AMENDMENT
Exhibit 10.10
AMENDMENT
This Amendment (this “Amendment”), dated August 31, 2007, by and between Applied Digital
Solutions, Inc., a Delaware corporation (the “Company”), Laurus Master Fund, Ltd. (“Laurus”),
Valens Offshore SPV I, Ltd. (“VOF”) and Valens U.S. SPV I, LLC (“VON” and together with Laurus and
VOF, the “Required Purchasers” and each, a “Required Purchaser”), amends that certain Common Stock
Purchase Warrant, issued as of August 24, 2006 by the Company in favor of Laurus Master Fund, Ltd.
and exercisable into up to 1,719,745 shares of Common Stock of the Company (as amended, modified or
supplemented from time to time, the “Warrant”). Capitalized terms used but not defined herein
shall have the meanings given them in the Securities Purchase Agreement, dated as of August 24,
2006, by and between the Company and Laurus (as amended, modified or supplemented from time to
time, the “Purchase Agreement”).
PREAMBLE
WHEREAS, pursuant to the terms of the Purchase Agreement, the Company issued and sold the
Warrant to Laurus;
WHEREAS, Laurus subsequently assigned a portion of the Warrant to each of VOF, VON and PSOURCE
STRUCTURED DEBT LIMITED; and
WHEREAS, the Required Purchasers and the Company desire to amend Warrant.
NOW, THEREFORE, in consideration of the covenants, agreements and conditions hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The “Exercise Price” of the Warrant is hereby amended by deleting the price “$1.88”
appearing therein and inserting the price “$1.35” in lieu thereof.
2. Effective on the Waiver Effective Date (as defined below), Section 10 of the Warrant is
hereby deleted in its entirety and the following new Section 10 is hereby inserted in lieu thereof:
“10. Maximum Exercise. Notwithstanding anything herein to the contrary, in no
event shall the Holder be entitled to exercise any portion of this Warrant in excess of
that portion of this Warrant upon exercise of which the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its Affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised portion of this Warrant or the unexercised or unconverted portion of any other
security of the Holder subject to a limitation on conversion analogous to the limitations
contained herein) and (2) the number of shares of Common Stock issuable upon the exercise
of the portion of this Warrant with respect to which the determination of this proviso is
being made, would result in beneficial ownership by the Holder and its Affiliates of any
amount greater than 9.99% of the then outstanding shares
of Common Stock (whether or not, at the time of such exercise, the Holder and its
Affiliates beneficially own more than 9.99% of the then outstanding shares of Common
Stock). As used herein, the term “Affiliate” means any person or entity that, directly or
indirectly through one or more intermediaries, controls or is controlled by or is under
common control with a person or entity, as such terms are used in and construed under Rule
144 under the Securities Act. For purposes of the second preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such sentence. For any reason at any time, upon written or oral request of
the Holder, the Company shall within three (3) business days confirm orally and in writing
to the Holder the number of shares of Common Stock outstanding as of any given date. The
limitations set forth herein (x) may be waived by the Holder upon provision of no less than
sixty-one (61) days prior written notice to the Company and (y) shall automatically become
null and void following notice to the Company upon the occurrence and during the
continuance of an Event of Default (as defined in the Security Agreement), except that at
no time shall the Company be obligated to issue any shares of Common Stock pursuant to the
terms of this Warrant, the Purchase Agreement, any Related Agreement (as defined in the
Purchase Agreement) if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which the Company may issue pursuant to the
terms of this Warrant, the Purchase Agreement or any Related Agreement without violating
the rules or regulations of the Principal Market (the “Exchange Cap”), except that such
limitation shall not apply in the event that the Company obtains the approval of its
stockholders as required by the applicable rules or regulations of the Principal Market for
issuances of Common Stock in excess of such amount. Notwithstanding anything contained
herein to the contrary, the number of shares of Common Stock issuable by the Company and
acquirable by the Holder pursuant to the terms of this Warrant, the Purchase Agreement, any
Related Agreement (as defined in the Purchase Agreement) or otherwise, shall not exceed an
aggregate of 13,567,898 shares of Common Stock (subject to appropriate adjustment for stock
splits, stock dividends, or other similar recapitalizations affecting the Common Stock).”
3. The Company understands that it has an affirmative obligation to make prompt public
disclosure of material agreements and material amendments to such agreements. The Company agrees
to file an 8-K within 4 business days of the date hereof and in the form otherwise prescribed by
the SEC.
4. This Amendment shall be effective as of the date hereof following the execution and
delivery of this Amendment by each of the Company, Laurus, VON and VOF.
5. The Company and Required Purchasers agree that, upon execution of this Amendment by the
Company and the Required Purchasers (the “Waiver Effective Date”), the Company will be deemed to
have received notice from the Required
Purchasers of the Required Purchasers’ waiver of the 4.99% conversion limitation set forth in
Section 10 of the Warrant, which waiver shall become effective on the 61st day following
the Waiver Effective Date.
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6. Except as specifically set forth in this Amendment, there are no other amendments,
modifications or waivers to the Warrant, and all of the other forms, terms and provisions of the
Warrant remains in full force and effect.
7. From and after the Amendment Effective Date, all references in the Purchase Agreement and
the Related Agreement referred to therein to the “Warrant” shall be deemed to be references to the
“Warrant” as modified hereby.
8. This Amendment shall be binding upon the parties hereto and their respective successors and
permitted assigns and shall inure to the benefit of and be enforceable by each of the parties
hereto and their respective successors and permitted assigns. THIS AMENDMENT SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Amendment
may be executed in any number of counterparts, each of which shall be an original, but all of which
shall constitute one instrument.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment or has caused this
Amendment to be executed on its behalf by a representative duly authorized, all as of the date
first above set forth.
| COMPANY: | PURCHASER: | |||||
| Applied Digital Solutions, Inc. | Laurus Master Fund, Ltd. | |||||
By: |
/s/ Xxxxxxxx X. Xxxxxx | By: | /s/ Xxxxx Grin | |||
Name: |
Xxxxxxxx X. Xxxxxx | Name: | Xxxxx Grin | |||
Title: |
SVP, ACFO | Title: | Director | |||
| Valens Offshore SPV I, Ltd. | ||||||
| By: Valens Capital Management, LLC, its Investment Manager | ||||||
| By: | /s/ Xxxxx Grin | |||||
| Name: | Xxxxx Grin | |||||
| Title: | Authorized Signatory | |||||
| Valens U.S. SPV I, LLC | ||||||
| By: Valens Capital Management, LLC, its Investment Manager | ||||||
| By: | /s/ Xxxxx Grin | |||||
| Name: | Xxxxx Grin | |||||
| Title: | Authorized Signatory | |||||
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