Exhibit 2
STOCK PURCHASE AGREEMENT
by and among
APPLIED DIGITAL SOLUTIONS, INC.
DIGITAL XXXXX.XXX, INC.,
Buyer,
and
XXXXXX X. XXXXXXX,
XXXXXXX XXXXXXX,
and
XXXXXXXX XXXXXXX
Sellers
Dated as of February 27, 2001
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
February 27, 2001, by and among Digital Xxxxx.xxx, Inc., a Delaware corporation
("Buyer") a subsidiary of Applied Digital Solutions, Inc., a Missouri
corporation ("Applied Digital"), and Xxxxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxxxx
Xxxxxxx ("PP"), and Xxxxxxxx Xxxxxxx ("MP", and collectively with Hall,
Pickett, and PP, the "Sellers") (Buyer and Sellers each a "Party" and together
"Parties").
RECITALS
Buyer desires to purchase from Sellers, on the following terms and
conditions, the DOC Shares (as defined below) of Medical Advisory Systems, Inc.,
a Delaware corporation (the "Company" or "DOC"); and
Sellers desire to sell to Buyer, on the following terms and conditions, the
DOC Shares.
NOW, THEREFORE, in consideration of the recitals and the mutual covenants,
representations, warranties, conditions, and agreement hereinafter expressed,
the Parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1. The DOC Shares. Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing (as defined below), the Sellers shall sell and
deliver to Buyer, free and clear of all security interests, claims, and
restrictions, and Buyer shall purchase and accept from Sellers, shares of DOC
common stock reflected on Schedule 1.1 consisting of an aggregate of three
hundred fifty thousand (350,000) shares of DOC common stock now held by Sellers
(the "DOC Shares").
1.2 Consideration. The consideration that Buyer shall pay Sellers for the
DOC Shares, the obligations of Sellers under Article VI, and the other rights of
Buyer hereunder, shall be an aggregate of One Million Three Hundred Sixty-eight
Thousand (1,368,000) restricted shares (the "ADS Shares") of common stock of
Applied Digital and the sole shareholder of Buyer. At the closing of the
purchase of the DOC Shares (the "Closing"), Buyer will deliver to Sellers the
ADS shares.
1.3 Closing; Cooperation. The Closing shall take place at the office of
Xxxxx Xxxx LLP, 000 X. Xxxxxxxx, Xxxxx 0000, Xx. Xxxxx, Xxxxxxxx at 10:00 a.m.
local time on February ___, 2001, or, if the conditions to the Closing are not
by then satisfied, upon satisfaction of such conditions, the date on which the
Closing actually occurs being referred to herein as the "Closing Date." Each
Party shall reasonably cooperate, as to matters under such Party's control, in
the satisfaction of conditions to the obligations of the Parties at the Closing;
provided, that the foregoing shall not require
either Party to waive any condition herein to its obligations at the Closing or
to incur any substantial cost not otherwise required hereunder.
1.4 Deliveries of Sellers at Closing. Subject to the conditions to Sellers'
obligations in Article V, at the Closing, Sellers shall deliver to Buyer a
certificate or certificates evidencing the DOC Shares, duly endorsed or
accompanied by a duly executed stock power, together with the documents
identified in Article IV, duly executed by Sellers.
1.5 Deliveries of Buyer at Closing. Subject to the conditions to Buyer's
obligations in Article IV, at the Closing, Buyer shall deliver to Sellers a
certificate or certificates evidencing the ADS Shares, newly issued or duly
endorsed or accompanied by a duly executed stock power, and the documents
identified in Article V, duly executed by Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, hereby make the following representations
and warranties to Buyer, each of which is true and correct on the date hereof
and each of which shall survive the Closing:
2.1 Power and Authority. Each Seller has the power and capacity to execute
and deliver this Agreement, to perform such Seller's obligations hereunder, and
to consummate the transactions contemplated hereby.
2.2 Stock Ownership. Each Seller is the sole holder of record and
beneficial owner of the DOC Shares as provided on Schedule 1.1. Sellers own the
DOC Shares as set forth on Schedule 1.1, free and clear of all security
interests, claims, restrictions and voting agreements of any kind, except that
the DOC Shares are "restricted securities" as such term is defined under Rule
144 promulgated by the SEC. Each of the Sellers will transfer good and
marketable title to the DOC Shares which such Seller owns, at the Closing, free
and clear of all liens, security interests, claims, restrictions and voting
agreements.
2.3 Enforceability. This Agreement has been duly executed and delivered by
each Seller and constitutes a legal, valid and binding obligation of each
Seller, enforceable against each Seller in accordance with its terms.
2.4 No Violation; Consents. The execution and delivery of this Agreement by
Sellers, the performance by Sellers of the obligations hereunder and the
consummation by Sellers of the transactions contemplated by this Agreement will
not (i) contravene any provision of the articles of incorporation or bylaws of
the Company or the governing documents of the Partnership, (ii) violate or
conflict with any law, statute, ordinance, rule, regulation, decree, writ,
injunction, judgment or order of any governmental authority or of any
arbitration award which is either applicable to, binding upon or enforceable
against the Company or any Seller, (iii) conflict with, result in any
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breach of, or constitute a default (or an event which would, with the passage of
time or the giving of notice or both, constitute a default) under, or give rise
to a right to terminate, amend, modify, abandon or accelerate, any contract
which is applicable to, binding upon or enforceable against the Company or any
Seller, (iv) result in or require the creation or imposition of any lien upon or
with respect to any of the property or assets of the Company, or (v) require the
consent, approval, authorization or permit of, or filing with or notification
to, any governmental authority, any court or tribunal or any other person,
except any applicable filings required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended ("HSR"), and any filings with the
Securities and Exchange Commission (the "SEC") and other filings required to be
made by Buyer.
2.5 Control Shares. Each of the Sellers and the Company has taken all
requisite action so that no provision of Delaware law or the Company's
certificate of incorporation shall limit the value or voting power of the DOC
Shares post-Closing.
2.6 Corporate Existence and Qualification. The Company is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
State of Delaware; it is duly qualified and in good standing in each foreign
jurisdiction in which the conduct of its business or its ownership or leasing of
property makes such qualification or licensing necessary. The Company has the
corporate power and authority to own and use its properties and to transact the
business in which it is engaged.
2.7 Capitalization. The authorized capital stock of the Company consists of
11,000,000 shares, consisting of 10,000,000 shares of common stock, par value $
0.005 per share, and 1,000,000 shares of preferred stock, par value $1.75 per
share. As of the date hereof, 5,161,000 shares are issued, 5,111,000 of which
are outstanding, and all of which have been duly authorized and validly issued
and are fully paid and non-assessable. Except as set forth in the Annual Report
on Form 10-KSB for the fiscal year ended October 31, 2000 and filed with the
Securities and Exchange Commission ("SEC") on January 26, 2001 (the "Annual
Report"), there are no contracts, options or other obligations, contingent or
otherwise, relating to the issuance, sale or transfer by the Company of any
equity security of the Company.
2.8 Subsidiaries. The Company owns of record and beneficially, free and
clear of all liens, all of the outstanding equity securities and other
securities of each entity (the "Subsidiaries") listed on Exhibit 21 to the
Annual Report. Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority to carry on its business
as now conducted and to own its properties. Each Subsidiary is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property makes such qualification or licensing necessary. No legend appears on
any certificate representing equity securities of any Subsidiary. All of the
outstanding equity securities of each Subsidiary have been duly authorized and
validly issued, and are fully paid and nonassessable. There are no contracts
relating to the
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issuance, sale or transfer of any equity security of any Subsidiary. Neither the
Company nor any Subsidiary owns or has any contract to acquire any securities or
ownership interest in any other business.
2.9 Property and Permits. Except as set forth on in the financial
statements (or notes thereto) referenced in Section 2.10, the Company is the
sole owner of all right, title, and interest in and to all assets reflected on
the current balance sheet included in the Annual Report, free and clear of all
mortgages, security interests, claims, restrictions and other encumbrances, and
there exists no restriction on the use or transfer of such assets or property.
No such assets or property are in the possession of others and the Company holds
no property on consignment. All tangible such assets and property are in good
condition and repair and fit for their intended purpose, and are not in
violation of applicable zoning or other Law (as defined below). The Company
holds all permits, licenses and other approvals necessary to conduct the
business in which it is engaged.
2.10 Financial Statements. The consolidated balance sheets and the related
consolidated statements of income, changes in stockholders' equity and cash
flows contained in the Company's Annual Report and in all other documents filed
by the Company with the SEC since January 26, 2001, presented fairly in all
material respects the consolidated financial position of the Company, and the
results of the consolidated operations and changes in stockholders' equity and
consolidated financial position of the Company and the Subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth
(subject to possible ordinary year-end adjustments to any such statements not
reflecting a fiscal year or year-end date); each of such statements (including
the related notes where applicable) has been prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved ("GAAP"). The books and records of the Company and the Subsidiaries
have been, and are being, maintained in all material respects in accordance with
the GAAP and any other applicable legal and accounting requirements and reflect
only actual transactions.
2.11 Changes Since January 26, 2001. Since January 26, 2001, the Company
has not (i) issued any capital stock or other securities (including without
limitation options or warrants), with the exception of options to purchase
common stock issued to employees and/or agents of the Company; (ii) made any
distribution of or with respect to its capital stock or other securities or
purchased or redeemed any of its securities; (iii) paid any bonus to or
increased the rate of compensation of any of its officers or salaried employees
or amended any other terms of employment of such persons; (iv) sold, leased or
transferred any of its properties or assets other than in the ordinary course of
business consistent with past practice; (v) made or obligated itself to make
capital expenditures out of the ordinary course of business consistent with past
practice; (vi) made any payment in respect of its liabilities other than in the
ordinary course of business consistent with past practice; (vii) entered into
any other transaction or been subject to any event which has or may have a
material adverse effect on the Company; or (viii) agreed to do or authorized any
of the foregoing.
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2.12 (a) Compliance with Disclosure Requirements. Except as otherwise
disclosed in the Company's Annual Report, the Company has timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since
December 31, 1998 to or with any governmental agency, including without
limitation the SEC. No document filed with the SEC since December 31, 1998
contains any untrue statement of material fact, or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading.
(b) Compliance with Continued Listing Requirements. (i) The Company is in
compliance with all applicable American Stock Exchange continued listing
requirements, (ii) there are no proceedings pending or to the Company's
knowledge threatened against the Company relating to the continued listing of
the Company's common stock on the American Stock Exchange and (iii) the Company
has not received any notice of, nor to the knowledge of the Company is there any
basis for, the delisting of such common stock from the American Stock Exchange.
2.13 Insurance. The Company maintains insurance coverage. All policies of
insurance to which the Company or any Subsidiary is a party: (a) are validly
issued, outstanding and enforceable; (b) are issued by an insurer that is
financially sound and reputable; (c) taken together, provide adequate insurance
coverage for the assets and the operations of the Company; and (d) will continue
in full force and effect following the Closing. The Company has given notice to
the insurer of all claims that may be insured thereby.
2.14 No Undisclosed Liabilities. The Company does not have any material
liabilities or obligations whatsoever, known or unknown, accrued, absolute,
contingent, or other, except (a) as disclosed in the Annual Report or other
fillings with the SEC since the Annual Report, or (b) to the extent they arise
in the ordinary course of the business of the Company and would not have been
required to be set forth therein had they existed on January 26, 2001: (i) Taxes
(as defined below) incurred since January 26, 2001 and (ii) performance and
payment obligations (but not liabilities for breach or violation) lawfully
incurred under arm's-length contracts for goods or services.
2.15 Taxes.
(a) Since December 31, 1994, the Company timely has filed or caused to be
filed with the appropriate Government entity all tax returns and reports
required to be filed by or on behalf of the Company, including estimated tax and
informational returns ("Tax Returns") and no Tax Returns have been amended. All
Tax Returns are true, correct, and complete.
(b) Except as noted in the Annual Report, all Taxes (whether or not
reflected in Tax Returns as filed) payable by the Company with respect to all
periods reflected on Tax Returns have been fully paid, and there are no grounds
for the assertion or assessment of any additional Taxes against the Company or
its assets with
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respect to such periods. All unpaid Taxes are properly accrued on the books of
the Company and will be so accrued on the Company's balance sheet as of the
Closing Date in an amount sufficient to pay them in full when due.
(c) The Company has complied with all Laws relating to the withholding of
Taxes and the payment thereof (including, without limitation, withholding of
Taxes under Section 1441 and 1442 of the Internal Revenue Code of 1986, as
amended (the "Code"), or similar provision under foreign laws), and has timely
and properly withheld from employee wages and paid over to the proper Government
all amounts required to be withheld and be paid over under applicable Law.
(d) As used in this Agreement, "Taxes" means all taxes, charges, fees,
levies, or other like assessments, including without limitation income, gross
receipts, ad valorem, value added, premium, excise, real property, personal
property, windfall profit, sales, use, transfer, license, withholding,
employment, payroll, and franchise taxes imposed by: the United States or any
other nation, state, or bilateral or multilateral governmental authority, any
local governmental unit or subdivision thereof, or any branch, agency, or
judicial body thereof ("Government"); and shall include any interest, fines,
penalties, assessments, or additions to tax resulting from, attributable to, or
incurred in connection with any such Taxes or any contest or dispute thereof.
2.16 No Breach of Law or Governing Document. The Company is not and has not
been in default under or in breach or violation of any applicable statute, law,
treaty, convention, ordinance, decree, order, injunction, rule, directive, or
regulation of any Government ("Law") or the provisions of any Government permit,
franchise, or license, or any provision of its certificate of incorporation or
its bylaws. The Company has not received any notice alleging such default,
breach or violation. Neither the execution of this Agreement nor the Closing do
or will constitute or result in any such default, breach or violation.
2.17 Litigation. Except as disclosed in the Annual Report, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation pending, or threatened against, by or affecting the Company or any
Seller, or any of their properties or assets, which alone or in the aggregate
would have a material adverse effect upon the Company, or which questions the
validity or enforceability of this Agreement or the transactions contemplated
hereby, and there is no basis for any of the foregoing. There are no outstanding
orders, injunctions, decrees or stipulations issued by any governmental
authority in any proceeding to which the Company or any Seller is or was a party
which have not been complied with in full or which continue to impose any
material obligations on the Company or such Seller.
2.18 Intellectual Property. Except as disclosed in the Annual Report:
(a) The Company is the sole and exclusive owner of each patent, trademark,
trade name, service xxxx, and copyrighted work, and registrations thereof and
applications therefor, trade secret, software program, invention, proprietary
process, and item of proprietary know-how and other intellectual property, and
all
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licenses, sublicenses, and agreements in respect thereof, used or licensed by or
to the Company, to which the Company is a party, or which are otherwise included
in the property of the Company (the "Intellectual Property") and all such items
are valid and subsisting;
(b) The Company is the exclusive owner of all internally developed prospect
lists, customer lists, projections, analyses, and market studies, free and clear
of all restrictions whatsoever, and has the unrestricted right to use any other
such materials used by the Company but not internally developed;
(c) The ownership, use, licensing, purchase, or sale by or to the Company
of any of the Intellectual Property or of the other technology used in the
business of the Company does not conflict with, contravene, infringe upon,
interfere with, or violate any patent, trademark, copyright or other
intellectual property right of any third person or require the acquiescence,
agreement or consent of any third person; and
(d) The Intellectual Property and the other technology used in the business
of the Company are not subject to a challenge or claim of infringement,
interference or unfair competition or other claim and, to the knowledge of
Sellers or the Company, the Intellectual Property is not being infringed upon or
violated by any third person.
2.19 Officers and Directors. Set forth on Schedule 2.19 is a list of: (a)
all current directors of the Company, and (b) all current officers (with office
held) of the Company.
2.20 Governmental Approvals and Filings. No Seller nor the Company is
required to obtain any approval, consent, or authorization of, or to make any
declaration or filing with, any Government for the valid execution and delivery
of this Agreement or any other agreement to be delivered hereunder, the purchase
and sale of the DOC Shares, or the performance or consummation of the respective
transactions contemplated hereby or thereby, except any applicable filings
required under HSR, and any filings with the SEC and other filings required to
be made by Buyer.
2.21 Purchase Entirely for Own Account. The ADS Shares to be received by
the Sellers hereunder will be acquired for the Sellers' own accounts, not as
nominee or agent, for investment purposes and not with a view to, or for offer
or sale in connection with directly or indirectly, any distribution in violation
of the Securities Act of 1933 (the "1933 Act") or any other applicable
securities law and with no intention of participating in the formulation,
determination of direction of the basic business decisions of the Buyer. No
Seller is a registered broker dealer or an entity engaged in the business of
being a broker dealer. No Seller has any intention of participating in the
formulation, determination or direction of the basic business decisions of the
Buyer.
2.22 Investment Experience. Each Seller acknowledges that it can bear the
economic risk and complete loss of its investment in the ADS Shares and has such
8
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated hereby.
2.23 Disclosure of Information. Each Seller has had access to such
financial and other information concerning the Buyer and the ADS Shares as such
Seller deems necessary in order to make a decision to acquire the ADS Shares,
including an opportunity to ask questions of and receive information from the
Buyer. Neither such inquiries nor any other due diligence investigation
conducted by the Sellers shall modify, amend or affect any Seller's right to
rely on the Buyer's representations and warranties contained in this Agreement.
2.24 Accredited Investor. Each Seller is an accredited investor as defined
in Rule 501(a) of Regulation D, as amended, under the 1933 Act.
2.25 Disclosure. Each Schedule and each document attached as or on a
Schedule, as well as the other information provided to the Buyer by or on behalf
of the Sellers, is true, correct, and complete. No representation or warranty by
Sellers in this Agreement or any Schedule referred to herein or in any agreement
to be delivered hereunder, and no information furnished to Buyer by or on behalf
of Sellers pursuant to or in connection with this Agreement contains or will
contain as of the Closing Date any untrue statement of a material fact or any
omission of a material fact necessary to make the respective statements
contained herein or therein, in light of the circumstances under which the
statements were made, not misleading.
2.26 Brokers; Finders. No Seller has incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
2.27 Restrictive Documents. No Seller is subject to any charter, by-law,
mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree or any other restriction which would prevent consummation of
the transactions contemplated by this Agreement.
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2.28 Employee Benefit Matters.
(a) Schedule 2.28 lists all employee benefit plans (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that are maintained or contributed to by the Company or any
Subsidiary or with respect to which the Company or any Subsidiary has or may
have any liability (the "Company Benefit Plans"). Except as set forth in the
Annual Report, each Company Benefit Plan has been established and maintained in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA and the Code.
Except as set forth in the Annual Report, each Company Benefit Plan that is
intended to be qualified under Section 401(a) of the Code is, and since its
inception has been, so qualified and a determination letter has been issued by
the Internal Revenue Service to the effect that each such Company Benefit Plan
is so qualified and that each trust forming a part of any such Company Benefit
Plan is exempt from tax pursuant to Section 501(a) of the Code and no
circumstances exist which could adversely affect this qualification or
exemption.
(b) No Company Benefit Plan is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA that is subject to Title IV of ERISA.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer, and Applied Digital as applicable, hereby make the following
representations and warranties to Sellers, each of which is true and correct on
the date hereof and each of which shall survive the Closing:
3.1 Corporate Status. Buyer is a corporation, duly organized, validly
existing and in good standing under the laws of Delaware; it is duly qualified
and in good standing in each foreign jurisdiction in which the conduct of its
business or its ownership or leasing of property makes such qualification or
licensing necessary. The Buyer has the corporate power and authority to own and
use its properties and to transact the business in which it is engaged.
3.2 Corporate Power and Authority. Buyer has all requisite power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. Buyer has
taken all action necessary to authorize its execution and delivery of this
Agreement, the performance of its respective obligations hereunder and the
consummation of the transactions contemplated hereunder.
3.3 Enforceability. This Agreement has been duly executed and delivered by
Buyer and constitutes a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
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3.4 No Violation. The execution and delivery of this Agreement by Buyer,
the performance by Buyer of the obligations hereunder and the consummation by
Buyer of the transactions contemplated by this Agreement will not (i) contravene
any provision of the articles of incorporation or bylaws of Buyer, (ii) violate
or conflict with any law, statute, ordinance, rule, regulation, decree, writ,
injunction, judgment or order of any governmental authority or of any
arbitration award which is either applicable to, binding upon or enforceable
against Buyer, (iii) conflict with, result in any breach of, or constitute a
default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any contract which is
applicable to, binding upon or enforceable against Buyer, (iv) result in or
require the creation or imposition of any lien upon or with respect to any of
the property or assets of Buyer, or (v) require the consent, approval,
authorization or permit of, or filing with or notification to, any governmental
authority, any court or tribunal or any other person, except any applicable
filings required under HSR, and any filings with the SEC and other filings
required to be made by Buyer.
3.5 Capitalization. The authorized capital stock of Applied Digital
consists of 245,000,000 shares of common stock, par value $ 0.001 per share, and
5,000,000 shares of preferred stock, par value $10.00 per share. As of January
19, 2001 (a) 119,440,777 shares of common stock were issued and outstanding, and
all of which have been duly authorized and validly issued and are fully paid and
non-assessable, and (b) 26,188.04 shares of Class C Preferred Stock were issued
all of which are outstanding, and all of which have been duly authorized and
validly issued and are fully paid and non-assessable.
3.6 Issuance of Shares. Upon issuance to Sellers, the ADS Shares will be
duly authorized, validly issued, fully paid, and non-assessable.
3.7 Financial Statements. The consolidated balance sheets and the related
consolidated statements of income, changes in stockholders' equity and cash
flows contained in Applied Digital's annual report on Form 10-K for the fiscal
year ended December 31, 1999 (the "ADS 10-K") and in all other documents filed
by Applied Digital with the SEC since December 31, 1999, presented fairly in all
material respects the consolidated financial position of Applied Digital, and
the results of the consolidated operations and changes in stockholders' equity
and consolidated financial position of Applied Digital and its subsidiaries for
the respective fiscal periods or as of the respective dates therein set forth
(subject to possible ordinary year-end adjustments to any such statements not
reflecting a fiscal year or year-end date); each of such statements (including
the related notes where applicable) has been prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved ("GAAP"). The books and records of Applied Digital and its subsidiaries
have been, and are being, maintained in all material respects in accordance with
the GAAP and any other applicable legal and accounting requirements and reflect
only actual transactions. Notwithstanding the foregoing, the representations
contained in this Section 3.7 will not be deemed to refer to any information
contained in any applicable document filed with the SEC relating to the
business, operations,
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financial condition or results of operations of Bostek, Inc. which was acquired
by Applied Digital in 1999.
3.8 (a) Compliance with Disclosure Requirements. Except as otherwise
disclosed in the ADS 10-K, Applied Digital has timely filed all material
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that it was required to file since December 31,
1998 to or with any governmental agency, including without limitation the SEC.
No document filed with the SEC since December 31, 1998 contains any untrue
statement of material fact, or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading.
(b) Compliance with Nasdaq Continued Listing Requirements. (i) Applied
Digital is in compliance with all applicable Nasdaq National Market continued
listing requirements, (ii) there are no proceedings pending or to the Buyer's
knowledge threatened against Applied Digital relating to the continued listing
of Applied Digital's common stock on the Nasdaq National Market and (iii)
Applied Digital has not received any notice of, nor to the knowledge of the
Buyer is there any basis for, the delisting of such common stock from the Nasdaq
National Market.
3.9 No Undisclosed Liabilities. Applied Digital does not have any material
liabilities or obligations whatsoever, known or unknown, accrued, absolute,
contingent, or other, except (a) as disclosed in the ADS 10-K or other filings
with the SEC since the ADS 10-K, or (b) to the extent they arise in the ordinary
course of the business of Applied Digital and would not have been required to be
set forth therein had they existed on June 30, 2000: (i) Taxes (as defined
below) incurred since June 30, 2000 and (ii) performance and payment obligations
(but not liabilities for breach or violation) lawfully incurred under
arm's-length contracts for goods or services.
3.10 Investment Representation. Buyer is acquiring the DOC Shares for its
own account, for investment and without any view to resale or distribution of
the DOC Shares or any portion thereof.
3.11 Investment Experience. The Buyer acknowledges that it can bear the
economic risk and complete loss of its investment in the DOC Shares and 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.
3.12 Disclosure of Information. The Buyer has had access to such financial
and other information concerning the Company and the DOC Shares as the Buyer
deems necessary in order to make a decision to acquire the DOC Shares, including
an opportunity to ask questions of and receive information from the Company.
Neither such inquiries nor any other due diligence investigation conducted by
the Buyer shall modify, amend or affect the Buyer's right to rely on the
Sellers' representations and warranties contained in this Agreement.
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3.14 Brokers, Finders. Buyer has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
3.15 Restrictive Documents. Buyer is not subject to any charter, by-law,
mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree or any other restriction which would prevent consummation of
the transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer at the Closing shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions
(unless waived in writing by Buyer):
4.1 Accuracy of Representations and Warranties. Sellers' representations
and warranties set forth in Article II shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made at and as of such date and time.
4.2 Performance of Agreement. Sellers shall have fully performed and
complied with all covenants, conditions, and other obligations under this
Agreement to be performed or complied with by them at or prior to the Closing.
4.3 No Adverse Change. There shall have been no material adverse change in
the Company's business, prospects or financial condition between the date hereof
and Closing.
4.4 Consents. Sellers shall have obtained the written consent of all
lenders and parties to material contracts with the Company, if otherwise
required..
4.5 Certificate. Sellers shall have delivered to Buyer at the Closing a
certificate of Sellers, dated the Closing Date, to the effect that the
conditions set forth in Sections 4.1, 4.2, 4.3 and 4.4 have been satisfied. Such
certificate shall be deemed an additional representation and warranty of Sellers
hereunder.
4.6 Board Composition. The number of members of the Board of Directors of
the Company shall be seven, all of the members of the Board of Directors of the
Company, other than Xxxxxx Xxxxxxx, Xxxxxx Xxxx, and Xxxxxx Xxxxxxx, shall have
resigned, and Xxxxxxxx Xxxxxx, Xxxxx Xxxxxxx, and two other individual
designated by Applied Digital shall have been appointed thereto.
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4.7 Satisfactory Investigation. Buyer shall have completed its
investigation of the business, assets and financial condition of the Company and
its Subsidiaries in connection with the transactions contemplated hereby and
shall have been satisfied with such results in its sole and absolute discretion.
4.8 Other Transaction. Buyer shall have consummated that certain Stock
Purchase Agreement by and between the Buyer and Xx. Xxxxxx X. Xxxx of even date
herewith prior to or simultaneously with this Agreement.
4.9 Consent. Applied Digital shall have obtained the consent of IBM Credit
Corporation.
4.10 Board Approval. Applied Digital's board of directors shall have
approved this Agreement and the transactions contemplated hereby.
ARTICLE V
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers at the Closing shall be subject to the
satisfaction at the Closing of the following conditions (unless waived in
writing by Sellers):
5.1 Accuracy of Representations and Warranties. Buyer's representations and
warranties set forth in Article III shall have been true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made at and as of such date and time.
5.2 Performance of Agreement. Buyer shall have fully performed and complied
with all covenants, conditions, and other obligations under this Agreement to be
performed or complied with by it at or prior to the Closing.
5.3 No Adverse Change. There shall have been no material adverse change in
the Buyer's business, prospects or financial condition between the date hereof
and Closing.
5.4 Certificate. Buyer shall have delivered to Sellers at the Closing a
certificate of Buyer executed by an executive officer of Buyer, dated the
Closing Date, to the effect that the conditions set forth in Sections 5.1, 5.2
and 5.3 have been satisfied. Such certificate shall be deemed an additional
representation and warranty of Buyer hereunder.
ARTICLE VI
COVENANT NOT TO COMPETE
In consideration of the sale of the DOC Shares and the consummation of the
transactions contemplated hereby, no Seller shall, individually or collectively,
for two (2) years following the termination of Xxxxxxx'x employment with the
Company, operate or have financial interest in any business that competes,
directly or indirectly, with the
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business of the Company, except for passive investments (less than 2% of
outstanding shares) in publicly-held entities.
ARTICLE VII
ADDITIONAL COVENANTS OF THE PARTIES
7.1 Registration. Within ninety (90) days of the Closing, if Applied
Digital is eligible to use such form, Applied Digital shall file a registration
statement on Form S-3 under the Securities Act of 1933, as amended, in order to
register for re-sale the ADS Shares.
7.2 (a) Piggyback Registration. If at any time Applied Digital proposes to
file a registration statement under the Securities Act of 1933, as amended, with
respect to a public offering of Common Stock for its own account (other than a
registration statement (i) on Form S-8 or any successor form thereto, (ii) filed
solely in connection with a dividend reinvestment plan or employee benefit plan
covering officers or directors of Applied Digital or its Affiliates, or (iii) on
Form S-4 or any successor form thereto, in connection with a merger, acquisition
or similar corporate transaction or for the account of any holder of Common
Stock), and at such time no registration statement described in Section 7.1 has
yet been filed, then Applied Digital shall, subject to the provision set forth
in subsection 7.2(b) below, include in each such registration the ADS Shares.
(b) Priority on Piggyback Registrations. Applied Digital shall permit the
Sellers to include the ADS Shares on the same terms and conditions as Common
Stock of Applied Digital included therein. Notwithstanding the foregoing, if the
managing underwriter or underwriters participating in such offering advise the
Sellers in writing that the total amount of securities requested to be included
in such registration exceeds the amount which can be sold in (or during the time
of) such offering without delaying or jeopardizing the success of the offering
(including the price per share of the securities to be sold), then the amount of
securities to be offered for the account of the Sellers and other holders of
securities who have piggyback registration rights with respect thereto shall be
reduced (to zero if necessary) pro rata on the basis of the number or amount of
Common Stock requested to be registered by the Sellers and each other holder
participating in such offering.
7.3 Conduct of Business Before Closing. Until Closing Sellers shall not,
without the prior written consent of Buyer (a) fail to cause the Company to
operate in the ordinary course of business, (b) take or permit the Company to
take any action which would require a change or addition to or deletion from the
disclosures of Sellers pursuant to Article II hereof, or (c) permit the Company
to file any document with the SEC.
7.4 Public Disclosure. No Party to this Agreement shall (and Sellers shall
cause the Company not to) make any public disclosure of the terms hereof or the
transactions contemplated hereby without the prior written consent of the other
Party, except as required by law. In the event circumstances shall change
requiring, in the
15
opinion of either Party, a public announcement, the Party proposing to make the
announcement will advise the other in advance and will give the other Party the
opportunity to comment on the form of the proposed announcement. If the Closing
does not occur, Buyer, and if the Closing does occur, Sellers shall not disclose
to any third person any confidential information relating to the Company without
the prior written consent of the other Party.
7.5 Further Assurances. From and after the Closing, the Parties shall do
such acts and execute such documents and instruments as may be reasonably
required to make effective the transactions contemplated hereby.
7.6 Termination of the Agreement. If the Closing shall not have occurred
prior thereto, this Agreement may be terminated by a Party hereto without
further liability or obligation after March 1, 2001 if such Party is not in
breach or violation hereof.
7.7 Effect of Termination. The Parties agree that the sole remedy available
to a party terminating this Agreement pursuant to Section 7.6 hereof shall be
limited to such party's right not to effect the transactions contemplated
hereby; provided, however, that notwithstanding the foregoing (i) Section 7.4,
this Section 7.7, Section 9.6 and Section 9.8 shall survive any termination of
this Agreement and (ii) no Party shall be relieved or released as a result of
such termination from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Buyer. Sellers, jointly and severally, shall hold
Buyer, and the shareholders, directors, officers, successors, assigns, and
agents of Buyer (the "Buyer Indemnified Persons"), harmless and indemnify each
of them from and against, and waives any claim for contribution or indemnity
with respect to, any and all claims, losses, damages, liabilities, expenses or
costs ("Losses"), plus reasonable attorneys' fees and expenses incurred in
connection with Losses and/or enforcement of this Agreement, plus interest from
the date incurred through the date of payment at two (2) percent above the prime
lending rate of Citibank, NA from time to time prevailing (in all, "Indemnified
Losses") incurred or to be incurred by any of them to the extent resulting from
or arising out of any breach or violation of Sellers' representations,
warranties, covenants, or agreements contained in this Agreement, including
provisions of this Article VIII.
8.2 Indemnification of Sellers. Buyer shall hold Sellers, their permitted
assigns and agents (the "Seller Indemnified Persons") harmless and indemnify
each of them from and against, and waives any claim for contribution or
indemnity with respect to, any and all Indemnified Losses incurred or to be
incurred by any of them, to the extent resulting from or arising out of any
breach or violation of Buyer's representations, warranties, covenants and
agreements contained in this Agreement, including the provisions of this Article
VIII.
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8.3 Survival. The respective representations and warranties made by the
Parties in Articles II and III and certificates under Sections 4.4 and 5.4 shall
survive the Closing Date but the right to bring a claim for indemnification
under this Article VIII shall expire on the second anniversary of the Closing
Date unless a claim with respect thereto shall have been made pursuant to
Section 8.1 or 8.2 prior to such date against the Party responsible for
indemnification hereunder (the "Indemnifying Party"); provided, that the
foregoing shall not apply to representations and warranties under Sections 2.1
or 2.2 or a certificate relating thereto, or to any intentional breach or
violation of any provision of this Agreement, which shall survive without
limitation hereunder.
8.4 Notice of Claim. In the event that Buyer seeks indemnification on
behalf of a Buyer Indemnified Person, or Sellers seek indemnification on behalf
of a Seller Indemnified Person, such Party seeking indemnification (the
"Indemnified Party") shall give written notice to the Indemnifying Party
specifying the facts constituting the basis for such claim and the amount, to
the extent known, of the claim asserted. The Indemnifying Party shall pay the
amount of any valid claim not more than ten days after the Indemnified Party
provides notice to the Indemnifying Party of such amount.
8.5 Right to Contest Claims of Third Persons. If an Indemnified Party is
entitled to indemnification hereunder because of a claim asserted by any
claimant (other than an indemnified person hereunder) ("Third Person"), the
Indemnified Party shall give the Indemnifying Party reasonably prompt notice
thereof after such assertion is actually known to the Indemnified Party;
provided, however, that the right of a person to be indemnified hereunder in
respect of claims made by a Third Person shall not be adversely affected by a
failure to give such notice unless, and then only to the extent that, an
Indemnifying Party is prejudiced thereby. The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party, and using counsel
reasonably satisfactory to the Indemnified Party, to investigate, secure,
contest, or settle the claim alleged by such Third Person (a "Third-Person
Claim"), provided that the Indemnifying Party has unconditionally acknowledged
to the Indemnified Party in writing his or its obligation to indemnify the
persons to be indemnified hereunder with respect to such Third-Person Claim; the
Indemnified Party may thereafter participate in (but not control) the defense of
any such Third-Person Claim with its own counsel at its own expense, unless
separate representation is necessary to avoid a conflict of interest, in which
case such representation shall be at the expense of the Indemnifying Party.
Unless and until the Indemnifying Party so acknowledges his or its obligation to
indemnify, the Indemnified Party shall have the right, at its option, to assume
and control defense of the matter and to look to the Indemnifying Party for the
full amount of the costs of defense. The failure of the Indemnifying Party to
respond in writing to the aforesaid notice of the Indemnified Party with respect
to such Third-Person Claim within twenty (20) days after receipt thereof shall
be deemed an election not to defend the same. If the Indemnifying Party does not
so acknowledge his or its obligation to indemnity and assume the defense of any
such Third-Person Claim, (a) the Indemnified Party may defend against such
claim, in such manner as it may deem appropriate, including, but not limited to,
settling such claim, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party may participate in (but not control) the defense of such
action, with
17
its own counsel at its own expense. If the Indemnifying Party thereafter seeks
to question the manner in which the Indemnified Party defended such Third-Person
Claim or the amount or nature of any such settlement, the Indemnifying Party
shall have the burden to prove by clear and convincing evidence that conduct of
the Indemnified Party in the defense and/or settlement of such Third-Person
Claim constituted gross negligence or willful misconduct. The Parties shall make
available to each other all relevant information in their possession relating to
any such Third-Person Claim and shall cooperate in the defense thereof.
8.6 Limitation of Indemnification. No Indemnified Party shall be entitled
to indemnification for any Losses unless such Indemnified Party has sustained
Losses which, in the aggregate, exceed $50,000, and then for all Losses as
provided above.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Notice. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given and made upon being delivered either by courier
or fax delivery to the Party for whom it is intended, provided that a copy
thereof is deposited, postage prepaid, certified or registered mail, return
receipt requested, in the United States mail, bearing the address shown in this
Section 9.1 for, or such other address as may be designated in writing hereafter
by, such Party:
If to Buyer or Applied Digital:
Applied Digital Solutions, Inc.
Attention: Xxxxx X. Xxxxxxx, Esq.
000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
With copies to:
Xxxxx X. XxXxxxxx, Esq.
Xxxxx Xxxx LLP
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to Sellers:
Xxxxxx X. Xxxxxxx
Xxxxxxx Xxxxxxx
Xxxxxxxx Xxxxxxx
_____________________
_____________________
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With a copy to:
_____________________
_____________________
_____________________
_____________________
9.2 Entire Agreement. This Agreement and the Schedules and Exhibits hereto
embody the entire agreement and understanding of the parties hereto with respect
to the subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings relative to such subject matter.
9.3 Assignment; Binding Agreement. This Agreement and various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
Buyer, its successors, and permitted assigns and Sellers, their legal
representatives, successors, and permitted assigns. Neither this Agreement nor
any of the rights, interests, or obligations hereunder shall be transferred,
delegated, or assigned (by operation of law or otherwise) by any of the Parties
hereto without the prior written consent of the other Parties, except that Buyer
shall have the right to transfer and assign its rights hereunder to purchase the
DOC Shares and any other rights or benefits afforded to it by this Agreement to
any entity which at the time of such transfer and assignment is controlled by
Buyer.
9.4 Counterparts. This Agreement may be executed simultaneously in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. The parties agree that a
copy of a signature sent by telecopier shall be deemed an original for all
purposes.
9.5 Headings; Interpretation. The article and section headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of the Agreement. Each reference in this Agreement
to an Article, Section, Schedule or Exhibit, unless otherwise indicated, shall
mean an Article or a Section of this Agreement or a Schedule or Exhibit attached
to this Agreement, respectively. References herein to "days", unless otherwise
indicated, are to consecutive calendar days. All Parties have participated
substantially in the negotiation and drafting of this Agreement and agree that
no ambiguity herein should be construed against the draftsman.
9.6 Expenses. Sellers (and not the Company) shall pay all costs and
expenses incurred on behalf of themselves or the Company in connection with the
negotiation, preparation and execution of this Agreement and the consummation of
the
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transactions contemplated hereby, including, without limitation, fees and
expenses of attorneys, investment bankers and accountants.
9.7 Remedies Cumulative. All rights and remedies of the Parties under this
Agreement are cumulative and without prejudice to any other rights or remedies
under Law.
9.8 Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the substantive laws of the State of Delaware,
without reference to its conflict of law rules.
* * * * * * * *
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IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be executed as of the date first above written.
BUYER:
DIGITAL XXXXX.XXX, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman
APPLIED DIGITAL SOLUTIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and CEO
SELLERS:
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------------------------------
Xxxxxx X. Xxxxxxx
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------------------------
Xxxxxxx Xxxxxxx, Custodian for Xxxxxxx Xxxxxxx UTMA
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------------------------
Xxxxxxx Xxxxxxx, Custodian for Xxxxxxxx Xxxxxxx UTMA
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