; (III) the 2004 Warrants (as defined in
the
Securities Purchase Agreement) and securities issued or issuable thereunder;
(IV) shares of Common Stock (or the common stock of any Subsidiary) issuable
or
issued to (x) employees or directors of the Company or any such Subsidiary
from
time to time either directly or upon the exercise of options, in such case
granted or to be granted in the discretion of the Company’s or such Subsidiary’s
Board of Directors (or a duly authorized committee thereof) as an inducement
to
join the Company or such Subsidiary or pursuant to one or more stock option
plans or restricted stock plans in effect as of the Closing Date or adopted
after the Closing Date by the Company’s or such Subsidiary’s Board of Directors
(or a duly authorized committee thereof) or by the Company’s or such
Subsidiary’s shareholders, or (y) vendors, service providers or consultants,
either directly or pursuant to options or warrants to purchase Common Stock
that
are outstanding on the date hereof or issued hereafter, provided such issuances
are approved by the Company’s or such Subsidiary’s Board of Directors (or a duly
authorized committee thereof) or by the Company’s or such Subsidiary’s
shareholders; (V) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization of the Company or any of its
Subsidiaries; (VI) shares of Common Stock issued in connection with the
acquisition by the Company of any corporation or other entity occurring after
the Effective Date; (VII)
shares
of Common Stock issued in connection with any Convertible Securities or Purchase
Rights outstanding on the date hereof
and
disclosed on Schedule
3.5
to the
Securities Purchase Agreement;
(IX)
shares issued to Persons with whom the Company
or any
of its Subsidiaries is
entering into a joint venture, strategic alliance or other commercial
relationship in connection with the operation of the Company’s or any such
Subsidiary’s business and not in connection with a transaction the primary
purpose of which is to raise equity capital; (VIII) shares of Common Stock,
Convertible Securities or Purchase Rights issued in connection with the
settlement of a bona
fide
litigation approved by the Company’s or such Subsidiary’s Board of Directors and
(IX) shares issued to a Subsidiary pursuant to a share exchange.
(v) Notice
Of Adjustments.
Upon
the occurrence of one or more adjustments or readjustments of the Exercise
Price
pursuant to this paragraph (c) resulting in a change in the Exercise Price
by
more than one percent (1%) in the aggregate, or any change in the number
or type
of stock, securities and/or other property issuable upon exercise of this
Warrant, the Company, at its expense, shall promptly compute such adjustment
or
readjustment or change and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment or change and showing in detail
the facts upon which such adjustment or readjustment or change is based.
The
Company shall, upon the written request at any time of the Holder, furnish
to
the Holder a like certificate setting forth (i) such adjustment or readjustment
or change, (ii) the Exercise Price at the time in effect and (iii) the number
of
shares of Common Stock and the amount, if any, of other securities or property
which at the time would be received upon exercise of this Warrant.
(d) Major
Transactions.
In the
event of a merger, consolidation, business combination, tender offer, exchange
of shares, recapitalization, reorganization, redemption or other similar
event,
as a result of which shares of Common Stock 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
12
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 least ten (10) Trading Days’ written notice
prior to the earlier of (I) the closing or effectiveness of such Major
Transaction and (II) the record date for the receipt of such shares of stock
or
securities or other assets, and 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 issuable to the Holder upon such exercise, the same per share
consideration payable to the other holders of Common Stock in connection
with
such Major Transaction. If and to the extent that the Holder retains this
Warrant or any portion hereof 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 with respect to this Warrant, with such adjustments to the Exercise
Price and the securities covered hereby as may be necessary in order to preserve
the economic benefits of this Warrant to the Holder.
(e) Adjustments;
Additional Shares, Securities or Assets.
In the
event that at any time, as a result of an adjustment made pursuant to this
paragraph 6, 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 6. Any adjustment
made herein other than pursuant to Section 6(c) hereof 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.
7. Fractional
Interests.
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 of the Exercise
Date.
13
8. Transfer
of this Warrant.
The
Holder may sell, transfer, assign, pledge 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
Notice”),
indicating the person or persons to whom this Warrant shall be 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.
9. Benefits
of this Warrant.
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.
10.
Loss,
theft, destruction or mutilation of Warrant.
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.
11.
Notice
or Demands.
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:
14
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
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.
12. Taxes.
(a) The
issue
of stock certificates on exercises of this Warrant shall be made 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.
13. Applicable
Law.
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.
15
14. Amendments.
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 (without regard to any limitation
contained therein on such exercise), it being understood that upon the
satisfaction of the conditions described in (A) and (B) above, each Warrant
(including any Warrant held by the 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]
16
IN
WITNESS WHEREOF, the Company has duly executed and delivered this Warrant
as of
the Issue Date.
APPLIED
DIGITAL SOLUTIONS, INC.
By:
/s/
Xxxx X. XxXxxxx
Name:
Xxxx X. XxXxxxx
Title:
SVP, CFO
17
EXHIBIT
A to WARRANT
EXERCISE
NOTICE
The
undersigned Holder hereby irrevocably exercises the right to
purchase
of
the shares of Common Stock (“Warrant
Shares”)
of
APPLIED
DIGITAL SOLUTIONS, INC. evidenced
by the attached Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1.
Form
of
Exercise Price. The Holder intends that payment of the Exercise Price shall
be
made as:
______
a
Cash
Exercise
with
respect to _________________ Warrant Shares; and/or
______
a
Cashless
Exercise
with
respect to _________________ Warrant Shares, as permitted by Section 5(b)
of the
attached Warrant.
2.
Payment
of Exercise Price. In the event that the Holder has elected a Cash Exercise
with
respect to some or all of the Warrant Shares to be issued pursuant hereto,
the
Holder shall pay the sum of $________________ to the Company in accordance
with
the terms of the Warrant.
Date:
______________________
___________________________________
Name
of
Registered Holder
By:
_______________________________
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.
18
EXHIBIT
B to WARRANT
TRANSFER
NOTICE
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. By signing this Transfer Notice, the
transferee agrees to be legally bound by the terms of the attached Warrant
and
of the related Securities Purchase Agreement and Registration Rights Agreement
applicable to an Investor.
Date:
______________________
___________________________________
Name
of
Registered Holder
By:
_______________________________
Name:
Title:
Accepted
and Agreed:
________________________
Transferee
Name
By: _________________________
Name:
Title:
Address:
___________________________________
___________________________________
19
___________________________________
19
