EXHIBIT 10.3
NEITHER THIS SECURITY NOR THE SHARES OF COMMON STOCK OF APPLIED DIGITAL
SOLUTIONS, INC. FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
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MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS
AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED
BY SUCH SECURITIES.
STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
APPLIED DIGITAL SOLUTIONS, INC.
and/or
____________ shares of Common Stock of
DIGITAL ANGEL CORPORATION
THIS STOCK PURCHASE WARRANT CERTIFIES that, for value
received, (the "Holder"), is entitled, upon the terms and
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subject to the limitations on exercise and the conditions hereinafter set
forth, at any time on or after June , 2003 (the "Initial Exercise Date")
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and on or prior to the close of business on the fourth anniversary of the
Initial Exercise Date (the "Termination Date") but not thereafter, to either
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(i) subscribe for and purchase from Applied Digital Solutions, Inc., a
corporation incorporated in the State of Missouri (the "Company"), up to
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shares (the "Warrant Shares") of Common Stock, par value $0.001
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per share, of the Company (the "Common Stock") or (ii) purchase from the
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Digital Angel Corporation ("DOC") up to shares ("DOC Warrant
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Shares") of common stock, par value $0.005 per share, of DOC (the "DOC
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Common Stock"), or any combination thereof. The purchase price of one share
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of Common Stock (the "Exercise Price") under this Warrant shall be $0.564,
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subject to adjustment hereunder, and the purchase price of one share of DOC
Common Stock (the "DOC Exercise Price") under this Warrant shall be $3.178,
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as adjusted hereunder. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED
HEREIN SHALL HAVE THE MEANINGS SET FORTH IN THAT CERTAIN SECURITIES PURCHASE
AGREEMENT (THE "PURCHASE
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1
AGREEMENT"), DATED JUNE 30, 2003, BETWEEN THE COMPANY AND THE PURCHASERS
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SIGNATORY THERETO.
1. Title to Warrant. Prior to the Termination Date and
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subject to compliance with applicable laws and Section 7 of this Warrant,
this Warrant and all rights hereunder are transferable, in whole or in part,
at the office or agency of the Company by the Holder in person or by duly
authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed. The transferee shall sign
an investment letter in form and substance reasonably satisfactory to the
Company.
2. Authorization of Warrant Shares and DOC Warrant Shares.
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The Company covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will, upon
exercise of the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue). The
Company is the beneficial owner and the Trustee is the record owner of all
of the DOC Warrant Shares, free and clear of any Liens, and upon exercise in
accordance with this Warrant, the Company and the Trustee will transfer to
the Holder good and marketable title to such DOC Warrant Shares, free and
clear of any Liens. Upon any such transfer to the Holder of any DOC Warrant
Shares, and assuming the Holder is not deemed to be an underwriter and
assuming the Holder complies with the applicable plan of distribution, the
DOC Warrant Shares shall be unrestricted and freely tradable on the
Principal Market without any prospectus delivery or other requirements
whatsoever and without the need to make any registration or other filing
with the Commission.
3. Exercise of Warrant.
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(a) Except as provided in Section 4 herein,
exercise of the purchase rights represented by this Warrant may be
made at any time or times on or after the Initial Exercise Date and
on or before the Termination Date by the surrender of this Warrant
and the Notice of Exercise Form annexed hereto duly executed, at
the office of the Company or, in the case of exercise into DOC
Warrant Shares, to the Trustee (or such other office or agency of
the Company or Trustee as they may designate by notice in writing
to the registered Holder at the address of such Holder appearing on
the books of the Company or the Trustee, respectively) and upon
payment of the Exercise Price and/or DOC Exercise Price, as the
case may be, of the shares thereby purchased by wire transfer or
cashier's check drawn on a United States bank to the Company, or by
means of a cashless exercise pursuant to Section 3(e) (as to
Warrant Shares only), the Holder shall be entitled to receive a
certificate for the number of Warrant Shares, DOC Warrant Shares,
or combination thereof, so purchased. Certificates for shares
purchased hereunder shall be delivered to the Holder within five
(5) Trading Days after the date on which this Warrant shall have
been exercised as aforesaid. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed
to have been issued, and Holder or any other person so designated
to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant
has been exercised by payment to the Company of the Exercise Price
and/or DOC Exercise Price, as the case may be, and all taxes
required to be paid by the Holder, if any, pursuant
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to Section 5 prior to the issuance of such shares, have been paid.
If the Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this
Section 3(a) by the third Trading Day after the date of exercise,
then the Holder will have the right to rescind such exercise. In
addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an
exercise by the third Trading Day after the date of exercise, and
if after such third Trading Day the Holder is required by its
broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a "Buy-In"), then the Company shall (1) pay in
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cash to the Holder the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (A) the number of Warrant Shares that the Company
was required to deliver to the Holder in connection with the
exercise at issue times (B) the price at which the sell order
giving rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the portion of the
Warrant and equivalent number of Warrant Shares for which such
exercise was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with an aggregate
sale price giving rise to such purchase obligation of $10,000,
under clause (1) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the
Company. Nothing herein shall limit a Holder's right to pursue any
other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company's failure to
timely deliver certificates representing shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
(b) This Warrant is exercisable proportionately
into Warrant Shares and/or DOC Warrant Shares, but is not
exercisable into the full number of both Warrant Shares and DOC
Warrant Shares. For every Warrant Share purchased, a proportionate
number of DOC Warrant Shares shall cease to be purchasable and
vice versa. By way of example, if this Warrant were initially
exercisable for up to 2,000 Warrant Shares and up to 1,000 DOC
Warrant Shares, and the Holder subsequently exercises this Warrant
for 500 Warrant Shares, then, after such exercise, the maximum
number of DOC Warrant Shares for which this Warrant could be
exercised would be 750 DOC Warrant Shares. If this Warrant were
first exercised to purchase 500 DOC Warrant Shares, then, after
such exercise, the maximum number of Warrant Shares for which this
Warrant could be exercised would be 1,000.
(c) Notwithstanding anything herein to the contrary,
in no event shall the Holder be permitted to exercise this Warrant for
Warrant Shares to the extent that (i) the number of shares of
Common Stock beneficially owned by such Holder, together with
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any affiliate thereof (other than Warrant Shares issuable
upon exercise of this Warrant) plus (ii) the number of Warrant
Shares issuable upon exercise of this Warrant, would be equal to
or exceed 4.9999% of the number of shares of Common Stock then
issued and outstanding, including shares issuable upon exercise of
this Warrant held by such Holder after application of this Section
3(c). As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules
promulgated thereunder. To the extent that the limitation
contained in this Section 3(c) applies, the determination of
whether this Warrant is exercisable (in relation to other
securities owned by the Holder) and of which a portion of this
Warrant is exercisable shall be in the sole discretion of such
Xxxxxx, and the submission of a Notice of Exercise shall be deemed
to be such Holder's determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder)
and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company
shall have no obligation to verify or confirm the accuracy of such
determination. Nothing contained herein shall be deemed to
restrict the right of a Holder to exercise this Warrant into
Warrant Shares at such time as such exercise will not violate the
provisions of this Section 3(c). The provisions of this Section
3(c) may be waived by the Holder upon, at the election of the
Holder, not less than 61 days' prior notice to the Company, and
the provisions of this Section 3(c) shall continue to apply until
such 61st day (or such later date, as determined by the Holder, as
may be specified in such notice of waiver). No exercise of this
Warrant in violation of this Section 3(c) but otherwise in
accordance with this Warrant shall affect the status of the
Warrant Shares as validly issued, fully-paid and nonassessable.
(d) Notwithstanding anything herein to the
contrary, in no event shall the Holder be permitted to exercise
this Warrant for DOC Warrant Shares to the extent that (i) the
number of shares of DOC Common Stock beneficially owned by such
Holder, together with any affiliate thereof (other than DOC Warrant
Shares issuable upon exercise of this Warrant) plus (ii) the number
of DOC Warrant Shares issuable upon exercise of this Warrant, would
be equal to or exceed 4.9999% of the number of shares of DOC Common
Stock then issued and outstanding, including shares issuable upon
exercise of this Warrant held by such Holder after application of
this Section 3(d). As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder. To the extent that the limitation
contained in this Section 3(d) applies, the determination of
whether this Warrant is exercisable (in relation to other
securities owned by the Holder) and of which a portion of this
Warrant is exercisable shall be in the sole discretion of such
Xxxxxx, and the submission of a Notice of Exercise shall be deemed
to be such Holder's determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder)
and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company
shall have no obligation to verify or confirm the accuracy of such
determination. Nothing contained herein shall be deemed to restrict
the right of a Holder to exercise this Warrant into DOC Warrant
Shares at such time as such exercise will not violate the
provisions of this Section 3(d). The provisions of this Section
3(d) may be waived by the Holder upon, at the election of the
Holder, not less than 61 days' prior notice to the Company, and the
provisions of this Section 3(d)
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shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of
waiver).
(e) If at any time after one year from the date
of issuance of this Warrant there is no effective Registration
Statement registering the resale of the Warrant Shares by the
Holder, or the sale of the DOC Warrant Shares by the Trust to the
Holder, then this Warrant may also be exercised at such time by
means of a "cashless exercise" in which the Holder shall be
entitled to receive a certificate for the number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) = the VWAP or the DOC VWAP, as applicable, on the
Trading Day preceding the date of such election;
(B) = the Exercise Price or the DOC Exercise Price, as
applicable, of the Warrants, as adjusted; and
(X) = the number of Warrant Shares or DOC Warrant
Shares, as applicable, issuable upon exercise of
the Warrants in accordance with the terms of this
Warrant.
4. No Fractional Shares or Scrip. No fractional shares or
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scrip representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price or DOC Exercise Price, as the case
may be.
5. Charges, Taxes and Expenses. Issuance of certificates
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for Warrant Shares and/or DOC Warrant Shares shall be made without charge to
the Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the
name of the Holder or in such name or names as may be directed by the
Holder; provided, however, that in the event certificates for Warrant Shares
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and/or DOC Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum sufficient
to reimburse it for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its
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stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.
7. Transfer, Division and Combination.
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(a) Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 1
and 7(f) hereof and to the provisions of Section 4.1 of the
Purchase Agreement, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company, together
5
with a written assignment of this Warrant substantially in
the form attached hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall
execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant
shall promptly be cancelled. A Warrant, if properly assigned,
may be exercised by a new holder for the purchase of Warrant
Shares and/or DOC Warrant Shares without having a new Warrant
issued.
(b) This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid
office of the Company, together with a written notice
specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 7(a), as to any
transfer which may be involved in such division or
combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver
at its own expense (other than transfer taxes) the new
Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid
office, books for the registration and the registration of
transfer of the Warrants.
(e) If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer
of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and
under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer
(i) that the Holder or transferee of this Warrant, as the
case may be, furnish to the Company a written opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions)
to the effect that such transfer may be made without
registration under the Securities Act and under applicable
state securities or blue sky laws, (ii) that the holder or
transferee execute and deliver to the Company an investment
letter in form and substance acceptable to the Company and
(iii) that the transferee be an "accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act.
8. No Rights as Shareholder until Exercise. This Warrant does
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not entitle the Holder to any voting rights or other rights as a shareholder
of the Company or of DOC prior to the exercise hereof. Upon the surrender of
this Warrant and the payment of the aggregate Exercise Price (or by means of
a cashless exercise) or DOC Warrant Shares, the Warrant Shares and/or DOC
Warrant Shares so purchased shall be and be deemed to be issued to such
Holder as the record owner of such shares as of the close of business on the
later of the date of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The
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Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft,
6
destruction or mutilation of this Warrant or any stock certificate relating
to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of
the Warrant, shall not include the posting of any bond), and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated, the
Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or
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appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday,
then such action may be taken or such right may be exercised on the next
succeeding day not a Saturday, Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Warrant
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Shares and DOC Warrant Shares.
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(a) Stock Splits, etc.
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(i) Warrant Shares. The number and kind of
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securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to
adjustment from time to time upon the happening of
any of the following. In case the Company shall
(i) pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (ii)
subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue
any shares of its capital stock in a reclassification
of the Common Stock, then the number of Warrant
Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that
the Holder shall be entitled to receive the kind
and number of Warrant Shares or other securities
of the Company which it would have owned or have
been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such
adjustment of the kind and number of Warrant Shares
or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter
be entitled to purchase the number of Warrant Shares
or other securities resulting from such adjustment
at an exercise price per Warrant Share or other
security obtained by multiplying the Exercise Price
in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant
hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares
or other securities of the Company resulting from
such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after
the effective date of such event retroactive to the
record date, if any, for such event.
(ii) DOC Warrant Shares. The number and kind
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of securities purchasable upon the exercise of this
Warrant and the DOC Exercise Price shall be subject
to adjustment from time to time upon the happening
of any of the following. In case DOC shall (i) pay
a dividend in shares of DOC Common Stock or make
a distribution in shares of DOC Common Stock to
holders of its
7
outstanding DOC Common Stock, (ii) subdivide its
outstanding shares of DOC Common Stock into a
greater number of shares, (iii) combine its
outstanding shares of DOC Common Stock into a
smaller number of shares of DOC Common Stock, or
(iv) issue any shares of its capital stock in a
reclassification of the DOC Common Stock, then the
number of DOC Warrant Shares purchasable upon
exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be
entitled to receive the kind and number of DOC
Warrant Shares or other securities of DOC which it
would have owned or have been entitled to receive
had such Warrant been exercised in advance thereof.
Upon each such adjustment of the kind and
number of DOC Warrant Shares or other securities of
DOC which are purchasable hereunder, the Holder
shall thereafter be entitled to purchase the number
of DOC Warrant Shares or other securities resulting
from such adjustment at an exercise price per DOC
Warrant Share or other security obtained by
multiplying the DOC Exercise Price in effect
immediately prior to such adjustment by the number
of DOC Warrant Shares purchasable pursuant hereto
immediately prior to such adjustment and dividing
by the number of DOC Warrant Shares or other
securities of DOC resulting from such
adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after
the effective date of such event retroactive to
the record date, if any, for such event.
(b) Anti-Dilution Provisions. During the Exercise
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Period, the Exercise Price and the number of Warrant Shares
issuable hereunder and for which this Warrant is then
exercisable pursuant to Section 1 hereof shall be subject
to adjustment from time to time as provided in this
Section 11(b). In the event that any adjustment of the
Exercise Price as required herein results in a fraction
of a cent, such Exercise Price shall be rounded up or
down to the nearest cent.
(i) Adjustment of Exercise Price. Except as
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set forth in Section 11(b)(ii)(E), if and whenever
the Company issues or sells, or in accordance with
Section 11(b) hereof is deemed to have issued or
sold, any shares of Common Stock for an effective
consideration per share of less than the then
Exercise Price or for no consideration (such lower
price, the "Base Share Price" and such issuances
----------------
collectively, a "Dilutive Issuance"), then, the
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Exercise Price shall be reduced to equal the Base
Share Price, provided, that for purposes hereof,
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all shares of Common Stock that are issuable upon
conversion, exercise or exchange of Capital Share
Equivalents shall be deemed outstanding immediately
after the issuance of such Common Stock. Such
adjustment shall be made whenever such shares
of Common Stock or Capital Share Equivalents are
issued.
(ii) Effect on Exercise Price of Certain
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Events. For purposes of determining the adjusted
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Exercise Price under Section 11(b) hereof, the
following will be applicable:
(A) Issuance of Rights or
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Options. If the Company in any manner issues
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or grants any warrants, rights or options,
whether or not immediately exercisable, to
subscribe for or to purchase Common Stock or
other securities exercisable, convertible
into or exchangeable for Common
8
Stock ("Convertible Securities") (such
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warrants, rights and options to purchase
Common Stock or Convertible Securities are
hereinafter referred to as "Options") and
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the effective price per share for which
Common Stock is issuable upon the exercise
of such Options is less than the
Exercise Price ("Below Base Price Options"),
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then the maximum total number of shares of
Common Stock issuable upon the exercise
of all such Below Base Price Options
(assuming full exercise, conversion or
exchange of Convertible Securities, if
applicable) will, as of the date of the
issuance or grant of such Below Base Price
Options, be deemed to be outstanding and
to have been issued and sold by the Company
for such price per share and the maximum
consideration payable to the Company upon
such exercise (assuming full exercise,
conversion or exchange of Convertible
Securities, if applicable) will be deemed
to have been received by the Company. For
purposes of the preceding sentence, the
"effective price per share for which Common
Stock is issuable upon the exercise of
such Below Base Price Options" is determined
by dividing (i) the total amount, if any,
received or receivable by the Company as
consideration for the issuance or granting
of all such Below Base Price Options, plus
the minimum aggregate amount of additional
consideration, if any, payable to the
Company upon the exercise of all such
Below Base Price Options, plus, in the case
of Convertible Securities issuable upon
the exercise of such Below Base Price
Options, the minimum aggregate amount of
additional consideration payable upon the
exercise, conversion or exchange thereof
at the time such Convertible Securities first
become exercisable, convertible or
exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable
upon the exercise of all such Below Base
Price Options (assuming full conversion of
Convertible Securities, if applicable).
No further adjustment to the Exercise Price
will be made upon the actual issuance of
such Common Stock upon the exercise of
such Below Base Price Options or upon the
exercise, conversion or exchange of
Convertible Securities issuable upon exercise
of such Below Base Price Options.
(B) Issuance of Convertible
-----------------------
Securities. If the Company in any manner
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issues or sells any Convertible Securities,
whether or not immediately convertible (other
than where the same are issuable upon the
exercise of Options) and the effective price
per share for which Common Stock is issuable
upon such exercise, conversion or exchange
is less than the Exercise Price, then the
maximum total number of shares of
Common Stock issuable upon the exercise,
conversion or exchange of all such
Convertible Securities will, as of the date
of the issuance of such Convertible
Securities, be deemed to be outstanding and
to have been issued and sold by the Company
for such price per share and the maximum
consideration payable to the Company upon
such exercise (assuming full exercise,
conversion or exchange of Convertible
Securities, if applicable) will be deemed
to have been received by the Company. For
9
the purposes of the preceding sentence,
the "effective price per share for
which Common Stock is issuable upon such
exercise, conversion or exchange" is
determined by dividing (i) 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 exercise, conversion
or exchange thereof at the time such
Convertible Securities first become
exercisable, convertible or exchangeable,
by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise,
conversion or exchange of all such
Convertible Securities. No further
adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock
upon exercise, conversion or exchange of such
Convertible Securities.
(C) Change in Option Price or
-------------------------
Conversion Rate. If there is a change at any
---------------
time in (i) the amount of additional
consideration payable to the Company upon
the exercise of any Options; (ii) the amount
of additional consideration, if any, payable
to the Company upon the exercise, conversion
or exchange of any Convertible Securities;
or (iii) the rate at which any Convertible
Securities are convertible into or
exchangeable for Common Stock (in each
such case, other than under or by reason of
provisions designed to protect against
dilution), the Exercise Price in effect at
the time of such change will be readjusted
to the Exercise Price which would have
been in effect at such time had such Options
or Convertible Securities still
outstanding provided for such changed
additional consideration or changed
conversion rate, as the case may be, at the
time initially granted, issued or sold.
(D) Calculation of Consideration
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Received. If any Common Stock, Options or
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Convertible Securities are issued, granted or
sold for cash, the consideration received
therefor for purposes of this Warrant will
be the amount received by the Company
therefor, before deduction of reasonable
commissions, underwriting discounts or
allowances or other reasonable expenses
paid or incurred by the Company in
connection with such issuance, grant or sale.
In case any Common Stock, Options or
Convertible Securities are issued or sold
for a consideration part or all of which
shall be other than cash, the amount of
the consideration other than cash
received by the Company will 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 fair market value (closing bid price,
if traded on any market) thereof as of
the date of receipt. In case any Common
Stock, Options 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-
10
surviving corporation as is attributable to
such Common Stock, Options or Convertible
Securities, as the case may be. The fair
market value of any consideration other than
cash or securities will be determined in
good faith by an investment banker or other
appropriate expert of national reputation
selected by the Company and reasonably
acceptable to the holder hereof, with
the costs of such appraisal to be borne by
the Company.
(E) Exceptions to Adjustment of
---------------------------
Exercise Price. Notwithstanding the
--------------
foregoing, no adjustment will be made under
this Section 11(b) in respect of (1) the
granting of options to employees, officers
and directors of the Company pursuant to
any stock option plan duly adopted by
a majority of the non-employee members of the
Board of Directors of the Company or a
majority of the members of a committee of
non-employee directors established for such
purpose, (2) upon the exercise of the
Debentures or any Debentures of this series
or of any other series or security
issued by the Company in connection with the
offer and sale of this Company's securities
pursuant to the Purchase Agreement, (3) upon
the exercise of or conversion of any
convertible securities, options or warrants
issued and outstanding on the Original Issue
Date, provided that the securities have not
been amended since the date of the Purchase
Agreement, (4) acquisitions or strategic
investments, the primary purpose of which
is not to raise capital or (5) any other
Exempt Transaction.
(iii) Minimum Adjustment of Exercise Price. No
------------------------------------
adjustment of the Exercise Price or DOC Exercise Price
shall be made in an amount of less than 1% of the Exercise
Price or DOC Exercise Price in effect at the time such
adjustment is otherwise required to be made, but any such
lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent
adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such exercise
price.
12. Reorganization, Reclassification, Merger, Consolidation
-------------------------------------------------------
or Disposition of Assets.
------------------------
(a) In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into
another corporation (where the Company is not the surviving
corporation or where there is a change in or distribution with
respect to the Common Stock of the Company), or sell, transfer or
otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of
such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or
acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to
or in lieu of common stock of the successor or acquiring
corporation ("Other Property"), are to be received by or
--------------
distributed to the holders of Common Stock of the Company, then
the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of Common Stock of
the successor or acquiring corporation or of the Company, if it is
11
the surviving corporation, and Other Property receivable upon or
as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number
of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if
other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject
to such modifications as may be deemed appropriate (as determined
in good faith by resolution of the Board of Directors of the
Company) in order to provide for adjustments of Warrant Shares for
which this Warrant is exercisable which shall be as nearly
equivalent as practicable to the adjustments provided for in this
Section 12. For purposes of this Section 12, "common stock of the
successor or acquiring corporation" shall include stock of such
corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences
of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions
of this Section 12 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or
disposition of assets.
(b) If any of the foregoing events shall occur with
respect to DOC, and the DOC Warrant Shares shall have been
converted into or shall be deemed to have been converted into
common stock of the successor or acquiring corporation and/or
Other Property, then, after such event, this Warrant shall be
exercisable into such other corporation's common stock and/or
Other Property as aforesaid with respect to the Company.
13. Voluntary Adjustment by the Company. The Company may at
-----------------------------------
any time during the term of this Warrant reduce the then current Exercise
Price or DOC Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant
--------------------
Shares or number or kind of securities or other property purchasable upon
the exercise of this Warrant or the Exercise Price is adjusted, as herein
provided, the Company shall give notice thereof to the Holder, which notice
shall state the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares (and other securities or property) after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made. Whenever
the Company has knowledge that the number of DOC Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the DOC Exercise Price is adjusted, as herein provided, the
Company shall give notice thereof to the Holder, which notice shall state
the number of DOC Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the DOC Exercise Price of
such DOC Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief
12
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
15. Notice of Corporate Action. If at any time:
--------------------------
(a) the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, or any right to subscribe
for or purchase any evidences of its indebtedness, any shares of
stock of any class or any other securities or property, or to
receive any other right, or
(b) there shall be any capital reorganization of
the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger of the
Company with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Company
to, another corporation or,
(c) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i)
at least 20 days' prior written notice of the date on which a record date
shall be selected for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
liquidation or winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written
notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause also shall specify (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Stock shall be entitled to
any such dividend, distribution or right, and the amount and character
thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up.
Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Xxxxxx appearing on the books of the Company and
delivered in accordance with Section 17(d). Notwithstanding the foregoing,
no notice or action by the Company is required in connection with the
reincorporation of the Company from Missouri to Florida as set forth in the
Proxy.
16. Authorized Shares. The Company covenants that during the
-----------------
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights
under this Warrant. The Company will take all such reasonable action as may
be necessary to assure that such Warrant Shares may be issued as
13
provided herein without violation of any applicable law or regulation, or of
any requirements of the Principal Market upon which the Common Stock may be
listed.
Except and to the extent as waived or consented
to by the Holder, the Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company
will (a) not increase the par value of any Warrant Shares above the amount
payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
Before taking any action which would result in an
adjustment in the number of Warrant Shares for which this Warrant is
exercisable or in the Exercise Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.
17. Miscellaneous.
-------------
(a) Jurisdiction. This Warrant shall constitute a
------------
contract under the laws of New York, without regard to its conflict
of law, principles or rules.
(b) Restrictions. The Holder acknowledges that this
------------
Warrant and the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed
by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or
----------------------
any delay or failure to exercise any right hereunder on the part
of Holder shall operate as a waiver of such right or otherwise
prejudice Holder's rights, powers or remedies, notwithstanding all
rights hereunder terminate on the Termination Date. If the Company
willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the
Company shall pay to Holder such amounts as shall be sufficient to
cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(d) Notices. Any notice, request or other document
-------
required or permitted to be given or delivered to the Holder by
the Company shall be delivered in accordance
14
with the notice provisions of the Purchase Agreement. Notice of
any exercise of this Warrant shall also be sent to
xxxxxxxxxx@xxxx.xxx.
(e) Limitation of Liability. No provision hereof,
-----------------------
in the absence of any affirmative action by Holder to exercise
this Warrant or purchase Warrant Shares, and no enumeration herein
of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or
as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled
--------
to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees
to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable
----------------------
securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon
the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this
Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.
(h) Amendment. This Warrant may be modified or
---------
amended or the provisions hereof waived with the written consent
of the Company and the Holder.
(i) Severability. Wherever possible, each provision
------------
of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Warrant shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Warrant.
(j) Headings. The headings used in this Warrant are
--------
for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant.
********************
15
IN WITNESS WHEREOF, the Company has caused this Warrant to
be executed by its officer thereunto duly authorized.
Dated: June __, 2003
APPLIED DIGITAL SOLUTIONS, INC.
By: /s/ Xxxxx Xxxxxxxxx
------------------------------
Name: Xxxxx Xxxxxxxxx
Title: CEO
16
NOTICE OF EXERCISE
To: Applied Digital Solutions, Inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares
of Applied Digital Solutions, Inc. and/or __________ DOC Warrant Shares of
Digital Angel Corporation pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] as to Warrant Shares only, the cancellation
of such number of Warrant Shares as is necessary,
in accordance with the formula set forth in
subsection 3(e), to exercise this Warrant with
respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise
procedure set forth in subsection 3(e).
(3) Please issue a certificate or certificates representing said
Warrant Shares and/or DOC Warrant Shares in the name of the undersigned or
in such other name as is specified below:
________________________________________ (if issuance is to a
Person other than Holder, a letter on Xxxxxx's letterhead must confirm the
notice) Federal Taxpayer ID# _______________________
The Warrant Shares and/or DOC Warrant Shares shall be delivered to the
following:
----------------------------------------
----------------------------------------
----------------------------------------
OR, in the case of Warrant Shares ONLY, DTC information:
Clearing Agent Name:______________________________
DWAC Number:______________________________________
(4) Accredited Investor. The undersigned is an "accredited
-------------------
investor" as defined in Regulation D promulgated under the Securities Act
of 1933, as amended.
[PURCHASER]
By:_______________________________
Name:
Title:
Dated: ___________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
_______________________________________________ whose address is
___________________________________________________________________.
___________________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: _____________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or
any change whatsoever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
