Document:

ex10-3.htm

Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of July 15, 2010, by and among Applied DNA Sciences, Inc., a Delaware corporation, with headquarters located at 25 Health Sciences Drive, Stony Brook, New York 11790 (the “Company”), and the undersigned buyers (each, a “Buyer”, and collectively, the “Buyers”).

 

WHEREAS:

 

A.           In connection with the Securities Purchase Agreement, dated as of July 15, 2010, by and among the Company and the Buyers (the “Securities Purchase Agreement”), the Company has agreed, upon the terms and subject to the conditions set forth in the Securities Purchase Agreement, to issue and sell to each Buyer senior secured convertible notes of the Company (the “Notes”), which may, among other things, be convertible into shares of the Company’s common stock, $0.001 par value per share (the “Common Stock,” as converted, the “Conversion Shares”) in accordance with the terms of the Notes.

 

B.           To induce the Buyers to execute and deliver the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities laws.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:

 

1.     Definitions.

 

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement.  As used in this Agreement, the following terms shall have the following meanings:

 

a.   “Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York are authorized or required by law to remain closed.

 

b.   “Effective Date” means the date the Registration Statement (as defined below) is declared effective by the SEC.

 

c.   “Effectiveness Deadline” means, with respect to any registration statement required to be filed to cover the resale by the Investors of the Registrable Securities pursuant to Section 2, 45 days after the Filing Date, or if there is a review of the Registration Statement by the SEC, 90 days after the Filing Date.

  

  

  

 

d.   “Filing Date” means with respect to any registration statement required to be filed to cover the resale by the Investors of the Registrable Securities pursuant to Section 2.

 

e.   “Filing Deadline” means with respect to any registration statement required to be filed to cover the resale by the Investors of the Registrable Securities pursuant to Section 2, 45 days following the Demand Registration Request (as defined below), unless the Demand Registration Request is made after September 30, 2010 but before the financial statements for the year ended September 30, 2010 are available, in which case the Filing Deadline means the later of (i) one Business Day following the availability of the financial statements for the year ended September 30, 2010 and (ii) 45 days following the Demand Registration Request.

 

f.   “Investor” means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.

 

g.   “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

 

h.   “register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415 and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

 

i.   “Registrable Securities” means (i) the Conversion Shares issued or issuable upon conversion or redemption of the Note and (ii) any share capital of the Company issued or issuable with respect to the Conversion Shares or the Notes as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise.

 

j.   “Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering the Registrable Securities.

 

k.   “Required Holders” means the holders of at least a majority of the Registrable Securities.

 

l.   “Rule 415” means Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous or delayed basis.

 

m.      “SEC” means the United States Securities and Exchange Commission.

  

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2.     Registration.

 

a.   Demand Registration.  Subject to the terms and conditions of this Agreement, if at any time following the date hereof the Company receives a written request from the Required Holders that the Company register under the 1933 Act any of the Registrable Securities held by the Required Holders (such a written request being hereinafter referred to as a “Demand Registration Request”), the Company shall file, as promptly as reasonably practicable but no later than the Filing Deadline, a registration statement under the 1933 Act covering all of the Registrable Securities. The registration statement shall be on Form S-1 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-1, in which case such registration shall be on another appropriate form for such purpose).  The Registration Statement shall contain the “Selling Shareholders” and “Plan of Distribution” sections in substantially the form attached hereto as Exhibit B. The Company shall use its reasonable efforts to cause the registration statement to be declared effective or otherwise to become effective under the 1933 Act as soon as reasonably practicable but, in any event, no later than the Effectiveness Deadline.  By 9:30 am on the date following the Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Registration Statement.

 

b.   Eligibility for Form S-3.  If at any time the Company becomes eligible to register the resale of the Registrable Securities on Form S-3, it shall promptly convert any then effective Registration Statement(s) to Form S-3 and shall file any future Registration Statements on Form S-3 so long as so eligible.

 

c.   Effect of Failure to File and Obtain and Maintain Effectiveness of Registration Statement.  If (i) a Registration Statement covering Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before the respective Filing Deadline (a “Filing Failure”) or (B) not declared effective by the SEC on or before the respective Effectiveness Deadline (an “Effectiveness Failure”) or (ii) on any day after the Effective Date sales of all of the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(q)) pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective or a failure to disclose such information as is necessary for sales to be made pursuant to such Registration Statement) (a “Maintenance Failure”) then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to one percent (1.0%) of the aggregate Purchase Price (as such term is defined in the Securities Purchase Agreement) of such Investor’s Notes relating to the Registrable Securities included in such Registration Statement on each of the following dates: (i) the day of a Filing Failure and on every thirtieth day (pro rated for periods totaling less than thirty (30) days) thereafter until the earlier of the date such Filing Failure is cured and the date all of the Registrable Securities may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act; (ii) the day of an Effectiveness Failure and on every thirtieth day (pro rated for periods totaling less than thirty (30) days) thereafter until the earlier of the date such Effectiveness Failure is cured and the date all of the Registrable Securities may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act; and (iii) the initial day of a Maintenance Failure and on every thirtieth day (pro rated for periods totaling less than thirty (30) days) thereafter until the earlier of the date such Maintenance Failure is cured and the date all of the Registrable Securities may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act.  The payments to which a holder shall be entitled pursuant to this Section 2(c) are referred to herein as “Registration Delay Payments”.  Registration Delay Payments shall be paid on the day of the Filing Failure, Effectiveness Failure and the initial day of a Maintenance Failure, as applicable, and thereafter on the earlier of (I) the thirtieth day after the event or failure giving rise to the Registration Delay Payments has occurred, (II) the third Business Day after the event or failure giving rise to the Registration Delay Payments is cured and (III) the date all of the Registrable Securities may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act.  In the event the Company fails to make Registration Delay Payments in a timely manner, such Registration Delay Payments shall bear interest at the rate of one percent (1.0%) per month (prorated for partial months) until paid in full but in no event in excess of the maximum amount of interest permissible under applicable law.  Notwithstanding anything herein to the contrary, in no event shall the Registration Delay Payments exceed twelve percent (12.0%) of the aggregate Purchase Price for all Investors (the “Registration Delay Payments Cap”).  Any amount in excess of the Registration Delay Payments Cap (the “Excess Registration Delay Payments”) shall cause the Conversion Price of the Investor’s Notes to be lowered by an amount equal to the quotient of the amount of such Investors Excess Registration Delay Payments divided by the then outstanding amount of such Investor’s Notes.  Notwithstanding anything to the contrary contained herein, no Registration Delay Payments shall be payable with respect to any Registrable Securities excluded from a Registration Statement by election of an Investor.

 

  

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3.     Related Obligations.

 

At such time as the Company is obligated to file a Registration Statement with the SEC pursuant to Section 2(a) or 2(b), the Company will use its reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

 

a.   The Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities and use its reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective as soon as reasonably practicable after such filing (but in no event later than the Effectiveness Deadline).  The Company shall keep each Registration Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date as of which the Investors may sell all of the Registrable Securities covered by such Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act or (ii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “Registration Period”).  The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading.  The term “reasonable efforts” shall mean, among other things, that the Company shall submit to the SEC, within two (2) Business Days after the later of the date that (i) the Company learns that no review of a particular Registration Statement will be made by the staff of the SEC or that the staff has no further comments on a particular Registration Statement, as the case may be, and (ii) the approval of Investors whose Registrable Securities are included in such Registration Statement (which approval is immediately sought), a request for acceleration of effectiveness of such Registration Statement to a time and date, subject to acceptance by the SEC, not later than two (2) Business Days after the submission of such request.

 

  

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b.   The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement.  In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K, or any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC as soon as reasonably practicable after the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

 

c.   The Company shall permit the Investors whose Registrable Securities are included in any Registration Statement to review (i) a Registration Statement at least three (3) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q or any similar or successor reports) within a reasonable number of days prior to their filing with the SEC.  The Company shall furnish to the Investors whose Registrable Securities are included in a Registration Statement, without charge, (i) copies of any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to any Registration Statement, (ii) promptly after the same is prepared and filed with the SEC, one copy of any Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an such Investor, and all exhibits and (iii) upon the effectiveness of any Registration Statement, such number of copies of the prospectus included in such Registration Statement and all amendments and supplements thereto as such Investor may reasonably request.

 

  

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d.   The Company shall use its reasonable efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by the Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (w) make any change to its certificate of incorporation or bylaws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction.  The Company shall promptly notify each Investor of the Registrable Securities covered by a Registration Statement of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of notice of the initiation or threatening of any proceeding for such purpose.

 

e.   The Company shall notify each Investor of the Registrable Securities covered by a Registration Statement in writing of the happening of any event, as promptly as reasonably practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and, subject to Section 3(q), promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver such number of copies of such supplement or amendment to such Investor as such Investor may reasonably request.  The Company shall also promptly notify each Investor of the Registrable Securities covered by a Registration Statement in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to each such Investor by facsimile or e-mail on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.

 

f.   The Company shall use its reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of notice of the initiation or threat of any proceeding for such purpose.

 

  

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g.   If any Investors of the Registrable Securities covered by a Registration Statement is required under applicable securities laws to be described in the Registration Statement as an underwriter, at the reasonable request of such Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated as of such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to such Investor, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to such Investor.

 

h.   Upon the written request of any Investor of the Registrable Securities covered by a Registration Statement in connection with such Investor’s due diligence requirements, if any, the Company shall make available for inspection by such Investor or agents retained by such Investor (collectively, the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except to an Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement.  Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential.  Nothing herein shall be deemed to limit the Investors’ ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

 

i.   The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement.  The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor of the Registrable Securities covered by a Registration Statement is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at such Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

 

  

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j.   The Company shall use its reasonable efforts either to (i) cause all of the Registrable Securities covered by a Registration Statement to be listed or quoted on each securities exchange, bulletin board or quotation system on which securities of the same class or series issued by the Company are then listed or quoted.

 

k.   The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request.

 

l.   If requested by an Investor of the Registrable Securities covered by a Registration Statement, the Company shall (i) as soon as reasonably practicable incorporate in a prospectus supplement or post-effective amendment such information as such Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) as soon as reasonably practicable make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) as soon as reasonably practicable, supplement or make amendments to any Registration Statement if reasonably requested by such Investor holding any Registrable Securities.

 

m.      The Company shall use its reasonable efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

 

n.   The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of a Registration Statement.

 

o.   The Company shall otherwise use its reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

 

p.   Within two (2) Business Days after a Registration Statement which covers Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.

 

  

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q.   Notwithstanding anything to the contrary herein, at any time after the Effective Date, the Company may delay the disclosure of material, non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company and its counsel, in the best interest of the Company and, in the opinion of counsel to the Company otherwise required (a “Grace Period”); provided that no Grace Period shall exceed ten (10) consecutive days and during any three hundred sixty five (365) day period such Grace Periods shall not exceed an aggregate of twenty-five (25) days and the first day of any Grace Period must be at least five (5) trading days after the last day of any prior Grace Period (each, an “Allowable Grace Period”).  For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date referred to in such notice.  The provisions of Section 3(f) hereof shall not be applicable during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 3(e) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable.  Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale and delivered a copy of the prospectus included as part of the Registration Statement (unless an exemption from such prospectus delivery requirement exists) prior to the Investor’s receipt of the notice of a Grace Period and for which the Investor has not yet settled.

 

4.     Obligations of the Investors.

 

a.   At least five (5) Business Days prior to the first anticipated filing date of a Registration Statement, the Company shall notify each Investor whose Registrable Securities are to be included in a Registration Statement in writing of the information the Company requires from each such Investor.  It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

 

b.   Each Investor whose Registrable Securities are to be included in a Registration Statement agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder.

 

  

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c.   Each Investor whose Registrable Securities are to be included in a Registration Statement agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of 3(e) or receipt of notice that no supplement or amendment is required.

 

d.   Each Investor whose Registrable Securities are to be included in a Registration Statement covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.

 

5.     Expenses of Registration.

 

All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company.

 

6.     Indemnification.

 

In the event any Registrable Securities are included in a Registration Statement under this Agreement:

 

a.   To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor whose Registrable Securities are included in a Registration Statement, the directors, officers, members, partners, employees, agents, representatives of, and each Person, if any, who controls any Investor whose Registrable Securities are included in a Registration Statement within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon:  (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in the light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”).  Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim.  Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a):  (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(c) and (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

 

  

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b.   In connection with any Registration Statement in which a Investor is participating, each such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(c), such Investor will reimburse any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.  Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented.

 

  

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c.   Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding.  In the case of an Indemnified Person, legal counsel referred to in the immediately preceding sentence shall be selected by the Investors holding at least a majority in interest of the Registrable Securities included in the Registration Statement to which the Claim relates.  The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim.  The indemnifying party shall keep the Indemnified Party or Indemnified Person reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent.  No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnified Party.  Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

 

d.   The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

 

  

12

  

 

e.   The indemnity agreements contained herein shall be in addition to  (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

 

7.     Contribution.

 

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that:  (i) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.

 

8.     Reports Under the 1934 Act.

 

With a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“Rule 144”), the Company agrees to:

 

a.   make and keep public information available, as those terms are understood and defined in Rule 144;

 

b.   file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

 

c.   furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

 

9.      Assignment of Registration Rights.

 

The rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such Investor’s Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements of the Securities Purchase Agreement.

 

  

13

  

 

10.   Amendment of Registration Rights.

 

Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Required Holders.  Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company.  No such amendment shall be effective to the extent that it applies to less than all of the holders of the Registrable Securities.  No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

 

11.   Miscellaneous.

 

a.   A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities.  If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the such record owner of such Registrable Securities.

 

b.   Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:

 

If to the Company:

 

Applied DNA Sciences, Inc.

25 Health Sciences Drive, Suite 113

Stony Brook, New York 11790

Telephone:          (631) 444-6370

Facsimile:             (631) 444-8848

Attention:            Chief Financial Officer

 

  

14

  

 

With copies to:

Fulbright & Jaworski L.L.P

666 Fifth Avenue

New York, NY 10103-3198

Telephone:          (212) 318-3000

Facsimile:             (212) 318-3400

Attention:            Merrill Kraines, Esq.

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers attached hereto, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

c.   Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

 

d.   All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

  

15

  

 

e.   This Agreement, the other Transaction Documents (as defined in the Securities Purchase Agreement) and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein.  This Agreement, the other Transaction Documents and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

 

f.   Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.

 

g.   The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

h.   This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.  This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

i.   Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

j.   All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders.

 

k.   The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

 

l.   This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

  

16

  

 

m.      The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision of this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor.  Nothing contained herein, and no action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated herein.

 

 

[Signature Page Follows]

 

  

17

  

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

	 	 	 
	 	 	 
	 	
COMPANY:

	 
	 	 	 	 
	 	
APPLIED DNA SCIENCES, INC.

	 
	 	 	 	 
	 	By:	 
	 	 	Name: Dr. James A. Hayward	 
	 	 	Title:   President and Chief Executive Officer	 

 

  

  

  

 

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

	 	 	 
	 	 	 
	 	

[BUYERS]:

	 
	 	 	 	 
	 	By:	 
	 	 	Name:	 
	 	 	Title:	 

  

  

  

 

SCHEDULE OF BUYERS

 

	
Buyer

	 	
Buyer’s Address

and Facsimile Number

	 	
Buyer’s Representative’s

Address

and Facsimile Number

 

 

 

  

  

  

EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

 

American Stock Transfer and Trust Company

6201 15th Ave.

Brooklyn, New York 11219

Telephone: (718) 921-8210

Facsimile: (718) 921-8355

Attention:      [                ]

 

 

Re:         APPLIED DNA SCIENCES, INC. INC.

 

Ladies and Gentlemen:

 

[We are][I am] counsel to Applied DNA Sciences, Inc., a Delaware corporation (the “Company”), and have represented the Company in connection with that certain Securities Purchase Agreement, dated as of July 15, 2010 (the “Securities Purchase Agreement”), entered into by and among the Company and the buyers named therein (collectively, the “Holders”) pursuant to which the Company issued to the Holders secured convertible notes (the “Notes”) which are convertible into the Company’s common stock, $0.001 par value per share (the “Common Stock”).  Pursuant to the Securities Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the resale of the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion of the Notes under the Securities Act of 1933, as amended (the “1933 Act”).  In connection with the Company’s obligations under the Registration Rights Agreement, on _______, 2010, the Company filed a Registration Statement on Form S-1 (File No. 333-_____________) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each of the Holders as a selling shareholder thereunder.

 

In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has advised [us][me] by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we] [I] have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.

 

  

  

  

 

This letter shall serve as our standing instruction to you that the shares of Common Stock are freely transferable by the Holders pursuant to the Registration Statement.  You need not require further letters from us to effect any future legend-free issuance or reissuance of shares of Common Stock to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated July 15, 2010.

	 	 	 
	 	 	 
	 	Very truly yours,	 
	 	 	 	 
	 	[ISSUER’S COUNSEL]	 
	 	 	 	 
	 	By:	 	 
	 	 	 	 
	CC:            [LIST NAMES OF HOLDERS]	 	 	 

 

  

  

  

EXHIBIT B

 

SELLING STOCKHOLDERS

 

The shares of common stock being offered by the selling shareholders are those issuable upon conversion of the secured convertible notes.  We are registering the shares of common stock in order to permit the selling shareholders to offer the shares for resale from time to time.  Except for the ownership of the secured convertible notes, the selling shareholders have not had any material relationship with us within the past three years.

 

The table below lists the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling shareholders.  The second column lists the number of shares of common stock beneficially owned by each selling shareholder, based on its ownership of the shares of the secured convertible notes, as of ________, 2010, assuming conversion of all secured convertible notes held by the selling shareholders on that date, without regard to any limitations on conversions and/or redemptions of the secured convertible notes.

 

The third column lists the shares of common stock being offered by this prospectus by the selling shareholders.

 

The fourth column assumes the sale of all of the shares offered by the selling shareholders pursuant to this prospectus.

 

  

  

  

 

PLAN OF DISTRIBUTION

 

We are registering the shares of common stock issuable upon conversion of the secured convertible notes to permit the resale of these shares of common stock by the holders of the secured convertible notes from time to time after the date of this prospectus.  We will not receive any of the proceeds from the sale by the selling shareholders of the shares of common stock.  We will bear all fees and expenses incident to our obligation to register the shares of common stock.

 

The selling shareholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents.  If the shares of common stock are sold through underwriters or broker-dealers, the selling shareholders will be responsible for underwriting discounts or commissions or agent’s commissions.  The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices.  These sales may be effected in transactions, which may involve crosses or block transactions,

	 	 	 
	 	
●

	
on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

	 	 	 
	 	
●

	
in the over-the-counter market;

	 	 	 
	 	
●

	
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

	 	 	 
	 	
●

	
through the writing of options, whether such options are listed on an options exchange or otherwise;

	 	 	 
	 	
●

	
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

	 	 	 
	 	
●

	
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

	 	 	 
	 	
●

	
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

	 	 	 
	 	
●

	
an exchange distribution in accordance with the rules of the applicable exchange;

	 	 	 
	 	
●

	
privately negotiated transactions;

	 	 	 
	 	
●

	
short sales;

	 	 	 
	 	
●

	
sales pursuant to Rule 144;

 

 

  

  

  

	 	
●

	
broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated price per share;

	 	 	 
	 	
●

	
a combination of any such methods of sale; and

	 	 	 
	 	
●

	
any other method permitted pursuant to applicable law.

	 	 	 

If the selling shareholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved).  In connection with sales of the shares of common stock or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume.  The selling shareholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales.  The selling shareholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

 

The selling shareholders may pledge or grant a security interest in some or all of the secured convertible notes or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus.  The selling shareholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

The selling shareholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act.  At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling shareholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

 

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.  In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

  

  

  

 

There can be no assurance that any selling shareholder will sell any or all of the shares of common stock registered pursuant to the shelf registration statement, of which this prospectus forms a part.

 

The selling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling shareholders and any other participating person.  Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock.  All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

 

We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[_______] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling shareholder will pay all underwriting discounts and selling commissions, if any.  We will indemnify the selling shareholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreements, or the selling shareholders will be entitled to contribution.  We may be indemnified by the selling shareholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling shareholder specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

 

Once sold under the shelf registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.ex10-4.htm

    
      
        
          

        
Exhibit
10.4

    

     

    SECURITY
AGREEMENT

     

    SECURITY
AGREEMENT, dated as of July 15, 2010 (this “Agreement”) made by
APPLIED DNA SCIENCES, INC., a Delaware corporation (the “Grantor”),  in
favor of ETICO CAPITAL, LLC., a limited liability company organized under the
laws of the Delaware, in its capacity as collateral agent (in such capacity, the
“Collateral
Agent”) for the “Buyers” (as defined below) party to the Securities
Purchase Agreement, dated as of even date herewith (as amended, restated or
otherwise modified from time to time, the “Securities Purchase
Agreement”).

     

     

    W I T N E S S E T H:

     

    WHEREAS,
the Company and each party listed as a “Buyer” on the Schedule of Buyers
attached thereto (collectively, the “Buyers”) are parties
to the Securities Purchase Agreement, pursuant to which the Company shall be
required to sell, and the Buyers shall purchase or have the right to purchase,
the “Notes” (as defined therein) issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the “Notes”);
and

     

    WHEREAS,
it is a condition precedent to the Buyers purchasing the Notes pursuant to the
Securities Purchase Agreement that the Grantor shall have executed and delivered
to the Collateral Agent this Agreement providing for the grant to the Collateral
Agent for the benefit of the Buyers of a security interest in all personal
property of the Grantor to secure all of the Company’s obligations under the
Securities Purchase Agreement, the Notes, and the “Transaction Documents” (as
defined in the Securities Purchase Agreement) (the “Transaction
Documents”).

     

    NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce the Buyers to perform under the Securities Purchase Agreement,
the Grantor agrees with the Collateral Agent, for the benefit of the Buyers, as
follows:

     

    SECTION
1. Definitions.

     

    (a)   Reference
is hereby made to the Securities Purchase Agreement and the Notes for a
statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Securities Purchase Agreement, the
Notes or in Articles 8 or 9 of the Uniform Commercial Code as in effect from
time to time in the State of New York (the “Code”), and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein.

     

    (b)   As used
in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular and
plural forms of such terms:

     

    “Copyright Licenses” means all
licenses, contracts or other agreements, whether written or oral, naming the
Grantor as licensee or licensor and providing for the grant of any right to use
or sell any works covered by any copyright (including, without limitation, all
Copyright Licenses set forth in Schedule II
hereto).

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Copyrights” means all domestic
and foreign copyrights, whether registered or not, including, without
limitation, all copyright rights throughout the universe (whether now or
hereafter arising) in any and all media (whether now or hereafter developed), in
and to all original works of authorship fixed in any tangible medium of
expression, acquired or used by the Grantor (including, without limitation, all
copyrights described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

     

    “Event of Default” shall have
the meaning set forth in the Notes.

     

    “Insolvency Proceeding” means
any proceeding commenced by or against any Person under any provision of the
Bankruptcy Code (Chapter 11 of Title 11 of the United States Code) or under any
other bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, or extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.

     

    “Intellectual Property” means
the Copyrights, Trademarks and Patents.

     

    “Licenses” means the Copyright
Licenses, the Trademark Licenses and the Patent Licenses.

     

    “Lien” means any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights).

     

    “Patent Licenses” means all
licenses, contracts or other agreements, whether written or oral, naming the
Grantor as licensee or licensor and providing for the grant of any right to
manufacture, use or sell any invention covered by any Patent (including, without
limitation, all Patent Licenses set forth in Schedule II
hereto).

     

    “Patents” means all domestic
and foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how, formulae, rights of publicity and
other general intangibles of like nature, now existing or hereafter acquired
(including, without limitation, all domestic and foreign letters patent, design
patents, utility patents, industrial designs, inventions, trade secrets, ideas,
concepts, methods, techniques, processes, proprietary information, technology,
know-how and formulae described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office, or in any similar office or agency of the United
States or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    “Trademark Licenses” means all
licenses, contracts or other agreements, whether written or oral, naming the
Grantor as licensor or licensee and providing for the grant of any right
concerning any Trademark, together with any goodwill connected with and
symbolized by any such trademark licenses, contracts or agreements and the right
to prepare for sale or lease and sell or lease any and all Inventory now or
hereafter owned by the Grantor and now or hereafter covered by such licenses
(including, without limitation, all Trademark Licenses described in Schedule II
hereto).

     

    “Trademarks” means all domestic
and foreign trademarks, service marks, collective marks, certification marks,
trade names, business names, d/b/a’s, Internet domain names, trade styles,
designs, logos and other source or business identifiers and all general
intangibles of like nature, now or hereafter owned, adopted, acquired or used by
the Grantor (including, without limitation, all domestic and foreign trademarks,
service marks, collective marks, certification marks, trade names, business
names, d/b/a’s, Internet domain names, trade styles, designs, logos and other
source or business identifiers described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision
thereof), and all reissues, extensions or renewals thereof, together with all
goodwill of the business symbolized by such marks and all customer lists,
formulae and other Records of the Grantor relating to the distribution of
products and services in connection with which any of such marks are
used.

     

    SECTION
2. Grant of Security
Interest.  As collateral security for all of the “Obligations”
(as defined in Section
3 hereof), the Grantor hereby pledges and assigns to the Collateral Agent
for the benefit of the Buyers, and grants to the Collateral Agent for the
benefit of the Buyers a continuing security interest in, all personal property
of the Grantor, wherever located and whether now or hereafter existing and
whether now owned or hereafter acquired, of every kind and description, tangible
or intangible (collectively, the “Collateral”),
including, without limitation, the following:

     

    (a)         all
Accounts;

     

    (b)         all
Chattel Paper (whether tangible or electronic);

     

    (c)         the
Commercial Tort Claims specified on Schedule VI
hereto;

     

    (d)         all
Deposit Accounts, all cash and other property from time to time deposited
therein and the monies and property in the possession or under the control of
the Collateral Agent or any Buyer or any affiliate, representative, agent or
correspondent of the Collateral Agent or any Buyer;

     

    (e)         all
Documents;

     

    (f)         all
Equipment;

     

    (g)         all
Fixtures;

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    (h)         all
General Intangibles (including, without limitation, all Payment
Intangibles);

     

    (i)         
all
Goods

     

    (j)         
all
Instruments (including, without limitation, Promissory Notes and each
certificated Security);

     

    (k)         all
Inventory;

     

    (l)         
all
Investment Property;

     

    (m)        all
Copyrights, Patents and Trademarks, and all Licenses;

     

    (n)         all
Letter-of-Credit Rights;

     

    (o)         all
Supporting Obligations;

     

    (p)         all other
tangible and intangible personal property of the Grantor (whether or not subject
to the Code), including, without limitation, all bank and other accounts and all
cash and all investments therein, all proceeds, products, offspring, accessions,
rents, profits, income, benefits, substitutions and replacements of and to any
of the property of the Grantor described in the preceding clauses of this Section 2 (including,
without limitation, any proceeds of insurance thereon and all causes of action,
claims and warranties now or hereafter held by the Grantor in respect of any of
the items listed above), and all books, correspondence, files and other Records,
including, without limitation, all tapes, desks, cards, Software, data and
computer programs in the possession or under the control of the Grantor or any
other Person from time to time acting for the Grantor to the extent of the
Grantor’s rights therein, that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this Section 2 or are
otherwise necessary or helpful in the collection or realization thereof;
and

     

    (q)         all
Proceeds, including all cash Proceeds and non-cash Proceeds, and products of any
and all of the foregoing Collateral;

    in each
case howsoever the Grantor’s interest therein may arise or appear (whether by
ownership, security interest, claim or otherwise).

     

    The security interest of the Collateral
Agent in the Collateral granted hereby is in all respects pari passu with the security
interest granted in favor of the individuals and entities listed on Schedule
4(g) hereto pursuant to the secured convertible promissory notes issued by the
Company and listed on Schedule 4(g).

    

    SECTION
3. Security for
Obligations.  The security interest created hereby in the
Collateral constitutes continuing collateral security for all of the Obligations
(as hereinafter defined).  The term “Obligations” shall mean for so
long as the Notes are outstanding the payment by the Company, as and when due
and payable (by scheduled maturity, required prepayment, acceleration, demand or
otherwise), of all amounts from time to time owing by it in respect of the
Securities Purchase Agreement, the Notes and the other Transaction Documents,
including, without limitation, (A) all principal of and interest on the Notes
(including, without limitation, all interest that accrues after the commencement
of any Insolvency Proceeding (as defined in the Security Agreement) of the
Grantor, whether or not the payment of such interest is unenforceable or is not
allowable due to the existence of such Insolvency Proceeding), and (B) all fees,
commissions, expense reimbursements, indemnifications and all other amounts due
or to become due under any of the Transaction Documents.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

    SECTION
4. Representations and
Warranties.  The Grantor represents and warrants as of the date
of this Agreement as follows:

     

    (a)         Schedule I hereto
sets forth the exact legal name of the Grantor, and the state of incorporation
and the organizational identification number of the Grantor in such
state.

     

    (b)         There is
no pending or, to its knowledge, written notice threatening any action, suit,
proceeding or claim affecting the Grantor before any governmental authority or
any arbitrator, or any order, judgment or award issued by any governmental
authority or arbitrator, in each case, that may adversely affect the grant by
the Grantor, or the perfection, of the security interest purported to be created
hereby in the Collateral, or the exercise by the Collateral Agent of any of its
rights or remedies hereunder.

     

    (c)         All
Federal, state and local tax returns and other reports required by applicable
law to be filed by the Grantor have been filed, or extensions have been
obtained, and all taxes, assessments and other governmental charges imposed upon
the Grantor or any property of the Grantor (including, without limitation, all
federal income and social security taxes on employees’ wages) and which have
become due and payable on or prior to the date hereof have been paid, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with generally accepted accounting principles consistently
applied (“GAAP”), and except
for taxes that do not, individually or in the aggregate, exceed $50,000 at any
one time outstanding.

     

    (d)         All
Equipment, Fixtures, Goods and Inventory of the Grantor now existing are, and
all Equipment, Fixtures, Goods and Inventory of the Grantor hereafter existing
will be, located and/or based at the addresses specified therefor in Schedule III hereto,
except that the Grantor will give the Collateral Agent written notice of any
change in the location of any such Collateral within 5 days of such change,
other than to locations set forth on Schedule III hereto
(or a new Schedule
III delivered by the Grantor to Collateral Agent from time to time) and
with respect to which the Collateral Agent has filed financing statements and
otherwise fully perfected its Liens thereon or will take such actions pursuant
to Section 5(n).  The Grantor’s chief place of business and chief
executive office, the place where the Grantor keeps its Records concerning
Accounts and all originals of all Chattel Paper are located at the addresses
specified therefor in Schedule III
hereto.  None of the Accounts is evidenced by Promissory Notes or
other Instruments.  Set forth in Schedule IV hereto is
a complete and accurate list, as of the date of this Agreement, of (i) each
Promissory Note, Security and other Instrument owned by the Grantor and (ii)
each Deposit Account, Securities Account and Commodities Account of the Grantor,
together with the name and address of each institution at which each such
account is maintained, the account number for each such account and a
description of the purpose of each such account. Set forth in Schedule II hereto is
a complete and correct list of each trade name used by the Grantor and the name
of, and each trade name used by, each person from which the Grantor has acquired
any substantial part of the Collateral.

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    (e)         The
Grantor has delivered to the Collateral Agent complete and correct copies of
each License described in Schedule II hereto,
including all schedules and exhibits thereto, which represents all of the
Licenses existing on the date of this Agreement.  Each such License
sets forth the entire agreement and understanding of the parties thereto
relating to the subject matter thereof, and there are no other agreements,
arrangements or understandings, written or oral, relating to the matters covered
thereby or the rights of such Grantor or any of its affiliates in respect
thereof.  Each material License now existing is, and any material
License entered into in the future will be, the legal, valid and binding
obligation of the parties thereto, enforceable against such parties in
accordance with its terms. To the knowledge of the Grantor, no default under any
material License by any such party has occurred, nor does any defense, offset,
deduction or counterclaim exist thereunder in favor of any such
party.

     

    (f)         The
Grantor owns and controls, or otherwise possesses adequate rights to use, all
Trademarks, Patents and Copyrights, which are the only trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, rights of publicity necessary to conduct its business in
substantially the same manner as conducted as of the date hereof. Schedule II
hereto sets forth a true and complete list of all registered Copyrights,
including applications therefor, issued and provisional Patents, including
applications therefor, Trademarks, including applications therefor, and Licenses
owned or used by the Grantor as of the date hereof. To the best knowledge of the
Grantor, all such Intellectual Property of the Grantor is subsisting and in full
force and effect, has not been adjudged invalid or unenforceable, is valid and
enforceable and has not been abandoned in whole or in part. Except as set forth
in Schedule II,
no such Intellectual Property is the subject of any licensing or franchising
agreement. The Grantor has no knowledge of any conflict with the rights of
others to any such Intellectual Property and, to the knowledge of the Grantor,
the Grantor is not now infringing or in conflict with any such rights of others
in any material respect, and to the best knowledge of the Grantor, no other
Person is now infringing or in conflict in any material respect with any such
properties, assets and rights owned or used by the Grantor. No Grantor has
received any notice that it is violating or has violated the trademarks,
patents, copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, rights of publicity or other intellectual
property rights of any third party.

     

    (g)         The
Grantor is and will be at all times the sole and exclusive owner of, or
otherwise has and will have adequate rights in, the Collateral free and clear of
any Liens, except for Permitted Liens. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording or filing office except such as (i) may have been filed in
favor of the Collateral Agent and/or the Buyers relating to this Agreement or
the other Security Documents and (ii) are described on Schedule 4(g)
hereto.

     

    (h)         The
exercise by the Collateral Agent of any of its rights and remedies hereunder
will not contravene any law or any contractual restriction binding on or
otherwise affecting the Grantor or any of its properties and will not result in
or require the creation of any Lien, upon or with respect to any of its
properties.

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

     

    (i)         
No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or other regulatory body, is required for (i) the
grant by the Grantor, or the perfection, of the security interest purported to
be created hereby in the Collateral, or (ii) the exercise by the Collateral
Agent of any of its rights and remedies hereunder, except as follows: (A) for
the filing under the Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in Schedule V hereto (or
a new Schedule
V delivered by the Grantor to Collateral Agent from time to time), all of
which financing statements have been duly filed and are in full force and effect
or will be duly filed and in full force and effect, (B) with respect to Deposit
Accounts, and all cash and other property from time to time deposited therein,
for the execution of a control agreement with the depository institution with
which such account is maintained, as provided in Section 5(i), (C)
with respect to Commodity Contracts, for the execution of a control agreement
with the commodity intermediary with which such commodity contract is carried,
as provided in Section
5(i), (D) with respect to the perfection of the security interest created
hereby in the United States Intellectual Property and Licenses, for the
recording of the appropriate documents in the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, (E) with respect to
the perfection of the security interest created hereby in foreign Intellectual
Property and Licenses, for registrations and filings in jurisdictions located
outside of the United States and covering rights in such jurisdictions relating
to such foreign Intellectual Property and Licenses, (F) with respect to the
perfection of the security interest created hereby in Titled Collateral, for the
submission of an appropriate application requesting that the Lien of the
Collateral Agent be noted on the Certificate of Title or certificate of
ownership, completed and authenticated by the Grantor, together with the
Certificate of Title or certificate of ownership, with respect to such Titled
Collateral, to the appropriate governmental authority, (G) with respect to the
perfection of the security interest created hereby in any Letter-of-Credit
Rights, for the consent of the issuer of the applicable letter of credit to the
assignment of proceeds as provided in the Uniform Commercial Code as in effect
in the applicable jurisdiction, (H) with respect to any action that may be
necessary to obtain control of Collateral constituting Deposit Accounts,
Commodity Contracts, Electronic Chattel Paper, Investment Property or
Letter-of-Credit Rights, the taking of such actions, and (I) the Collateral
Agent having possession of all Documents, Chattel Paper, Instruments and cash
constituting Collateral (subclauses (A), (B), (C), (D), (E), (F), G), (H) and
(I), each a “Perfection
Requirement” and collectively, the “Perfection
Requirements”).

     

    (j)         
This
Agreement creates in favor of the Collateral Agent a legal, valid and
enforceable security interest in the Collateral, as security for the
Obligations. The Perfection Requirements result in the perfection of such
security interests. Such security interests are, or in the case of Collateral in
which the Grantor obtains rights after the date hereof, will be, perfected,
first priority security interests, subject only to Permitted Liens and the
Perfection Requirements and the financing statements described in Schedule
4(g).

     

    (k)         As of the
date hereof, the Grantor holds no Commercial Tort Claims or has knowledge of any
pending Commercial Tort Claims, except for such Commercial Tort Claims described
in Schedule VI.

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

     

    SECTION
5. Covenants as to the
Collateral.  So long as any of the Obligations shall remain
outstanding, unless the Collateral Agent shall otherwise consent in
writing:

     

    (a)         Further
Assurances.  The Grantor will at its expense, at any time and from
time to time, promptly execute and deliver all further instruments and documents
and take all further action that the Collateral Agent may reasonably request in
order to: (i) perfect and protect the security interest purported to be created
hereby; (ii) enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder in respect of the Collateral; or (iii) otherwise effect the
purposes of this Agreement, including, without limitation: (A) marking
conspicuously all Chattel Paper and each License and, at the request of the
Collateral Agent, each of its Records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that such Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B) delivering and pledging to the Collateral Agent
each Promissory Note, Security, Chattel Paper or other Instrument, now or
hereafter owned by the Grantor, duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Collateral Agent, (C) executing and filing (to the extent, if any, that the
Grantor’s signature is required thereon) or authenticating the filing of, such
financing or continuation statements, or amendments thereto, as may be necessary
or that the Collateral Agent may reasonably request in order to perfect and
preserve the security interest purported to be created hereby, (D) furnishing to
the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral in each case as the Collateral Agent may reasonably request,
all in reasonable detail, (E) if any Collateral shall be in the possession of a
third party, notifying such Person of the Collateral Agent’s security interest
created hereby and obtaining a written acknowledgment from such Person that such
Person holds possession of the Collateral for the benefit of the Collateral
Agent, which such written acknowledgement shall be in form and substance
reasonably satisfactory to the Collateral Agent, (F) if at any time after the
date hereof, the Grantor acquires or holds any Commercial Tort Claim, promptly
notifying the Collateral Agent in a writing signed by the Grantor setting forth
a brief description of such Commercial Tort Claim and granting to the Collateral
Agent a security interest therein and in the proceeds thereof, which writing
shall incorporate the provisions hereof and shall be in form and substance
satisfactory to the Collateral Agent, (G) upon the acquisition after the date
hereof by the Grantor of any motor vehicle or other Equipment subject to a
certificate of title or ownership (other than a Motor Vehicle or Equipment that
is subject to a purchase money security interest), causing the Collateral Agent
to be listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Collateral Agent in accordance with
Section 5(j) hereof if and to the extent requested by the Collateral Agent and
(H) filing, and causing the filing of, such agreements, documents and
instruments with the United States Patent and Trademark Office and with all
other foreign, federal, state and local governmental agencies and other Persons
as, in the sole discretion of the Collateral Agent, were and are necessary to
reflect the Grantor’s ownership in all of its Copyrights, Patents and
Trademarks.

     

    (b)         Location of Equipment and
Inventory.  The Grantor will keep the Equipment and Inventory
(i) at the locations specified therefor on Schedule III hereto,
or (ii) at such other locations set forth on Schedule III (or a
new Schedule
III delivered by the Grantor to Collateral Agent from time to time) and
with respect to which the Collateral Agent has filed financing statements and
otherwise fully perfected its Liens thereon, or (iii) at such other locations in
the United States, provided that within 5 days following the relocation of
Equipment or Inventory to such other location or the acquisition of Equipment or
Inventory, Grantor shall deliver to the Collateral Agent a new Schedule III
indicating such new locations.

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

     

    (c)          
Condition of
Equipment.  The Grantor will maintain or cause the Equipment
(to the extent necessary or useful to its business) to be maintained and
preserved in good condition, repair and working order, ordinary wear and tear
excepted, and will forthwith, or in the case of any loss or damage to any
Equipment of the Grantor within a commercially reasonable time after the
occurrence thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith which are necessary or desirable,
consistent with past practice, or which the Collateral Agent may
request.  The Grantor will promptly furnish to the Collateral Agent a
statement describing in reasonable detail any such loss or damage in excess of
$50,000 per occurrence to any Equipment.

     

    (d)         
Taxes,
Etc.  The Grantor agrees to pay promptly when due all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is being contested in good
faith by appropriate proceedings which stay the imposition of any penalty, fine
or Lien resulting from the non-payment thereof and with respect to which
adequate reserves in accordance with GAAP have been set aside for the payment
thereof.

     

    (e)          
Provisions Concerning the
Accounts and the Licenses.

     

    (i)         The
Grantor will (A) give the Collateral Agent at least 30 days’ prior written
notice of any change in such Grantor’s name, identity or organizational
structure, (B) maintain its jurisdiction of incorporation, organization or
formation as set forth in Schedule I hereto,
(C) immediately notify the Collateral Agent upon obtaining an organizational
identification number, if on the date hereof such Grantor did not have such
identification number, and (D) keep adequate records concerning the Accounts and
Chattel Paper and permit representatives of the Collateral Agent during normal
business hours on reasonable notice to such Grantor, to inspect and make
abstracts from such Records and Chattel Paper.

     

    (ii)         The
Grantor will, except as otherwise provided in this subsection (f), continue to
collect, at its own expense, all amounts due or to become due under the
Accounts. In connection with such collections, the Grantor may (and, at the
Collateral Agent’s direction, will) take such action as the Grantor or the
Collateral Agent may deem necessary or advisable to enforce collection or
performance of the Accounts; provided, however, that the
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuance of an Event of Default, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to the Collateral
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to the Grantor thereunder directly to the
Collateral Agent or its designated agent and, upon such notification and at the
expense of the Grantor and to the extent permitted by law, to enforce collection
of any such Accounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as the Grantor might have
done. After receipt by the Grantor of a notice from the Collateral Agent that
the Collateral Agent has notified, intends to notify, or has enforced or intends
to enforce the Grantor’s rights against the account debtors or obligors under
any Accounts as referred to in the proviso to the immediately preceding
sentence, (A) all amounts and proceeds (including Instruments) received by the
Grantor in respect of the Accounts shall be received in trust for the benefit of
the Collateral Agent hereunder, shall be segregated from other funds of the
Grantor and shall be forthwith paid over to the Collateral Agent in the same
form as so received (with any necessary endorsement) to be applied as specified
in Section 7(b)
hereof, and the Grantor will not adjust, settle or compromise the amount or
payment of any Account or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon. In addition, upon the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may (in its sole and absolute discretion) direct any or all of the banks
and financial institutions with which the Grantor either maintains a Deposit
Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Collateral Agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all or a portion of such securities, cash, investments and other
items held by such institution. Any such securities, cash, investments and other
items so received by the Collateral Agent shall be applied as specified in
accordance with Section 7(b) hereof.

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    (iii)        Upon the
occurrence and during the continuance of any breach or default under any
material License referred to in Schedule II hereto by
any party thereto other than the Grantor, the Grantor party thereto will,
promptly after obtaining knowledge thereof, give the Collateral Agent written
notice of the nature and duration thereof, specifying what action, if any, it
has taken and proposes to take with respect thereto and thereafter will take
reasonable steps to protect and preserve its rights and remedies in respect of
such breach or default, or will obtain or acquire an appropriate substitute
License.  The Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any material License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by such Grantor
thereto.  The Grantor will exercise promptly and diligently each and
every right which it may have under each material License (other than any right
of termination) and will duly perform and observe in all respects all of its
obligations under each material License and will take all action reasonably
necessary to maintain such Licenses in full force and effect. The Grantor will
not, without the prior written consent of the Collateral Agent, cancel,
terminate, amend or otherwise modify in any respect, or waive any provision of,
any material License referred to in Schedule II
hereto.

     

    (f)          
Transfers and Other
Liens.

     

    (i)         The
Grantor will not sell, assign (by operation of law or otherwise), lease,
license, exchange or otherwise transfer or dispose of any of the Collateral,
except as expressly permitted by the other Transaction Documents.

     

    (ii)        The
Grantor will not create, suffer to exist or grant any Lien upon or with respect
to any Collateral other than a Permitted Lien.

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    (g)          
Intellectual
Property.

     

    (i)         If
applicable, the Grantor shall, upon the Collateral Agent’s written request, duly
execute and deliver a security agreement or security agreements relating to
Intellectual Property. The Grantor (either itself or through licensees) will,
and will cause each licensee thereof to, take all action necessary to maintain
all of the Intellectual Property in full force and effect, including, without
limitation, using the proper statutory notices and markings and using the
Trademarks on each applicable trademark class of goods in order to so maintain
the Trademarks in full force and free from any claim of abandonment for non-use,
and the Grantor will not (nor permit any licensee thereof to) do any act or
knowingly omit to do any act whereby any Intellectual Property may become
invalidated; provided, however, that so long
as no Event of Default has occurred and is continuing, the Grantor shall have no
obligation to use or to maintain any Intellectual Property (A) that relates
solely to any product or work, that has been, or is in the process of being,
discontinued, abandoned or terminated, (B) that is being replaced with
Intellectual Property substantially similar to the Intellectual Property that
may be abandoned or otherwise become invalid, so long as the failure to use or
maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such
replacement Intellectual Property is subject to the Lien created by this
Agreement or (C) that is substantially the same as another Intellectual Property
that is in full force, so long the failure to use or maintain such Intellectual
Property does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such other Intellectual Property is subject
to the Lien and security interest created by this Agreement.  The
Grantor will cause to be taken all necessary steps in any proceeding before the
United States Patent and Trademark Office and the United States Copyright Office
or any similar office or agency in any other country or political subdivision
thereof to maintain each registration of the Intellectual Property (other than
the Intellectual Property described in the proviso to the immediately preceding
sentence), including, without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings and payment of maintenance fees, filing fees, taxes or other
governmental fees. If any Intellectual Property (other than Intellectual
Property described in the proviso to the first sentence of subsection (i) of
this clause (h)) is infringed, misappropriated, diluted or otherwise violated in
any material respect by a third party, the Grantor shall (x) upon learning of
such infringement, misappropriation, dilution or other violation, promptly
notify the Collateral Agent and (y) to the extent the Grantor shall deem
appropriate under the circumstances, promptly sue for infringement,
misappropriation, dilution or other violation, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as
such Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property.  The Grantor shall furnish to the Collateral
Agent from time to time upon its request statements and schedules further
identifying and describing the Intellectual Property and Licenses and such other
reports in connection with the Intellectual Property and Licenses as the
Collateral Agent may reasonably request, all in reasonable detail and promptly
upon request of the Collateral Agent, following receipt by the Collateral Agent
of any such statements, schedules or reports, the Grantor shall modify this
Agreement by amending Schedule II hereto,
as the case may be, to include any Intellectual Property and License, as the
case may be, which becomes part of the Collateral under this Agreement and shall
execute and authenticate such documents and do such acts as shall be necessary
or, in the reasonable judgment of the Collateral Agent, desirable to subject
such Intellectual Property and Licenses to the Lien and security interest
created by this Agreement. Notwithstanding anything herein to the contrary, upon
the occurrence and during the continuance of an Event of Default, the Grantor
may not abandon or otherwise permit any Intellectual Property to become invalid
without the prior written consent of the Collateral Agent, and if any
Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, the Grantor will take such
action as the Collateral Agent shall deem appropriate under the circumstances to
protect such Intellectual Property.

     

    
      
         

      

      
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    (ii)        In no
event shall the Grantor, either itself or through any agent, employee, licensee
or designee, file an application for the registration of any Trademark or
Copyright or the issuance of any Patent with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, or in any
similar office or agency of the United States or any country or any political
subdivision thereof unless it gives the Collateral Agent prior written notice
thereof. Upon request of the Collateral Agent, the Grantor shall execute,
authenticate and deliver any and all assignments, agreements, instruments,
documents and papers as the Collateral Agent may reasonably request to evidence
the Collateral Agent’s security interest hereunder in such Intellectual Property
and the General Intangibles of the Grantor relating thereto or represented
thereby, and the Grantor hereby appoints the Collateral Agent its
attorney-in-fact to execute and/or authenticate and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed, and such power (being coupled with an interest) shall be irrevocable
until the indefeasible payment in full in cash of all of the Obligations in
full.

     

    (h)         
Deposit, Commodities and
Securities Accounts. Upon the Collateral Agent’s written request, the
Grantor shall cause each bank and other financial institution with an account
referred to in Schedule IV hereto to
execute and deliver to the Collateral Agent a control agreement, in form and
substance reasonably satisfactory to the Collateral Agent, duly executed by the
Grantor and such bank or financial institution, or enter into other arrangements
in form and substance satisfactory to the Collateral Agent, pursuant to which
such institution shall irrevocably agree, inter alia, that (i) it
will comply at any time with the instructions originated by the Collateral Agent
to such bank or financial institution directing the disposition of cash,
Commodity Contracts, securities, Investment Property and other items from time
to time credited to such account, without further consent of the Grantor, which
instructions the Collateral Agent will not give to such bank or other financial
institution in the absence of a continuing Event of Default, (ii) all Commodity
Contracts, securities, Investment Property and other items of the Grantor
deposited with such institution shall be subject to a perfected, first priority
security interest in favor of the Collateral Agent, except for Permitted Liens,
(iii) any right of set off (other than recoupment of standard fees), banker’s
Lien or other similar Lien, security interest or encumbrance shall be fully
waived as against the Collateral Agent, and (iv) upon receipt of written notice
from the Collateral Agent during the continuance of an Event of Default, such
bank or financial institution shall immediately send to the Collateral Agent by
wire transfer (to such account as the Collateral Agent shall specify, or in such
other manner as the Collateral Agent shall direct) all such cash, the value of
any Commodity Contracts, securities, Investment Property and other items held by
it. Without the prior written consent of the Collateral Agent, the Grantor shall
not make or maintain any Deposit Account, Commodity Account or Securities
Account except for the accounts set forth in Schedule IV hereto.
The provisions of this paragraph 5(i) shall not apply to Deposit Accounts
specially and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of the Grantor’s
employees.

     

    
      
         

      

      
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    (i)           
Motor
Vehicles.

     

    (i)         Upon the
Collateral Agent’s written request, the Grantor shall deliver to the Collateral
Agent originals of the certificates of title or ownership for all motor vehicles
owned by it with the Collateral Agent listed as lienholder, for the benefit of
the Buyers.

     

    (ii)        The
Grantor hereby appoints the Collateral Agent as its attorney-in-fact, effective
the date hereof and terminating upon the termination of this Agreement, for the
purpose of (A) executing on behalf of such Grantor title or ownership
applications for filing with appropriate state agencies to enable motor vehicles
now owned or hereafter acquired by such Grantor to be retitled and the
Collateral Agent listed as lienholder thereof, (B) filing such applications with
such state agencies, and (C) executing such other documents and instruments on
behalf of, and taking such other action in the name of the Grantor as the
Collateral Agent may deem necessary or advisable to accomplish the purposes
hereof (including, without limitation, for the purpose of creating in favor of
the Collateral Agent a perfected Lien on the motor vehicles and exercising the
rights and remedies of the Collateral Agent hereunder). This appointment as
attorney-in-fact is coupled with an interest and is irrevocable until all of the
Obligations are indefeasibly paid in full in cash.

     

    (j)           
Control.  Upon
the Collateral Agent’s request, the Grantor hereby agrees to take any or all
action that may be necessary or that the Collateral Agent may reasonably request
in order for the Collateral Agent to obtain control in accordance with Sections
9-105 through and including 9-107 of the Code with respect to the following
Collateral: (i) Electronic Chattel Paper, (ii) Investment Property, and (iii)
Letter-of-Credit Rights.

     

    (k)          
Inspection and
Reporting.  The Grantor shall permit the Collateral Agent, or
any agents or representatives thereof or such professionals or other Persons as
the Collateral Agent may designate, during normal business hours, after
reasonable notice in the absence of an Event of Default and not more than once a
year in the absence of an Event of Default, (i) to examine and make copies of
and abstracts from the Grantor’s records and books of account, (ii) to visit and
inspect its properties, (iii) to verify materials, leases, Instruments,
Accounts, Inventory and other assets of the Grantor from time to time, (iii) to
conduct audits, physical counts, appraisals and/or valuations, examinations at
the locations of the Grantor. The Grantor shall also permit the Collateral
Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate to discuss the Grantor’s affairs,
finances and accounts with any of its directors, officers, managerial employees,
independent accountants or any of its other representatives.

     

    (l)          
Fixture
Filings.  At the Collateral Agent’s request, the Grantor shall
cause financing statements to be filed in the appropriate county clerk’s offices
in order to perfect the security interest of the Collateral Agent in and to all
Fixtures constituting Collateral.

     

    SECTION
6. Additional Provisions
Concerning the Collateral.

     

    (a)         
The
Grantor hereby (i) authorizes the Collateral Agent to file one or more Uniform
Commercial Code financing or continuation statements, and amendments thereto,
relating to the Collateral and (ii) ratifies such authorization to the extent
that the Collateral Agent has filed any such financing or continuation
statements, or amendments thereto, prior to the date hereof. A photocopy or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.

     

    
      
         

      

      
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    (b)         The
Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact
and proxy, with full authority in the place and stead of such Grantor and in the
name of such Grantor or otherwise, from time to time in the Collateral Agent’s
discretion, so long as an Event of Default shall have occurred and is
continuing, to take any action and to execute any instrument which the
Collateral Agent may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of the Grantor under Section 5 hereof),
including, without limitation, (i) to obtain and adjust insurance required to be
paid to the Collateral Agent pursuant to Section 5(e) hereof,
(ii) to ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
Instruments, Documents and Chattel Paper, (iv) to file any claims or take any
action or institute any proceedings which the Collateral Agent may deem
necessary or desirable for the collection of any Collateral or otherwise to
enforce the rights of the Collateral Agent and the Buyers with respect to any
Collateral, and (v) to execute assignments, licenses and other documents to
enforce the rights of the Collateral Agent and the Buyers with respect to any
Collateral. This power is coupled with an interest and is irrevocable until all
of the Obligations are indefeasibly paid in full in cash.

     

    (c)         For the
purpose of enabling the Collateral Agent to exercise rights and remedies
hereunder, at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, and for no other purpose, the Grantor hereby
grants to the Collateral Agent, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to the Grantor) to use, assign, license or sublicense any
Intellectual Property now owned or hereafter acquired by such Grantor, wherever
the same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of the
Securities Purchase Agreement that limit the right of the Grantor to dispose of
its property, and Section 5(g) and
Section 5(h)
hereof, so long as no Event of Default shall have occurred and be continuing,
the Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Intellectual Property in
the ordinary course of its business. In furtherance of the foregoing, unless an
Event of Default shall have occurred and be continuing, the Collateral Agent
shall from time to time, upon the request of the Grantor, execute and deliver
any instruments, certificates or other documents, in the form so requested to
allow it to take any action permitted above (including relinquishment of the
license provided pursuant to this clause (c) as to any Intellectual Property).
Further, upon the indefeasible payment in full in cash of all of the
Obligations, the Collateral Agent (subject to Section 10(e) hereof) shall
release and reassign to the Grantor all of the Collateral Agent’s right, title
and interest in and to the Intellectual Property, and the Licenses, all without
recourse, representation or warranty whatsoever. The exercise of rights and
remedies hereunder by the Collateral Agent shall not terminate the rights of the
holders of any licenses or sublicenses theretofore granted by the Grantor in
accordance with the second sentence of this clause (c). The Grantor hereby
releases the Collateral Agent from any claims, causes of action and demands at
any time arising out of or with respect to any actions taken or omitted to be
taken by the Collateral Agent under the powers of attorney granted herein other
than actions taken or omitted to be taken through the Collateral Agent’s gross
negligence or willful misconduct, as determined by a final determination of a
court of competent jurisdiction.

     

    
      
         

      

      
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    (d)        If the
Grantor fails to perform any agreement or obligation contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement or
obligation, in the name of such Grantor or the Collateral Agent, and the
expenses of the Collateral Agent incurred in connection therewith shall be
payable by such Grantor pursuant to Section 8 hereof and
shall be secured by the Collateral.

     

    (e)         The
powers conferred on the Collateral Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Collateral
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.

     

    (f)         Anything
herein to the contrary notwithstanding (i) the Grantor shall remain liable under
the Licenses and otherwise with respect to any of the Collateral to the extent
set forth therein to perform all of its obligations thereunder to the same
extent as if this Agreement had not been executed, (ii) the exercise by the
Collateral Agent of any of its rights hereunder shall not release the Grantor
from any of its obligations under the Licenses or otherwise in respect of the
Collateral, and (iii) the Collateral Agent shall not have any obligation or
liability by reason of this Agreement under the Licenses or with respect to any
of the other Collateral, nor shall the Collateral Agent be obligated to perform
any of the obligations or duties of the Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.

     

    
      
         

      

      
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    SECTION
7. Remedies Upon Event of
Default.  If any Event of Default shall have occurred and be
continuing:

     

    (a)         The
Collateral Agent may exercise in respect of the Collateral, in addition to any
other rights and remedies provided for herein or otherwise available to it, all
of the rights and remedies of a secured party upon default under the Code, and
also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent’s name or into the name of its
nominee or nominees (to the extent the Collateral Agent has not theretofore done
so) and thereafter receive, for the benefit of the Collateral Agent, all
payments made thereon, give all consents, waivers and ratifications in respect
thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) require the Grantor to, and the Grantor hereby agrees that
it will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of its respective Collateral as directed by the Collateral
Agent and make it available to the Collateral Agent at a place or places to be
designated by the Collateral Agent that is reasonably convenient to both
parties, and the Collateral Agent may enter into and occupy any premises owned
or leased by the Grantor where the Collateral or any part thereof is located or
assembled for a reasonable period in order to effectuate the Collateral Agent’s
rights and remedies hereunder or under law, without obligation to the Grantor in
respect of such occupation, and (iii) without notice except as specified below
and without any obligation to prepare or process the Collateral for sale, (A)
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent’s offices or elsewhere, for cash,
on credit or for future delivery, and at such price or prices and upon such
other terms as the Collateral Agent may deem commercially reasonable and/or (B)
lease, license or dispose of the Collateral or any part thereof upon such terms
as the Collateral Agent may deem commercially reasonable. The Grantor agrees
that, to the extent notice of sale or any other disposition of its respective
Collateral shall be required by law, at least ten (10) days’ notice to the
Grantor of the time and place of any public sale or the time after which any
private sale or other disposition of its respective Collateral is to be made
shall constitute reasonable notification. The Collateral Agent shall not be
obligated to make any sale or other disposition of any Collateral regardless of
notice of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. The Grantor hereby waives any claims against
the Collateral Agent and the Buyers arising by reason of the fact that the price
at which its respective Collateral may have been sold at a private sale was less
than the price which might have been obtained at a public sale or was less than
the aggregate amount of the Obligations, even if the Collateral Agent accepts
the first offer received and does not offer such Collateral to more than one
offeree, and waives all rights that the Grantor may have to require that all or
any part of such Collateral be marshaled upon any sale (public or private)
thereof. The Grantor hereby acknowledges that (i) any such sale of its
respective Collateral by the Collateral Agent shall be made without warranty,
(ii) the Collateral Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth in
clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Collateral. In addition to the foregoing, (1)
upon written notice to the Grantor from the Collateral Agent after and during
the continuance of an Event of Default, such Grantor shall cease any use of the
Intellectual Property or any trademark, patent or copyright similar thereto for
any purpose described in such notice; (2) the Collateral Agent may, at any time
and from time to time after and during the continuance of an Event of Default,
upon 10 days’ prior notice to such Grantor, license, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any of the
Intellectual Property, throughout the universe for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its sole
discretion determine; and (3) the Collateral Agent may, at any time, pursuant to
the authority granted in Section 6 hereof
(such authority being effective upon the occurrence and during the continuance
of an Event of Default), execute and deliver on behalf of such Grantor, one or
more instruments of assignment of the Intellectual Property (or any application
or registration thereof), in form suitable for filing, recording or registration
in any country.

     

    (b)         Any cash
held by the Collateral Agent as Collateral and all cash Proceeds received by the
Collateral Agent in respect of any sale of or collection from, or other
realization upon, all or any part of the Collateral shall be applied (after
payment of any amounts payable to the Collateral Agent pursuant to Section 8 hereof) by
the Collateral Agent against, all or any part of the Obligations in such order
as the Collateral Agent shall elect, consistent with the provisions of the
Securities Purchase Agreement. Any surplus of such cash or cash Proceeds held by
the Collateral Agent and remaining after the indefeasible payment in full in
cash of all of the Obligations shall be paid over to whomsoever shall be
lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.

    
      
         

      

      
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    (c)         In the
event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Collateral Agent and the Buyers are
legally entitled, the Grantor shall be liable for the deficiency, together with
interest thereon at the highest rate specified in the Notes for interest on
overdue principal thereof or such other rate as shall be fixed by applicable
law, together with the costs of collection and the reasonable fees, costs,
expenses and other client charges of any attorneys employed by the Collateral
Agent to collect such deficiency.

     

    (d)        The
Grantor hereby acknowledges that if the Collateral Agent complies with any
applicable state, provincial, or federal law requirements in connection with a
disposition of the Collateral, such compliance will not adversely affect the
commercial reasonableness of any sale or other disposition of the
Collateral.

     

    (e)         The
Collateral Agent shall not be required to marshal any present or future
collateral security (including, but not limited to, this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of the Collateral Agent’s rights hereunder and in
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that the Grantor lawfully may, the Grantor hereby agrees that it will
not invoke any law relating to the marshaling of collateral which might cause
delay in or impede the enforcement of the Collateral Agent’s rights under this
Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, the Grantor hereby irrevocably waives the
benefits of all such laws.

     

    SECTION
8. Indemnity and
Expenses.

     

    (a)         The
Grantor agrees, jointly and severally, to defend, protect, indemnify and hold
the Collateral Agent and each of the Buyers, jointly and severally, harmless
from and against any and all claims, damages, losses, liabilities, obligations,
penalties, fees, costs and expenses (including, without limitation, reasonable
legal fees, costs, expenses, and disbursements of such Person’s counsel) to the
extent that they arise out of or otherwise result from this Agreement
(including, without limitation, enforcement of this Agreement), except to the
extent resulting from such Person’s gross negligence or willful misconduct, as
determined by a final judgment of a court of competent
jurisdiction.

     

    (b)         The
Grantor agrees, jointly and severally, to pay to the Collateral Agent upon
demand the amount of any and all costs and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Collateral Agent and
of any experts and agents (including, without limitation, any collateral trustee
which may act as agent of the Collateral Agent), which the Collateral Agent may
incur in connection with (i) the preparation, negotiation, execution, delivery,
recordation, administration, amendment, waiver or other modification or
termination of this Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any Collateral,
(iii) the exercise or enforcement of any of the rights of the Collateral Agent
hereunder, or (iv) the failure by the Grantor to perform or observe any of the
provisions hereof.

     

    
      
         

      

      
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    SECTION
9. Notices.
Etc.  All notices and other communications provided for
hereunder shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied, e-mailed or delivered, if to
the Grantor at its address specified the signature pages and if to the
Collateral Agent to it, at its address specified on the signature pages below;
or as to any such Person, at such other address as shall be designated by such
Person in a written notice to all other parties hereto complying as to delivery
with the terms of this Section 9. All such
notices and other communications shall be effective (a) if sent by certified
mail, return receipt requested, when received or three days after deposited in
the mails, whichever occurs first, (b) if telecopied or e-mailed, when
transmitted (during normal business hours) and confirmation is received, and
otherwise, the day after the notice or communication was transmitted and
confirmation is received, or (c) if delivered in person, upon
delivery.

     

    SECTION
10. Miscellaneous.

     

    (a)         No
amendment of any provision of this Agreement shall be effective unless it is in
writing and signed by the Grantor and the Collateral Agent, and no waiver of any
provision of this Agreement, and no consent to any departure by the Grantor
therefrom, shall be effective unless it is in writing and signed by the Grantor
and the Collateral Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which
given.

     

    (b)        No
failure on the part of the Collateral Agent to exercise, and no delay in
exercising, any right hereunder or under any of the other Transaction Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies of the Collateral Agent or any Buyer
provided herein and in the other Transaction Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of the Collateral Agent or any Buyer under any of the other Transaction
Documents against any party thereto are not conditional or contingent on any
attempt by such Person to exercise any of its rights under any of the other
Transaction Documents against such party or against any other Person, including
but not limited to, the Grantor.

     

     

    (c)         Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

     

    (d)         This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the indefeasible payment in full
in cash of the Obligations, and (ii) be binding on the Grantor and all other
Persons who become bound as debtor to this Agreement in accordance with Section
9-203(d) of the Code and shall inure, together with all rights and remedies of
the Collateral Agent and the Buyers hereunder, to the benefit of the Collateral
Agent and the Buyers and their respective permitted successors, transferees and
assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, without notice to the Grantor, the Collateral Agent and the
Buyers may assign or otherwise transfer their rights and obligations under this
Agreement and any of the other Transaction Documents, to any other Person and
such other Person shall thereupon become vested with all of the benefits in
respect thereof granted to the Collateral Agent and the Buyers herein or
otherwise. Upon any such assignment or transfer, all references in this
Agreement to the Collateral Agent or any such Buyer shall mean the assignee of
the Collateral Agent or such Buyer. None of the rights or obligations of the
Grantor hereunder may be assigned or otherwise transferred without the prior
written consent of the Collateral Agent, and any such assignment or transfer
without the consent of the Collateral Agent shall be null and void.

     

    
      
         

      

      
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    (e)         Upon the
indefeasible payment in full in cash of the Obligations, (i) this Agreement and
the security interests created hereby shall terminate and all rights to the
Collateral shall revert to the Grantor, and (ii) the Collateral Agent will, upon
the Grantor’s request and at such Grantor’s expense, (A) return to the Grantor
such of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (B) execute and deliver to the Grantor
such documents as the Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse
whatsoever.

     

    (f)         THIS
AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW
(OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND EXCEPT
TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT
OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

     

    (g)         ANY LEGAL
ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE
COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE GRANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE
GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

     

    (h)         THE
GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL
AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF
THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
ORAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.

     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

     

    (i)         The
Grantor irrevocably consents to the service of process of any of the aforesaid
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail (or any substantially similar form of mail),
postage prepaid, to the Grantor at its address provided herein, such service to
become effective 10 days after such mailing.

     

    (j)         Nothing
contained herein shall affect the right of the Collateral Agent to serve process
in any other manner permitted by law or commence legal proceedings or otherwise
proceed against the Grantor or any property of the Grantor in any other
jurisdiction.

     

    (k)        The
Grantor irrevocably and unconditionally waives any right it may have to claim or
recover in any legal action, suit or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages.

     

    (l)         Section
headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

     

    (m)       This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together constitute one in the same
Agreement.

     

     

    [REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
        -20-

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.

    
      
        	 	 	 
	 	 	 
	 	APPLIED
      DNA SCIENCES, INC.	 
	 	 	 	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Dr. James A. Hayward	 
	 	 	
                Name:  Dr.
      James A. Hayward

              	 
	 	 	
                Title:    President
      and Chief Executive Officer

              	 
	 	 	
                Address:  25
      Health Sciences Drive

              	 
	 	 	
                 
                      Stony
      Brook, NY 11790

              	 
	 	 	 	 
	 	 	
                Facsimile:
      (631) 444-6935

              	 
	 	 	
                Email:
      james.hayward@adnas.com

              	 

      

    

    
      
        	 	 	 
	 	ETICO
      CAPITAL, LLC	 
	 	 	 	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Scott A. Weisman	 
	 	 	
                Name:  Scott
      A. Weisman

              	 
	 	 	
                Title:    Managing
      Director

              	 
	 	 	
                Address:  405
      Lexington Avenue

              	 
	 	 	
                                  New
      York, NY 10174

              	 
	 	 	 	 
	 	 	
                Facsimile:
      (203) 529- 0096

              	 
	 	 	
                Email:
      sweisman@eticocapital.com

              	 

      

    

     

    
      
         

      

      
        -21-

        
          

        

      

      
         

      

    

     

    Schedule
I

    

    Grantor

     

    Legal Name of Grantor
– Applied DNA Sciences, Inc.

    

    State of
Incorporation – Delaware

    

    Organizational
Identification Number – 4635076

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      Schedule
II

       

      Copyrights,
Patents and Trademarks

       

       

      The
following are used by the Grantor:

      
        	
                PATENTS

              
	
                Patents
      Issued

              
	
                Patent
      Name

              	
                Patent
      No

              	
                Assignee
      of
Record

              	
                Date
      Issued

              	
                Jurisdiction

              
	
                Nucleic
      Acid as Marker for Product  Anticounterfeiting and
      Identification

              	
                (570982/196181)

                89108443

              	
                APDN
      (B.V.I.) Inc.

              	
                1/11/2004
      – 

                3/16/2020

                3/17/2000

              	
                Taiwan

              
	
                Method
      of using ribonucleic acid as marker for product anti-counterfeit
      labeling

              	
                CN1324955

                00107580.2

              	
                APDN
      (B.V.I.) Inc.

              	
                2/2/2005

              	
                China

              
	
                EppenLocker
      (A Leakage Prevention Apparatus of Microcentrifuge)

              	
                529633

                203050

              	
                APDN
      Inc.

              	
                4/21/2003-

                3/9/2012

                3/10/2000

              	
                Taiwan

              
	
                Multiple
      Tube Structure for Multiple PCR in a Closed Container

              	
                519130

                205554

              	
                APDN
      Inc.

              	
                1/21/2003-

                6/19/2012

                6/20/2000

              	
                Taiwan

              
	
                A
      Device for Multiple Polymerase Chain Reactions In  a Closed
      Container and a Method of Using Thereof

              	
                231311

              	
                APDN  Inc.

              	
                4/21/2005-

                6/12/2020

                6/12/2000

              	
                Taiwan

              
	
                A
      Method of marking solid or liquid substances with nucleic acid for
      anti-counterfeiting and authentication

              	
                7115301

                (10/748,412)

              	
                APDN
      (B.V.I.) Inc.

              	
                10/3/2006

              	
                United
      States

              
	
                A
      novel nucleic acid based steganography system and applications
      thereof

              	
                MY
      135976-A

              	
                APDN
      (B.V.I.) Inc.

              	
                7/31/2008

              	
                Malaysia

              
	 
      	
                KR
      20050025256

                679484

                (61387/2004)

              	
                APDN
      (B.V.I.) Inc.

              	
                3/14/2005

                8/3/2005

              	
                Korea

              
	
                Method
      for Mixing Ribonucleic Acid in Water Insoluble Media and Application
      Thereof

              	
                JP2004159502

                3930794

              	
                Rixflex
      Holding Limited*

              	
                6/10/2004

                8/31/2002

              	
                Japan

              
	
                Method
      for Mixing Ribonucleic Acid in Water Insoluble Media and Application
      Thereof

              	
                EP1394544

              	
                APDN
      (B.V.I.) Inc.

              	
                3/3/2004

              	
                EU

              
	
                Method
      of dissolving nucleic acid in water insoluble medium and its
      application

              	
                CN100349315C

                03155949.2

              	
                APDN
      (B.V.I.) Inc.

              	
                11/7/2007

                (8/27/2003)

              	
                China

              
	
                A
      Nucleic Acid Based Steganography System and Application
      thereof

              	
                EP1568783

              	
                APDN
      (B.V.I.) Inc.

              	
                8/31/2005

              	
                EU

              
	
                A
      Nucleic Acid Based Steganography System and Application
      Thereof

              	
                DE
      602004007474.8

              	
                APDN
      (B.V.I.) Inc

              	
                4/24/2008

              	
                Germany

              
	
                System
      and Method for authenticating multiple components associated with a
      particular product

              	
                WO2006127558
      A2

              	
                APDN

              	
                11/30/2006

              	
                EU

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                Patents
      Pending

              
	
                Patent
      Name

              	
                Publication
      No

              	
                Filed
      in Name of

              	
                Date
      Published

              	
                Jurisdiction

              
	
                Method
      for Mixing Nucleic Acid in Water Insoluble Media and Application
      Thereof

              	
                20040058374

                (10/645,602)

              	
                Rixflex
      Holdings Limited*

              	
                3/25/2004   

              	
                United
      States

              
	
                Novel
      nucleic acid based steganography system and application
      thereof

              	
                20050059059

                (10/909,431)

              	
                Rixflex
      Holdings Limited*

              	
                3/17/2005   

              	
                United
      States

              
	
                Cryptic
      method of secret information carried in DNA molecule and it deencryption
      method

              	
                200506064

                (921221490)

              	
                APDN
      (B.V.I.) Inc.

              	
                8/6/2003   

              	
                Taiwan

              
	
                 A
      novel nucleic acid based steganography system and applications
      thereof

              	
                1-2004-00742

              	
                APDN
      (B.V.I.) Inc.

              	
                8/4/2004   

              	
                Vietnam

              
	
                A
      novel nucleic acid based steganography system and applications
      thereof

              	
                092819

              	
                APDN
      (B.V.I.)  Inc. pending

              	
                8/4/2004   

              	
                Thailand

              
	
                A
      Method for encrypting and decrypting specific message by using nucleic
      acid molecules

              	
                JP2005055900

                2004-225987

              	
                Rixflex
      Holdings Limited*

              	
                3/3/2005   

              	
                Japan

              
	 
      	
                P-00200400374

              	
                APDN
      (B.V.I.) Inc

              	
                8/4/2004   

              	
                Indonesia

              
	
                Methods
      and Systems for the Generation of Plurality of Security Markers and the
      Detection Thereof

              	
                12/690,799

              	
                APDN
      (B.V.I.) Inc.

              	
                None   

              	
                United
      States

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                Published
      Patent Applications

              
	
                Patent
      Name

              	
                Patent
      Appl. No

              	
                Assignee
      of
Record

              	
                Publication
Date

              	
                Jurisdiction

              
	
                System
      and Method for Marking Textiles with Nucleic Acids

              	
                publication
      # 

                20050112610

                (10/825,968)

              	
                APDN
      (B.V.I.) Inc.

              	
                5/26/2005   

              	
                United
      States

              
	
                System
      and Method for Authenticating Multiple Components Associated with a
      Particular Good

              	
                20070048761

                (11/437,265)

              	
                APDN
      (B.V.I.) Inc.

              	
                3/1/2007   

              	
                United
      States

              
	
                System
      and Method for Secure Document Printing and Detection

              	
                20090042191

                (11/954,044)

              	
                APDN
      (B.V.I.) Inc.

              	
                2/12/2009   

              	
                United
      States

              
	
                System
      and Method for Authenticating Tablets

              	
                20090075261

                (11/954,055)

              	
                APDN
      (B.V.I.) Inc.

              	
                3/19/2009   

              	
                United
      States

              
	
                System
      and Method for Authenticating Sports Identification Goods

              	
                20080293052

                (11/954,051)

              	
                APDN
      (B.V.I.) Inc.

              	
                11/27/2008   

              	
                United
      States

              
	
                Optical
      Reporter Compositions

              	
                20080299667

                (11/954,030)

              	
                APDN
      (B.V.I.) Inc.

              	
                12/4/2008   

              	
                United
      States

              
	
                Methods
      for Covalent Linking of Optical Reporters

              	
                20080312427

                (11/954,009)

              	
                APDN
      (B.V.I.) Inc.

              	
                12/12/2008   

              	
                United
      States

              
	
                Method
      for Authenticating Articles with Optical Reporters

              	
                20080299559

                (11/954,038)

              	
                APDN
      (B.V.I.) Inc.

              	
                12/4/2008   

              	
                United
      States

              
	
                Methods
      for Genetic Analysis of Textiles made of Gossypium
      Barbadense and Gossypium
      Hirsutum Cotton

              	
                Published
      by WIPO

                WO
      2010/056642

                12/269,737

              	
                APDN
      (B.V.I.) Inc.

              	
                05/20/2010.  

              	
                United
      States

              
	
                Methods
      for Genetic Analysis of Textiles made of Gossypium Barbadense and
      Gossypium Hirsutum  Cotton

              	
                Published
      by WIPO

                WO
      2010/056642

                PCT/US09/63814

              	
                APDN
      (B.V.I.) Inc.

              	
                05/20/2010   

              	
                WIPO

              
	
                Methods
      for Genotyping Mature Cotton Fibers and Textiles

              	
                Published
      by WIPO

                WO
      2010/056645

                12/269,757

              	
                APDN
      (B.V.I.) Inc.

              	
                Published
      by WIPO   05/20/2010.  

              	
                United
      States

              
	
                Methods
      for Genotyping Mature Cotton Fibers and Textiles

              	
                Published
      by WIPO

                WO
      2010/056645

                PCT/US09/63818

              	
                APDN
      (B.V.I.) Inc.

              	
                05/20/2010   

              	
                WIPO

              
	
                Incorporating
      Water Soluble Security Markers into Cyanoacrylate
Solutions

              	
                20090286250

                (12/465,450)

              	
                APDN
      (B.V.I.) Inc.

              	
                11/19/2009   

              	
                United
      States

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      The
following are owned by the Grantor:

      
        	
                   
      TRADEMARKS

              
	
                   
      Registered

              	
                TM
      Reg #

              	
                Assignee
      of
Record

              	
                Registered

              	
                  
      Jurisdiction

              
	
                APPLIED
      DNA

              	
                3489209

              	
                APDN

              	
                8/19/2008

              	
                United
      States

              
	
                SIGNATURE

              	
                3482366

              	
                APDN

              	
                8/5/2008

              	
                United
      States

              
	
                SIGNATURE

              	
                005419031

              	
                Apdn

              	
                10/26/2006

              	
                EU

              
	
                SIGNATURE

              	
                1143760

              	
                APDN

              	
                10/27/2006

              	
                Australia

              
	
                AZSURE

              	
                3698729

              	
                APDN

              	
                10/20/2009

              	
                United
      States

              
	
                AZSURE

              	
                1022396

              	
                APDN

              	
                1109/2009

              	
                EU

              

      

      
        	
                   
      Pending

              	
                TM
      Reg #

              	
                Assignee
      of
Record

              	
                Filed

              	
                   
      Jurisdiction

              
	
                FIBERTYPING

              	
                77/488531

              	
                APDN

              	
                6/2/2008

              	
                United
      States

              
	
                PIMATYPING

              	
                77/488647

              	
                APDN

              	
                6/2/2008

              	
                United
      States

              
	
                BIOMATERIAL
      GENOTYPING

              	
                77/771522

              	
                APDN

              	
                6/30/2009

              	
                United
      States

              
	
                FIBERTYPING

              	
                77/728499

              	
                APDN

              	
                05/04/2009

              	
                United
      States

              
	
                PIMATYPING

              	
                77/728511

              	
                APDN

              	
                05/04/2009

              	
                United
      States

              

      

      * Rixflex
has been merged with and into APDN (B.V.I.) Inc.

      Licenses

      None.

    Trade
Names

    

    Grantor
uses the following trade names: Applied DNA Sciences, Inc., APDN,
ADNAS

    

    Trade
names used by each person from whom the Grantor has acquired a substantial part
of the Collateral: Biowell Technology, Inc., Rixflex Holdings
Limited

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
III

    

    Equipment,
Fixtures, Goods and Inventory

     

    Locations
of Equipment, Fixtures, Goods and Inventory

    

    25 Health
Sciences Drive, Suite 113

    Stony
Brook, New York 11790

    

    Chief
Executive Office

    

    25 Health
Sciences Drive, Suite 113

    Stony
Brook, New York 11790

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
IV

     

    (i)  Promissory Notes, Securities
and other Instruments owned by Grantor

    

    None.

     

    (ii)
Deposit Accounts,
Securities Accounts, Commodities Accounts

    

    
      	
              Deposit
      Accounts

            
	
                  Institution

            	
                  Account
      Name

            	
                  Account
      Number

            	
                  Description

            
	
                 
      Bank of America

            	
                 
      Applied DNA Sciences, Inc.

            	
                 
      XXXXXX-1068

            	
                 
      Operating, Checking

            
	
                 
      Bank of America

            	
                 
      Applied DNA Sciences, Inc.

            	
                 
      XXXXXX-0878      

            	
                  Money
      Market

            
	
                 
      Bank of America

            	
                 
      Applied DNA Sciences, Inc.

            	
                 
      XXXXXX-5941

            	
                  Escrow

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
V (Schedule 4(g))

    

    Financing
Statements and Other Required or Advisable Documents, Instruments and
Certificates

     

    Grantor
has granted a security interest in all of its assets to holders of the following
secured convertible promissory notes (the “Existing Promissory
Notes”):

    

    Promissory
Notes in the aggregate principal amount of $150,000 issued on January 29, 2009
to James A. Hayward, due January 29, 2010* with interest at 10% per
annum.

    

    Promissory
Notes in the aggregate principal amount of $200,000 issued on February 27, 2009
to James A. Hayward, due February 27, 2010* with interest at 10% per
annum.

    

    Promissory
Notes in the aggregate principal amount of $250,000 issued on March 30, 2009 to
James A. Hayward, due March 30, 2010* with interest at 10% per
annum.

    

    Promissory
Notes in the aggregate principal amount of $250,000 issued on June 22, 2009 to
accredited investors, due June 22, 2010 with interest at 10% per
annum.

    

    Promissory
Note in the principal amount of $150,000 issued on June 30, 2009 to James A.
Hayward, due June 30, 2010 with interest at 10% per annum.

    

    Promissory
Notes in the aggregate principal amount of $430,000 issued on August 21, 2009 to
accredited investors, due August 21, 2010 with interest at 10% per
annum.

    

    Promissory
Notes in the aggregate principal amount of $250,000 issued on September 30, 2009
to accredited investors, due September 30, 2010 with interest at 10% per
annum.

    

    Promissory
Note in the principal amount of $250,000 issued on September 30, 2009 to James
A. Hayward, due September 30, 2010 with interest at 10% per annum.

    

    Promissory
Notes in the aggregate principal amount of $270,000 issued on October 14, 2009
to accredited investors, due October 14, 2010 with interest at 10% per
annum.

    

    Promissory
Notes in the aggregate principal amount of $50,000 issued on January 7, 2010 to
Glenn A. Little, due January 7, 2011 with interest at 10% per
annum.

    

    Promissory
Note in the aggregate principal amount of $450,000 issued on June 4, 2010 to an
accredited investor, due June 4, 2011 with interest at 10% per
annum.

    

    Promissory
Note in the aggregate principal amount of $675,000 issued on June 4, 2010 to
James A. Hayward, due January 31, 2012 with interest at 10% per
annum.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    * These
promissory notes have matured but the Company and James A. Hayward have agreed
to delay payment and conversion of these notes to a future date.

    

    A UCC-1
was filed in connection with each of the Existing Promissory Notes.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
VI

    

    Commercial
Tort Claims

    

    Applied
DNA Sciences, Inc. v. Paul Reep et al. (Los Angeles County Superior Court Case
No. BC 345702)

    

    On August
27, 2008, the Superior Court of the State of California for the County of Los
Angeles rendered judgment against the defendants Peter Brocklesby and Cheri Lu
Brocklesby in the above action in the amount of $5,668,962.  As of the
date hereof, the Company has not sought payment on this judgment against the
defendants.

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