Document:

Exhibit 10.2

 

FORM OF

AGREEMENT 

 

THIS AGREEMENT, dated as
of December 30, 2005, between Archipelago Holdings, Inc., a Delaware corporation (including
any successor thereto, the “Company”), and the undersigned executive (the “Executive”)
pertains to the Amended and Restated Change in Control Severance Agreement
between the Company and the Executive dated as of June 15, 2004
(the “CIC Agreement”), Executive’s Restricted Stock Units issued under the
Company 2004 Stock Incentive Plan (each an “RSU”) and Executive’s unvested
stock options issued under various Company equity compensation plans (each a “Stock
Option”), effective as of December 30, 2005.

 

WHEREAS, completion of
the mergers (the “Mergers”) contemplated by the Agreement and Plan of Merger,
dated as of April 20, 2005, as amended and restated as of July 20,
2005, and as amended as of October 20, 2005 and as of November 2,
2005, by and among, the New York Stock Exchange, Inc. (the “NYSE”), the
Company, and certain subsidiaries of such entities, is expected to occur during
the first quarter of 2006;

 

WHEREAS, the CIC
Agreement provides, among other things, that if, during the one-year period
following a Change in Control (as defined in the CIC Agreement) such as the
Mergers, the Executive’s employment is terminated by the Company without Cause
or the Executive resigns for Good Reason (as defined in the CIC Agreement), the
Executive will be entitled to receive the benefits described in the Agreement;

 

WHEREAS, the RSUs contain
provisions that provide for the accelerated vesting and delivery of the
underlying Company common stock upon certain terminations without cause or for
good reason following a merger of the Company (such as the Mergers);

 

WHEREAS, the Stock
Options contain provisions that provide for the accelerated vesting thereof
upon certain terminations without cause or for good reason following a merger
of the Company (such as the Mergers);

 

WHEREAS, the NYSE has
consented to the Company’s payment of the amounts set forth in Section 1
below and the other provisions hereof, and to entry into this Agreement by December 31,
2005 in order to ensure that Executive will continue employment with the
combined entity following the Mergers, comply with new Section 409A of the
Internal Revenue Code (which applies to certain arrangements that provide for
the deferral of compensation) and realize significant tax-related cost savings;
and

 

WHEREAS, the Company and
the Executive desire to enter into this Amendment;

 

NOW, THEREFORE, it is
hereby agreed as follows:

 

1.             CIC Agreement.  On December 30, 2005, the Company shall
pay to the Executive a lump sum cash payment in an amount equal to the minimum
amount set forth in Section 4(a)(ii) of the CIC Agreement, or if
greater, two times the sum of the Executive’s (i) current annual salary
plus (ii) annual bonus for 2005 (as provided for in Section 4(a)(ii) of
the CIC Agreement).  Such payment shall
be subject to applicable tax withholding. 
Upon payment

 

 

of such amount, the CIC Agreement shall terminate and
be of no further force or effect, except that (a) Sections 4(a)(iv) (including
the related definitions in Section 1 of the CIC Agreement) shall continue
to apply to any Company stock options held by Executive as of the date hereof, (b) Sections
4(a)(iii) (relating to benefits continuation) and 4(a)(vi) (relating
to outplacement services) (including the related definitions in Section 1
of the CIC Agreement) shall continue to apply upon Executive’s termination of
employment to the extent provided in the CIC Agreement, provided that, in lieu
of continuation of benefits described in Section 4(a)(iii), the Company
shall pay Executive a cash payment of $30,000, less applicable taxes; (c) Section 5
of the CIC Agreement (relating to the “Gross-Up Payment”) shall continue to
apply, (d) Sections 6, 7 and 11(b) of the CIC Agreement (relating to
tax withholding and dispute resolution) and (e) Section 15 of the CIC
Agreement (relating to covenants not to solicit Company clients and employees
and confidential information) shall continue to apply during Executive’s
employment and following any termination thereof, in each instance as if such
provisions of the CIC Agreement were fully set forth herein.

 

2.             Restricted Stock Unit Vesting and Payment; Tax
Withholding.  On December 30,
2005, all RSUs shall vest in full and no longer be subject to any right of
recapture set forth in the applicable RSU award agreement.  On December 30, 2005, the Company shall
issue to the Executive the number of shares of Company common stock
attributable to such vesting, provided that the Company shall satisfy
applicable tax withholding by reducing the number of shares delivered to the
Executive by the amount of shares having a fair market value equal to the
minimum statutory withholding taxes applicable to the payment of such shares.

 

3.             Stock Options. 
Immediately prior to the consummation of the Mergers, subject to the
Executive’s continued employment with the Company through such date, 75 percent
of each tranche of Stock Options that are then outstanding and unvested shall
become immediately vested and exercisable in full and no longer subject to any
right of recapture set forth in the applicable stock option award agreement
(the “Option Acceleration”).  However, notwithstanding anything to the contrary
contained in this Agreement or the Employment Agreement to the contrary, in the event the Option Acceleration (together
with any other payments under this Agreement or otherwise (the “Payments”))
would constitute “excess parachute payments” under Section 280G of the
Code, the Option Acceleration will be reduced to the extent necessary so
that when aggregated with all other Payments, the Present Value (as defined
below) of the Option Acceleration shall be equal to three (3) times the Executive’s “base amount,” as determined in
accordance with Section 280G of the Code, less $10,000.00 (the “Reduced
Amount”).  If the Option
Acceleration is required to be reduced to result in the Reduced Amount, the
Company shall promptly give the Executive notice to that effect and a copy of
the detailed calculation thereof, and the Executive may then elect, in his sole
discretion, which and how much of the Option Acceleration shall be eliminated
or reduced (as long as after such election the Present Value of the aggregate
Payments equals the Reduced Amount), and shall advise the Company in writing of
his or her election within five days of his receipt of notice.  If no such election is made by the Executive
within such five-day period, the Company may elect which and how much of such Option
Acceleration shall be eliminated or reduced (as long as after such election the
Present Value of the aggregate Payments equals the Reduced Amount) and shall
notify the Executive promptly of such election, provided that if the
consummation of the Mergers occurs prior to the Executive’s and the Company’s
determination under this Section 3, the Executive’s right to exercise the
options that accelerate pursuant to the

 

 

first sentence of this Section 3 shall be
suspended until such time as such determination shall be made.  “Present Value” means such value determined
in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the
Code.

 

4.             Successors; Binding Agreement.  This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and on Executive and his
personal or legal representatives and successors.

 

5.             Governing Law.  The
interpretation, construction and performance of this Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Illinois without regard to the principle of conflicts of laws.

 

6.             Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one and the same
instrument.

 

IN WITNESS WHEREOF, the Executive
and the Company have executed this Amendment (which may be executed in
counterparts, each of which shall be an original and together shall constitute
one document) all as of the day and year first above written.

 

	
   

  	
  EXECUTIVE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARCHIPELAGO HOLDINGS, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:Exhibit 10.1

 

Execution Copy

 

NOTE
PURCHASE AGREEMENT

 

This NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of December 28,
2005, by and among APPLIED
DIGITAL SOLUTIONS, INC., a Missouri corporation (the “Company”), and each of the entities
whose names appear on the signature pages hereof.  Such entities are each referred to herein as
an “Investor” and, collectively, as the “Investors”.

 

A.                                   The
Company wishes to sell to each Investor, and each Investor wishes to purchase,
on the terms and subject to the conditions set forth in this Agreement, a
Senior Secured Note of the Company in the form attached hereto as Exhibit A (a “Note” and, collectively with the
other Senior Secured Notes sold hereunder, the “Notes”).

 

B.                                     The
Company’s obligations under the Notes, including, without limitation, its
obligation to make payments of principal thereof and interest thereon, shall be
secured by certain assets and properties of the Company pursuant to a security
agreement in the form attached hereto as Exhibit B
(the “Security Agreement”), and a
pledge agreement in the form attached hereto as Exhibit C
(the “Pledge Agreement”,
collectively with the Security Agreement, the “Security
Documents”).

 

C.                                     The
sale of the Notes by the Company to the Investors will be effected in reliance
upon the exemption from securities registration afforded by the provisions of
Regulation D (“Regulation D”) under the
Securities Act (as defined below).

 

In consideration of the mutual promises made herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and each Investor hereby agree as follows:

 

1.                                       PURCHASE
AND SALE OF NOTES.

 

1.1                                 Closing.  Upon the terms and subject to the
satisfaction or waiver of the conditions set forth herein, the Company agrees
to sell and each Investor agrees to purchase a Note with a principal amount
equal to the amount set forth below such Investor’s name on the signature pages hereof.  The date on which the closing of such
purchase and sale occurs (the “Closing”)
is hereinafter referred to as the “Closing Date”.
The Closing will be deemed to occur when (A) this Agreement and the other
Transaction Documents (as defined below) have been executed and delivered by
the Company and each Investor, (B) each of the conditions to the Closing
described in this Agreement has been satisfied or waived as specified therein
and (C) full payment of each Investor’s Purchase Price (as defined below)
payable with respect to the Note being purchased by such Investor at the Closing
has been made by wire transfer of immediately available funds against physical
delivery by the Company of a duly executed Note.

 

 

1.2                                 Certain Definitions.  When used herein, the following terms shall
have the respective meanings indicated:

 

“Affiliate”
means, as to any Person (the “subject Person”),
any other Person (a) that directly or indirectly through one or more
intermediaries controls or is controlled by, or is under direct or indirect
common control with, the subject Person, (b) that directly or indirectly
beneficially owns or holds ten percent (10%) or more of any class of voting
equity of the subject Person, or (c) ten percent (10%) or more of the
voting equity of which is directly or indirectly beneficially owned or held by
the subject Person. For the purposes of this definition, “control”
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting equity, through representation on such Person’s board of
directors or other management committee or group, by contract or otherwise.

 

“Agreement”
has the meaning specified in the preamble to this Agreement.

 

“Board of Directors”
means the board of directors of the Company.

 

“Business Day”
means any day other than a Saturday, a Sunday or a day on which the New York
Stock Exchange is closed or on which banks are authorized by law to close in
New York, New York.

 

“Closing”
has the meaning given to it in Section 1.1
of this Agreement.

 

“Closing Date”
has the meaning given to it in Section 1.1
of this Agreement.

 

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

 

“Common Stock”
means the common stock, par value $.01 per share, of the Company.

 

“Debt”
means, as to the Company and any Subsidiary at any time: (a) all
indebtedness, liabilities and obligations of the Company or any such Subsidiary
for borrowed money; (b) all indebtedness, liabilities and obligations of
the Company or any such Subsidiary to pay the deferred purchase price of
Property or services, except (i) trade accounts payable of such Person
arising in the ordinary course of business that are not past due by more than 180
days or the payables outstanding as of the date hereof and set forth on Schedule 1.2(i) hereto, and
(ii) the obligations of Government Telecommunications, Inc. arising
in the ordinary course of business that are set forth on Schedule 1.2(ii) hereto;
provided that the payment and/or performance of all such obligations described
in foregoing clauses (i) and (ii) shall
be made and performed at such time and in such manner that is consistent with
past practice; (c) all capital lease obligations of the Company or any
such Subsidiary; (d) all indebtedness, liabilities and obligations of
others guaranteed by the Company or any such Subsidiary; (e) all
indebtedness, liabilities and obligations secured by a Lien existing on
Property owned by the Company or any such

 

2

 

Subsidiary, whether or not the indebtedness, liabilities or obligations
secured thereby have been assumed by such Person or are non-recourse to such
Person; (f) all reimbursement obligations of the Company or any such
Subsidiary (whether contingent or otherwise) in respect of letters of credit,
bankers’ acceptances, surety or other bonds and similar instruments; and (g) all
indebtedness, liabilities and obligations of such Person to redeem or retire
shares of capital stock of the Company or any such Subsidiary.

 

“Disclosure Documents”
means all SEC Documents filed with the Commission at least five (5) Business
Days prior to the Execution Date via EDGAR in accordance with the requirements
of Regulation S-T under the Exchange Act.

 

“Environmental Law”
means any federal, state, provincial, local or foreign law, statute, code or
ordinance, principle of common law, rule or regulation, as well as any
permit, order, decree, judgment or injunction issued, promulgated, approved or
entered thereunder, relating to pollution or the protection, cleanup or restoration
of the environment or natural resources, or to the public health or safety, or
otherwise governing the generation, use, handling, collection, treatment,
storage, transportation, recovery, recycling, discharge or disposal of
hazardous materials.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder.

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended (or any successor act),
and the rules and regulations thereunder (or respective successors
thereto).

 

“Execution Date”
means the date of this Agreement.

 

“Existing Notes”
has the meaning specified in Section 4.3
of this Agreement.

 

“GAAP” means
United States generally accepted accounting principles, applied on a consistent
basis, as set forth in (i) opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants, (ii) statements of
the Financial Accounting Standards Board and (iii) interpretations of the
Commission and the Staff of the Commission. 
Accounting principles are applied on a “consistent basis” when the
accounting principles applied in a current period are comparable in all
material respects to those accounting principles applied in a preceding period,
except to the extent that new accounting standards have been adopted by such
organizations applicable as of the current period.

 

“Governmental Authority”
means any nation or government, any state, provincial or political subdivision
thereof and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government, including without
limitation any stock exchange, securities market or self-regulatory
organization.

 

3

 

“Governmental Requirement”
means any law, statute, code, ordinance, order, rule, regulation, judgment,
decree, injunction, franchise, license or other directive or requirement of any
federal, state, county, municipal, parish, provincial or other Governmental
Authority or any department, commission, board, court, agency or any other
instrumentality of any of them.

 

“Intellectual Property”
means any U.S. or foreign patents, patent rights, patent applications,
trademarks, trade names, service marks, brand names, logos and other trade
designations (including unregistered names and marks), trademark and service
mark registrations and applications, copyrights and copyright registrations and
applications, inventions, invention disclosures, protected formulae,
formulations, processes, methods, trade secrets, computer software, computer
programs and source codes, manufacturing research and similar technical
information, engineering know-how, customer and supplier information, assembly
and test data drawings or royalty rights.

 

“Investment Company Act”
has the meaning specified in Section 3.22
of this Agreement.

 

“Investor”
and “Investors” have the respective
meanings specified in the preamble to this Agreement.

 

“Issue Date”
means the first date on which the Notes are issued pursuant to this Agreement.

 

“Key Employee”
means, with respect to the Company, its president, any vice president of the
Company in charge of a principal business unit, division or function (such as
sales, administration or finance), any other officer who performs a policy
making function or any other person who performs similar policy making
functions for the Company.  Executive
officers of Subsidiaries may be deemed Key Employees if they perform such
policy making functions for the Company.

 

“Lien”
means, with respect to any Property, any mortgage, pledge, hypothecation,
assignment, deposit arrangement, security interest, tax lien, financing
statement, pledge, charge, or other lien, charge, easement, encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such Property (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).

 

“Mandatory Redemption Event”
has the meaning set forth in the Notes.

 

“Material Adverse Effect”
means an effect that is material and adverse to (i) the consolidated
business, operations, properties, financial condition or results of operations
of the Company and its Pledged Subsidiaries taken as a whole, (ii) the
transactions contemplated by this Agreement or the other Transaction Documents,
or (iii) the ability of the Company to perform its obligations (or the
ability of an Investor to enforce any such obligations) under this Agreement or
the other Transaction Documents.

 

4

 

“Material Contracts”
means, as to the Company, any agreement required pursuant to Item 601 of Regulation
S-B or Item 601 of Regulation S-K, as applicable, promulgated under the
Securities Act to be filed as an exhibit to any report,
schedule, registration statement or definitive proxy statement filed or
required to be filed by the Company with the Commission under the Exchange Act
or any rule or regulation promulgated thereunder, and any and all
amendments, modifications, supplements, renewals or restatements thereof.

 

“NASD” means
the National Association of Securities Dealers, Inc.

 

“Non-Material Subsidiaries”
means any Person (other than a Pledged Subsidiary) in which the Company owns at
least a majority of the outstanding shares of stock or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors (or Persons performing similar functions) of such
Person (regardless of whether or not at the time, in the case of a corporation,
stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency).

 

“Note” and “Notes” have the respective meanings
specified in the preamble to this Agreement.

 

“Obligations”
means any and all indebtedness, liabilities and obligations of the Company
or any of its Subsidiaries to the Investor evidenced by and/or arising pursuant
to this Agreement or any other Transaction Documents, now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several or joint and several, including, without
limitation, the obligations of the Company to repay principal of the Notes (and
any premium thereon, if applicable), to pay interest on the Notes (including,
without limitation, interest accruing after any bankruptcy, insolvency,
reorganization or other similar filing) and to pay all indemnities, costs and
expenses (including attorneys’ fees) provided for in this Agreement or any
other Transaction Documents.

 

“Pension Plan”
means an employee benefit plan (as defined in ERISA) maintained by the Company
for employees of the Company or any of its Affiliates.

 

“Permitted Debt”
means the following:

 

(a)                                  the
Notes;

 

(b)                                 Debt
outstanding on the Execution Date and disclosed on Schedule 3.5
hereto and any Debt incurred to replace any such outstanding Debt, as long as
such replacement Debt is on terms not materially less favorable to the Company
than the terms of such outstanding Debt, has no greater priority in payment or
liquidation than such outstanding Debt, and matures at least ninety-one (91)
days following the Maturity Date (as defined in the Notes);

 

(c)                                  Debt
consisting of capitalized lease obligations and purchase money indebtedness
incurred in connection with acquisition of capital assets and obligations

 

5

 

under sale-leaseback or similar arrangements provided in each case that
such obligations are not secured by Liens on any assets of the Company or any
of its Subsidiaries other than the assets so leased; and

 

(d)                                 Subordinated
Debt incurred by the Company that, individually or in the aggregate, does not
exceed $2 million in principal or face amount.

 

“Permitted Liens”
means the following:

 

(a)                                  Liens
securing the Notes;

 

(b)                                 Liens
in existence on the Execution Date and disclosed on Schedule 3.5
hereto;

 

(c)                                  encumbrances
consisting of easements, rights-of-way, zoning restrictions or other
restrictions on the use of real Property or imperfections to title that do not
(individually or in the aggregate) materially impair the ability of the Company
or any of its Subsidiaries to use such Property in its businesses, and none of
which is violated in any material respect by existing or proposed structures or
land use;

 

(d)                                 Liens
for taxes, assessments or other governmental charges that are not delinquent or
which are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the
Property subject to such Liens, and for which adequate reserves (as determined
in accordance with GAAP) have been established;

 

(e)                                  Liens
of mechanics, materialmen, warehousemen, carriers, landlords or other similar
statutory Liens securing obligations that are not yet due and are incurred in
the ordinary course of business or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the Property subject to such Liens, for which adequate
reserves (as determined in accordance with GAAP) have been established;

 

(f)                                    any
interest or title of a lessor under any capitalized lease obligation, provided that such Liens do not extend to any property or
assets which is not leased property subject to such capitalized lease
obligation;

 

(g)                                 purchase money Liens to
finance property or assets of the Company or any Subsidiary of the Company
acquired in the ordinary course of business; provided,
however, that (A) the related purchase money Debt shall not
exceed the cost of such property or assets (including the cost of design,
development, improvement, production, acquisition, construction, installation
and integration) and shall not be secured by any property or assets of the
Company or any Subsidiary of the Company other than the property and assets so
acquired or constructed (and any improvements) and (B) the Liens securing
such purchase money Debt shall be created within ten (10) days of such
acquisition, construction or improvement; and

 

6

 

(h)                                 mortgages
on real Property in existence on the Execution Date and disclosed on Schedule 3.19 hereto, and any
replacements thereof, securing amounts not greater than the amounts secured
thereby on the Execution Date.

 

“Person”
means any individual, corporation, trust, association, company, partnership,
joint venture, limited liability company, joint stock company, Governmental
Authority or other entity.

 

“Pledge Agreement”
has the meaning specified in the preamble to this Agreement.

 

“Pledged Subsidiaries”
means Digital Angel Corporation, VeriChip Corporation, InfoTech USA, Inc.
and the Subsidiaries.

 

“Principal Market”
means the principal exchange or market on which the Common Stock is listed or
traded.

 

“Property”
means property and/or assets of all kinds, whether real, personal or mixed,
tangible or intangible (including, without limitation, all rights relating
thereto).

 

“Pro Rata Share”
means, with respect to an Investor, the ratio determined by dividing (i) the
principal amount of the Note or Notes purchased hereunder by such Investor by (ii) the
aggregate principal amount of the Notes purchased hereunder by all of the
Investors.

 

“Purchase Price”
means, with respect to a Note, (A) the original principal amount of such
Note times (B) 0.99.

 

“Regulation D”
has the meaning specified in the preamble to this Agreement.

 

“Restricted Payment”
means: (a) any dividend or other distribution (whether in cash, Property
or obligations), direct or indirect, on account of (or the setting apart of
money for a sinking or other analogous fund for) any shares of any class of
capital stock of the Company or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
to all of the holders of that class; (b) any redemption, exchange,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of capital stock of the
Company or any of its Subsidiaries now or hereafter outstanding; (c) any
payment of principal of, premium, if any, or interest on, or any redemption,
conversion, exchange, purchase, retirement, sinking fund or defeasance of, any
Debt (whether upon acceleration of such Debt or otherwise); and (d) any
loan, advance or payment to any officer or director of the Company or any of
the Subsidiaries, exclusive of compensation and reimbursements paid to officers
or directors that are approved by the Compensation Committee of the Board of
Directors.  Notwithstanding the
foregoing, the term “Restricted Payment”
shall not include (x) the adjustment to the
exercise or conversion price of any of the Company’s options, warrants or other
convertible securities or (y) (1)

 

7

 

the issuance of securities upon exercise or conversion of the Company’s
options, warrants or other convertible securities outstanding as of the date
hereof or (2) the grant of additional options or warrants or the issuance
of additional securities (and the redemption of unvested restricted stock for
an amount equal to the purchase price thereof), in  case of the foregoing clauses (y)(1) or
(y)(2) under any Company stock option or restricted stock plan approved by
the independent members of the Board of Directors or by a committee of the
Board of Directors consisting only of independent members of the Board of
Directors, shall not be deemed to be a
Restricted Payment.

 

“Rule 144”
means Rule 144 under the Securities Act or any successor provision.

 

“Satellite”
has the meaning specified in Section 3.10 of
this Agreement.

 

“SEC Documents”
has the meaning specified in Section 3.4
hereof.

 

“Securities Act”
means the Securities Act of 1933, as amended (or any successor act), and the rules and
regulations thereunder (or respective successors thereto).

 

“Security Agreement”
has the meaning specified in the preamble to this Agreement.

 

“Security Documents”
has the meaning specified in the preamble to this Agreement.

 

“Subordinated Debt”
means Debt of the Company which is wholly unsecured (other than Permitted
Liens) and subordinated, as to payment and liquidation, to the payment in full
of the Notes, provided that with respect to
Debt incurred in connection with a lending transaction (whether as primary
obligor or guarantor), such Debt shall also be contractually subordinated, as
to payment and liquidation, to the payment in full of the Notes and shall mature
at least ninety-one (91) days following the Maturity Date (as defined in the
Note).

 

“Subsidiary”
means all or any of the following subsidiaries of the Company:  Computer Equity Corporation, Government
Telecommunications, Inc., Pacific Decision Sciences Corporation, Perimeter
Acquisition Corp., and Thermo Life Energy Corp.

 

“Termination Date”
means the first date on which there are no Notes outstanding or any Obligations
owed thereunder.

 

“Trading Day”
means any day on which the Common Stock is purchased and sold on the Principal
Market.

 

“Transaction Documents”
means (i) this Agreement, (ii) the Notes, (iii) the Security
Documents and (iv) all other agreements, documents and other instruments
executed and delivered by or on behalf of the Company or any of its
Subsidiaries in connection with the transactions contemplated by this
Agreement.

 

8

 

“VeriChip Event”
means either of the following:  (i) the
sale by VeriChip Corporation or any successor entity of any shares of its
common stock (the “VeriChip Common Stock”) in
any transactions constituting a public offering, or (ii) the VeriChip
Common Stock otherwise becomes registered pursuant to Section 12 of the
Exchange Act.

 

1.3                                 Other
Definitional Provisions.  All
definitions contained in this Agreement are equally applicable to the singular
and plural forms of the terms defined. 
The words “hereof”, “herein” and “hereunder” and words of similar import
referring to this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement.

 

2.                                       REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.

 

Each Investor (with respect to itself only) hereby
represents and warrants to the Company and agrees with the Company that, as of
the Execution Date:

 

2.1                                 Authorization;
Enforceability.  Such Investor is
duly and validly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization as set forth
below such Investor’s name on the signature page hereof with the requisite
corporate power and authority to purchase the Note to be purchased by it
hereunder and to execute and deliver this Agreement and the other Transaction
Documents to which it is a party.  This
Agreement constitutes, and upon the execution and delivery thereof, each other
Transaction Document to which such Investor is a party will constitute, such
Investor’s valid and legally binding obligation, enforceable in accordance with
its terms, subject to (i) applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and (ii) general principles of equity.

 

2.2                                 Investor
Status and Intent.  Such Investor (i) is
an “accredited investor” as that term is defined in Rule 501 of Regulation
D and (ii) is acquiring the Notes solely for its own account and not with
a present view to the public resale or distribution of all or any part thereof,
except pursuant to sales that are registered under, or exempt from the
registration requirements of, the Securities Act; provided,
however, that in making such representation, such Investor does not
agree to hold the Notes for any minimum or specific term and reserves the right
to sell, transfer or otherwise dispose of the Notes at any time in accordance
with the provisions of this Agreement and with Federal and state securities
laws applicable to such sale, transfer or disposition. Such
Investor can bear the economic risk of a total loss of its investment in the
Notes and has such knowledge and experience in business and financial matters
so as to enable it to understand the risks of and form an investment decision
with respect to its investment in the Notes.

 

2.3                                 Information.  The Company has, prior to the Execution Date,
provided such Investor with information regarding the business, operations and
financial condition of the Company and has, prior
to the Execution Date, granted to such Investor the opportunity to ask
questions of and receive answers from representatives of the Company, its
officers, directors, employees and agents concerning the Company and materials
relating to the terms and conditions of the purchase and sale of the Notes hereunder,
in order for such Investor to make an informed decision with respect to its
investment in the Notes. Neither such information nor any other investigation
conducted by such

 

9

 

Investor or any of its representatives shall modify, amend or otherwise
affect such Investor’s right to rely on the Company’s representations and
warranties contained in this Agreement.

 

2.4                                 Limitations on Disposition.  Such
Investor acknowledges that the Notes have not been and are not being registered
under the Securities Act and may not be transferred or resold without
registration under the Securities Act or unless pursuant to an exemption
therefrom. Such Investor agrees that neither it nor any Person acting on its
behalf or at its direction will engage in any transactions in securities of the
Company prior to the time that the transactions contemplated by this Agreement
are publicly disclosed.

 

2.5                                 Legend.  Such Investor understands that the Notes may
bear at issuance a restrictive legend in substantially the following form:

 

“The securities represented by this certificate have
not been registered under the Securities Act of 1933, as amended (the “Securities
Act”), or the securities laws of any state, and may not be offered for sale or
sold unless a registration statement under the Securities Act and applicable
state securities laws shall have become effective with regard thereto, or an
exemption from registration under the Securities Act and applicable state
securities laws is available in connection with such offer or sale.  This Note does not require physical surrender
hereof in order to effect a partial payment or redemption hereof.  Accordingly, the outstanding principal amount
of this note may be less than the principal amount shown below.  Notwithstanding the foregoing but subject to
compliance with the requirements of the Securities Act and applicable state
securities laws, these securities (i) may be pledged or hypothecated in
connection with a bona fide margin account or other loan secured by such
securities and (ii) may be transferred or assigned to an affiliate of the
holder hereof.”

 

Notwithstanding the foregoing, it is agreed that, as
long as such Notes (A) have been sold or transferred pursuant to an
effective registration statement, (B) have been sold pursuant to Rule 144,
subject to receipt by the Company of customary documentation reasonably
acceptable to the Company in connection therewith, or (C) are eligible for
resale under Rule 144(k) or any successor provision, such Notes shall be
issued without any legend or other restrictive language and, with respect to
Notes upon which such legend is stamped, the Company shall issue new
certificates without such legend to the holder upon request.

 

2.6                                 Reliance
on Exemptions.  Such Investor
understands that the Notes are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and accuracy
of the representations and warranties of such Investor set forth in this Section 2 in order to determine
the availability of such exemptions and the eligibility of such Investor to
acquire the Notes.

 

2.7                                 Fees.  Such Investor is not obligated
to pay any commissions, compensation or other fee, cost or related expenditure
to any underwriter, broker, agent or other representative in connection with
the transactions contemplated hereby, other than legal fees to its counsel.
Such

 

10

 

Investor will indemnify and hold harmless the Company from and against
any claim by any Person alleging that, as a result of any agreement or
arrangement between such Person and such Investor, the Company is obligated to
pay any such commissions, compensations, fee, cost or related expenditure in
connection with the transactions completed hereby.

 

3.                                       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company hereby represents and warrants to
each Investor as of the Execution Date (except that, to the extent that any
representation or warranty relates to a particular date, the Company hereby
makes such representation or warranty as of that particular date), and agrees
with such Investor, as follows:

 

3.1                                 Organization,
Good Standing and Qualification; Non-Material Subsidiaries.  Each of the Company and the Pledged
Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to
carry on its business as now conducted. 
Each of the Company and the Pledged Subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which it
conducts business except where the failure so to qualify has not had or would
not reasonably be expected to have a Material Adverse Effect.  None of the Non-Material Subsidiaries has any
material business operations, and the aggregate fair market value of all of the
assets of the Non-Material Subsidiaries does not exceed $50,000.

 

3.2                                 Authorization;
Consents.  The Company has the
requisite corporate power and authority to enter into and perform its
obligations under the Transaction Documents, and to issue and sell the Notes to
the Investors in accordance with the terms hereof. All corporate action on the
part of the Company by its officers, directors and shareholders necessary for
the authorization, execution and delivery of, and the performance by the
Company of its obligations under, the Transaction Documents to which it is a
party has been taken, and no further consent or authorization of the Company or
the Board of Directors, shareholders, any Governmental Authority or
organization or any other person or entity is required.

 

3.3                                 Enforcement.  The Company has duly executed and delivered
this Agreement and, at or prior to the Closing, shall have duly executed and
delivered the other Transaction Documents to which it is a party.  This Agreement constitutes and, following the
execution and delivery thereof by the Company, each other Transaction Document
will constitute, the valid and legally binding obligations of the Company,
enforceable against it in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or
other similar laws of general application relating to or affecting the
enforcement of creditors’ rights generally and (ii) general principles of
equity.

 

3.4                                 Disclosure
Documents; Agreements; Financial Statements; Other Information.  The Company has filed with the Commission all
reports, schedules, registration statements and definitive proxy statements
that the Company was required to file with the Commission on or after December 31,
2004 (collectively, the “SEC Documents”).  The Company is not aware of any event
occurring or expected to occur on or prior to the Closing Date (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing. Each SEC
Document, as of the date of the filing thereof with the Commission (or if
amended or superseded by a filing prior to the Execution Date, then on the date
of such amending or superseding filing), complied in all material respects with
the requirements of

 

11

 

the Securities Act or Exchange Act, as applicable, and the rules and
regulations promulgated thereunder and, as of the date of such filing (or if
amended or superseded by a filing prior to the Execution Date, then on the date
of such filing), such SEC Document (including all exhibits and schedules
thereto and documents incorporated by reference therein) did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.  All documents that are required to be filed
as exhibits to the SEC Documents have been filed as required.  The Company has no liabilities, contingent or
otherwise, other than liabilities incurred in the ordinary course of business
that, under GAAP, are not required to be reflected in the financial statements
included in the Disclosure Documents.  As
of their respective dates, the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. The financial statements included in the SEC
Documents have been and will be prepared in accordance with GAAP consistently
applied at the times and during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end adjustments).

 

3.5                                 Capitalization;
Debt Schedule.  The capitalization of
the Company as of the Execution Date, including its authorized capital stock,
the number of shares issued and outstanding, the number of shares issuable and
reserved for issuance pursuant to the Company’s stock option plans and
agreements, the number of shares issuable and reserved for issuance pursuant to
securities exercisable for, or convertible into or exchangeable for any shares
of Common Stock, is set forth on Schedule 3.5
hereto.  All issued and outstanding
shares of capital stock of the Company have been validly issued, fully paid and
non-assessable. Except as disclosed on Schedule 3.5
hereto, the Company owns all of the capital stock of each Subsidiary.  All capital stock of the Pledged Subsidiaries
owned by the Company is validly issued, fully paid and non-assessable, and no
shares of the capital stock of the Company or any of the Subsidiaries are
subject to preemptive rights or any other similar rights of the shareholders of
the Company or any such Subsidiary or any Liens created by or through the
Company or any such Subsidiary.  Except
as disclosed on Schedule 3.5, there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital
stock of the Company or any of the Subsidiaries, or arrangements by which the
Company or any of the Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of the Subsidiaries (whether
pursuant to anti-dilution, “reset” or other similar provisions). Schedule 3.5 identifies all
Debt of the Company and its Subsidiaries currently outstanding in excess of
$200,000 individually or in the aggregate as of the Execution Date, and all
such Debt scheduled on Schedule 3.5
represents, in the aggregate, not less than 80% of the total Debt of the
Company and its Subsidiaries currently outstanding.

 

3.6                                 Due
Authorization; Valid Issuance.  The
Notes are duly authorized and, when issued, sold and delivered in accordance
with the terms hereof, (i) will be duly and validly issued,

 

12

 

free and clear of any Liens and (ii) assuming the accuracy of each
Investor’s representations in this Agreement, will be issued, sold and
delivered in compliance with all applicable Federal and state securities laws.

 

3.7                                 No
Conflict.  Neither the Company nor
any of the Pledged Subsidiaries is in violation of any provisions of its
Articles of Incorporation, Bylaws or any other governing document.  Neither the Company nor any of Pledged
Subsidiaries is in violation of or in default (and no event has occurred which,
with notice or lapse of time or both, would constitute a default) under any
provision of any instrument or contract to which it is a party or by which it or
any of its Property is bound, or in violation of any provision of any
Governmental Requirement applicable to the Company or any Pledged Subsidiary,
except for any violation or default that has not had or would not reasonably be
expected to have a Material Adverse Effect. 
The (i) execution, delivery and performance of this Agreement and
the other Transaction Documents and (ii) consummation of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Notes) will not result in any violation of any provisions of the Company’s
or any Subsidiary’s Articles of Incorporation, Bylaws or any other governing
document or in a default under any provision of any instrument or contract to
which it is a party or by which it or any of its Property is bound, or in
violation of any provision of any Governmental Requirement applicable to the
Company or any Pledged Subsidiary or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument or contract or an event which results in the
creation of any Lien upon any assets of the Company or of any of the Pledged
Subsidiaries or the triggering of any preemptive rights or rights of first
refusal or first offer, or any other rights that would allow or permit the
holders of the Company’s securities to purchase securities of the Company.

 

3.8                                 Financial
Condition; Taxes; Litigation.

 

3.8.1  The financial condition of the Company and
each Subsidiary is, in all material respects, as described in the Disclosure
Documents, except for changes in the ordinary course of business and normal
year-end adjustments.  Except as
otherwise described on Schedule 3.8.1
hereto or as disclosed in the Disclosure Documents, as of the date hereof and
as of the Closing Date, there has been no material adverse change to the
business, operations, properties, financial condition, or results of operations
of the Company and the Subsidiaries taken as a whole since the date of the
Company’s most recent audited financial statements contained in the Disclosure
Documents.

 

3.8.2  Each of the Company and its Pledged
Subsidiaries has prepared in good faith and duly and timely filed all tax
returns required to be filed by it and such returns are complete and accurate
in all material respects and each of the Company and its Pledged Subsidiaries
has paid all taxes required to have been paid by it, except for taxes which it
reasonably disputes in good faith or the failure of which to pay has not had or
would not reasonably be expected to have a Material Adverse Effect.  Neither the Company nor any Subsidiary has
any material liability with respect to taxes that accrued on or before the date
of the most recent balance sheet of the Company included in the Disclosure
Documents in excess of the amounts accrued with respect thereto that are
reflected on such balance sheet.

 

3.8.3  Except as otherwise described on Schedule 3.8.3 hereto, neither
the Company nor any of the Pledged Subsidiaries is the subject of any pending
or, to the Company’s knowledge,

 

13

 

threatened inquiry, investigation or administrative or legal proceeding
by the Internal Revenue Service, the taxing authorities of any state or local
jurisdiction (other than with respect to taxes which it reasonably disputes in
good faith or the failure of which to pay has not had or would not reasonably
be expected to have a Material Adverse Effect), the Commission, the NASD, any
state securities commission or other Governmental Authority.

 

3.8.4  Except as described on Schedule 3.8.4
hereto, there is no material claim, litigation or administrative proceeding
pending, or, to the Company’s knowledge, threatened or contemplated, against
the Company or any of the Pledged Subsidiaries, or, to the Company’s knowledge,
against any officer, director or employee of the Company or any such Pledged
Subsidiary in connection with such person’s employment therewith.  Neither the Company nor any of the Pledged
Subsidiaries is a party to or subject to the provisions of, any order, writ,
injunction, judgment or decree of any court or Governmental Authority which has
had or would reasonably be expected to have a Material Adverse Effect.

 

3.9                                 Intellectual
Property.  Except as set forth in Schedule 3.9, no claim is
pending or, to the Company’s knowledge, threatened against the Company or any
of the Pledged Subsidiaries nor has the Company or any of the Pledged
Subsidiaries received any written notice or other written claim from any Person
asserting that any of the Company’s or the Pledged Subsidiaries’ present or
contemplated activities infringe or may infringe any Intellectual Property of
such Person, and the Company is not aware of any infringement by any other
Person of any rights of the Company or any of the Pledged Subsidiaries under
any Intellectual Property, except as has not had and would not reasonably be
expected to have a Material Adverse Effect.

 

3.10                           Solicitation;
Other Issuances of Securities. 
Neither the Company nor any of the Pledged Subsidiaries or Affiliates,
nor any person acting on its or their behalf, (i) has engaged in any form
of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Notes, (ii) has,
following the execution of the term sheet relating to the offer and sale of the
Notes, engaged in any discussion with any Person other than Satellite Asset
Management, L.P. (“Satellite”) and solicited or
accepted any offers from, or entered into any direct or indirect agreement or
understanding with, any such Person, in connection with a private financing or
securities issuance, or (iii) has, directly or indirectly, made any offers
or sales of any security or the right to purchase any security, or solicited
any offers to buy any security or any such right, under circumstances that
would require registration of the Notes under the Securities Act.

 

3.11                           Fees.  Except as described on Schedule 3.11
hereto, the Company is not obligated to pay any brokers, finders or financial
advisory fees or commissions to any underwriter, broker, agent or other
representative in connection with the transactions contemplated hereby.  The Company will indemnify and hold harmless
such Investor from and against any claim by any person or entity alleging that
such Investor is obligated to pay any such compensation, fee, cost or related
expenditure in connection with the transactions contemplated hereby.

 

3.12                           Foreign Corrupt Practices.  Neither the Company, any of the Pledged Subsidiaries
nor, to the knowledge of the Company, any director, officer, agent, employee or
other person acting on behalf of the Company or any of the Pledged
Subsidiaries, has (i) used any corporate funds for

 

14

 

any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity, (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
including, without limitation, any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment, or (iii) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended.

 

3.13                           Key
Employees.  Each Key Employee is
currently serving in the capacity described in the Disclosure Documents.  The Company has no knowledge of any fact or
circumstance (including without limitation (i) the terms of any agreement
to which such person is a party or any litigation in which such person is or
may become involved and (ii) any illness or medical condition that could
reasonably be expected to result in the disability or incapacity of such
person) that would limit or prevent any such person from serving in such
capacity on a full-time basis in the foreseeable future, or of any intention on
the part of any such person to limit or terminate his or her employment with
the Company.

 

3.14                           Employee
Matters.  There is no strike, labor
dispute or union organization activities pending or, to the knowledge of the
Company, threatened between it and its employees.  No employees of the Company belong to any
union or collective bargaining unit.

 

3.15                           Environment.  To the Company’s knowledge, except as
disclosed in the Disclosure Documents, the Company and the Pledged Subsidiaries
have no liabilities under any Environmental Law nor, to the Company’s
knowledge, do any factors exist that are reasonably likely to give rise to any
such liability, affecting any of the properties owned or leased by the Company
or any of the Pledged Subsidiaries that, individually or in the aggregate, has
had or would reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any of the Pledged Subsidiaries has violated any Environmental
Law applicable to it now or previously in effect, other than such violations or
infringements that, individually or in the aggregate, have not had and would
not reasonably be expected to have a Material Adverse Effect.

 

3.16                           ERISA.  The Company is in compliance in all material
respects with the presently applicable provisions of ERISA and the United
States Internal Revenue Code of 1986, as amended, with respect to each Pension
Plan except in any such case for any such matters that, individually or in the
aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect.

 

3.17                           Disclosure.  The representations, warranties and written
statements contained in the Disclosure Documents, this Agreement and the other
Transaction Documents and in the certificates, exhibits and schedules delivered
to such Investor by the Company pursuant to this Agreement and the other
Transaction Documents and in connection with such Investor’s due diligence
investigation of the Company and the Pledged Subsidiaries, taken as a whole, do
not contain any untrue statement of a material fact, and do not omit to state a
material fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made. Except for the terms of this
Agreement and the other Transaction Documents, neither the Company nor any
Person acting on its behalf or at its direction has provided such Investor with
material non-public information.  Following
the issuance of the press release in accordance with Section 4.1(c) hereof,
to the Company’s knowledge, such Investor will not possess any material
non-public

 

15

 

information concerning the Company as a result of information provided
directly to such Investor by the Company or its agents or representatives. The
Company acknowledges that each Investor is relying on the representations,
acknowledgments and agreements made by the Company in Section 3
hereof and elsewhere in this Agreement in making investing, trading and/or
other decisions concerning the Company’s securities.

 

3.18                           Insurance.  The Company and the Pledged Subsidiaries have
insurance in such amounts and covering such losses and risks as is reasonably
sufficient and customary in the businesses in which the Company and the Pledged
Subsidiaries are engaged, except where the failure to maintain such insurance
has not had or would not reasonably be expected to have a Material Adverse
Effect. No notice of cancellation has been received for any of such policies
and the Company and the Pledged Subsidiaries are in compliance in all material
respects with all of the terms and conditions thereof.  The Company has no reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue to conduct its business as currently conducted without a
significant increase in cost (other than cost increases generally affecting the
market for such insurance).  Without
limiting the generality of the foregoing, the Company maintains director’s and
officer’s insurance in the amount set forth on Schedule 3.18.

 

3.19                           Property.  The Company and the Pledged Subsidiaries have
valid and legal title to all real and personal Property owned by them, and in
the case of the Company and the Subsidiaries, such Property is owned free and
clear of all Liens other than Permitted Liens. 
To the Company’s knowledge, any Property held under lease by the Company
or any of the Pledged Subsidiaries is held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such Property
by the Company or any of the Pledged Subsidiaries.  Schedule 3.19 sets forth
all real property owned by the Company and all mortgages or other liens (other
than Permitted Liens specified in paragraphs (c), (d) and (e) in the
definition thereof) encumbering such Property.

 

3.20                           Regulatory Permits.  The Company and Pledged Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to have any such
authorization or permit would not have a Material Adverse Effect,
and neither the Company nor any such Pledged Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

 

3.21                           Exchange
Act Registration; Listing.  The
Company’s Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and the Company has taken no action designed to, or which, to the
knowledge of the Company, would reasonably be expected to have the effect of,
terminating the registration of the Common Stock under the Exchange Act.  The Company currently meets the eligibility
requirements for quotation of the Common Stock on the Nasdaq SmallCap Market,
and has not received any notice from the NASD that it does not currently
satisfy such requirements or that such continued quotation is in any way
threatened.

 

3.22                           Investment
Company Status. The Company is not, and immediately after receipt of
payment for the Notes issued under this Agreement will not be, an “investment company” or an entity “controlled” by an “investment company” within the
meaning of the Investment

 

16

 

Company Act of 1940, as amended (the “Investment
Company Act”), and shall conduct its business in a manner so
that it will not become subject to the Investment Company Act.

 

3.23                           Transfer
Taxes. No stock transfer or other taxes (other than income taxes) are
required to be paid in connection with the issuance and sale of any of the
Notes, other than such taxes for which the Company has established appropriate
reserves and intends to pay in full on or before the Closing.

 

3.24                           Sarbanes-Oxley
Act; Internal Controls and Procedures.  
The Company is in compliance in all material respects with all
applicable requirements of the Sarbanes-Oxley Act of 2002 and all applicable rules and
regulations promulgated by the Commission thereunder that are effective as of
the date hereof, except for instances of noncompliance that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.  Except as set forth in
the Disclosure Documents, the Company maintains internal accounting controls,
policies and procedures, and such books and records as are reasonably designed
to provide reasonable assurance that (i) all transactions to which the
Company or any of the Pledged Subsidiaries is a party or by which its
properties are bound are effected by a duly authorized employee or agent of the
Company, supervised by and acting within the scope of the authority granted by
the Company’s senior management; (ii) the recorded accounting of the
Company’s consolidated assets is compared with existing assets at regular
intervals; and (iii) all transactions to which the Company or any of the
Pledged Subsidiaries is a party, or by which its properties are bound, are
recorded (and such records maintained) in accordance with all Governmental
Requirements and as may be necessary or appropriate to ensure that the financial
statements of the Company are prepared in accordance with GAAP, except for
instances of noncompliance that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

3.25                           Transactions
with Interested Persons.   Except as
set forth in Schedule 3.25, no
officer, director or employee of the Company or any of the Pledged Subsidiaries
is or has made any arrangements with the Company or any of the Pledged
Subsidiaries to become a party to any transaction with the Company or any of
the Pledged Subsidiaries (other than for services as employees, consultants,
officers and directors), that could reasonably be considered material to the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

 

3.26                           Customers
and Suppliers.  The relationships of
the Company and the Pledged Subsidiaries with the material customers and
suppliers of the Company and the Pledged Subsidiaries, taken as a whole, are
maintained on commercially reasonable terms. 
To the Company’s knowledge, no customer or supplier of the Company or
any of the Pledged Subsidiaries has any plan or intention to terminate any
agreement with the Company or such Pledged Subsidiary, which termination would
reasonably be expected to have a Material Adverse Effect.

 

3.27                           No
Other Agreements.  The Company has
not, directly or indirectly, entered into any agreement with or granted any
right to any Investor relating to the terms or conditions of the

 

17

 

transactions contemplated by the Transaction Documents, except as
expressly set forth in the Transaction Documents.

 

4.                                       COVENANTS OF THE COMPANY AND EACH INVESTOR.

 

4.1                                 The
Company agrees with each Investor that the Company will:

 

(a)                                  file
a Form D with the Commission with respect to the Notes issued at the
Closing as and when required by Regulation D and provide a copy thereof to such
Investor promptly after such filing at such Investor’s request;

 

(b)                                 take
such action as the Company reasonably determines upon the advice of counsel is
necessary to qualify the Notes for sale under applicable state or “blue-sky”
laws or obtain an exemption therefrom, and shall promptly provide evidence of
any such action to such Investor at such Investor’s request;

 

(c)                                  (i) on
or prior to 8:30 a.m. (eastern time) on the Business Day immediately
following the Execution Date, issue a press release disclosing the material
terms of this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby, and (ii) on or prior to 5:00 p.m.
(eastern time) on the Business Day immediately following the Execution Date,
file with the Commission a Current Report on Form 8-K disclosing the
material terms of this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby, including as exhibits this
Agreement and the other Transaction Documents, and provide each Investor with a
receipt that such report has been accepted for filing by the Commission; provided, however, that each Investor shall have a
reasonable opportunity to review and comment on any such press release or Form 8-K
prior to the issuance or filing thereof. 
Thereafter, the Company shall timely file any filings and notices
required by the Commission or applicable law with respect to the transactions
contemplated hereby.

 

4.2                                 Existence
and Compliance.  The Company agrees
that it will, during the period beginning on the Execution Date and ending on
the Termination Date:

 

(a)                                  maintain
its and each of its Subsidiaries’ corporate existence in good standing;

 

(b)                                 pay
or discharge before becoming delinquent (i) all taxes, levies, assessments
and governmental charges imposed on it or its income or profits or any of its
Property and (ii) all lawful claims for labor, material and supplies,
which, if unpaid, might become a Lien upon any of its Property, except where
the failure to do so would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect; provided,
however, that the Company shall not be required to pay or discharge
any tax, levy, assessment or governmental charge, or claim for labor, material
or supplies, whose amount, applicability or validity is being contested in good
faith by appropriate proceedings being diligently pursued and for which
adequate reserves have been established under GAAP;

 

(c)                                  comply
with all Governmental Requirements applicable to the operation of its business,
except for instances of noncompliance that would not reasonably be

 

18

 

expected to have, individually or in the aggregate, a Material Adverse
Effect; provided, however,
that the Company shall not be required to comply with any Governmental
Requirements, the applicability or validity of which is being contested in good
faith by appropriate proceedings being diligently pursued and for which
adequate reserves have been established under GAAP;

 

(d)                                 comply
with all agreements, documents and instruments binding on it or affecting its
Properties or business, including, without limitation, all Material Contracts,
except for instances of noncompliance that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect;

 

(e)                                  timely
file with the Commission all reports required to be filed pursuant to the
Exchange Act and refrain from terminating its status as an issuer required by
the Exchange Act to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination;

 

(f)                                    use
commercially reasonable efforts to maintain adequate insurance coverage
(including director and officer insurance) for the Company and each Subsidiary.

 

4.3                                 Use of Proceeds.  The Company shall use the proceeds from the
sale of the Notes as follows: (i) concurrently with the Closing, the
Company shall redeem in full all unpaid principal and accrued interest on the
Senior Unsecured Notes held by Satellite Strategic Finance Associates, LLC and
Satellite Strategic Finance Partners, Ltd. (the aggregate amount of which is
approximately $5,500,000 as of the Execution Date (the “Existing
Notes”)); and (ii) the remaining proceeds shall be used for
general corporate purposes.  The Company
shall, no later than one Business Day after the Closing, deliver evidence
reasonably satisfactory to the Investor that all of the Existing Notes have
been repaid in full.

 

4.4                                 Limitation
on Debt and Liens. During the period beginning on the Execution Date and
ending on the Termination Date, the Company shall refrain, and shall ensure
that each of its Subsidiaries refrains, (a) from incurring any Debt
(including without limitation by issuing any Debt securities) or increasing the
amount of any existing line of credit or other Debt facility beyond the amount
outstanding on the date hereof, other than Permitted Debt, and (b) from
granting, establishing or maintaining any Lien on any of its assets, including
without limitation any pledge of securities owned or held by it (including
without limitation any securities issued by any such Subsidiary), other than
Permitted Liens.

 

4.5                                 Restricted
Payments.  During the period
beginning on the Execution Date and ending on the Termination Date, the Company
will not, nor will it permit any Subsidiary of the Company to, make any
Restricted Payments, except that:

 

(a)                                  the
Company shall redeem the Existing Notes in accordance with Section 4.3
of this Agreement.

 

(b)                                 the
Company and the Subsidiaries may make scheduled payments of principal and
interest accrued on any Permitted Debt; and

 

19

 

(c)                                  Subsidiaries
of the Company may make Restricted Payments to the Company;

 

provided, however, that no
Restricted Payments may be made pursuant to clause (b) or (c) above
if a Mandatory Redemption Event (or an event or circumstance that with the
giving of notice or lapse of time would constitute a Mandatory Redemption
Event) exists at the time of such Restricted Payment or would result therefrom.

 

4.6                                 Mergers
and Consolidations.  During the
period beginning on the Execution Date and ending on the Termination Date, the
Company will not, and will not permit any Subsidiary of the Company to, without
the prior written consent of Investors holding at least a majority in principal
amount of the Notes then outstanding (which consent will not be unreasonably
withheld), merge with or consolidate into, any Person, except that (i) any
of the Company’s wholly owned subsidiaries may merge with, consolidate into the
Company or another of the Company’s wholly owned subsidiaries, (ii) the
Company or any Subsidiary may effect a merger solely for the purpose of
changing its jurisdiction of incorporation, and (iii) the Company or any
Subsidiary may effect an event permitted by Section 4.7,
provided that such event does not result
in a change of control of the Company or such Subsidiary, and the Company or
such Subsidiary, as the case may be, is the surviving entity .

 

4.7                                 Acquisitions
and Investments.  During the period
beginning on the Execution Date and ending on the Termination Date, the Company
will not, nor will it permit any Subsidiary of the Company to, purchase or
otherwise acquire the capital stock or other equity interests in or assets
(constituting a business unit) of, any Person or agree to do so, unless (a) the
business or entity to be acquired has had net positive cash flow from
operations (determined in accordance with GAAP after deducting the amount of
capital expenditures) during the twelve-month period immediately preceding such
acquisition and (b) the Company in good faith believes that the acquired
business or entity will continue to generate such positive cash flow during the
twelve-month period immediately following such acquisition.

 

4.8                                 [Intentionally
Omitted] 

 

4.9                                 Transactions
with Affiliates. During the period beginning on the Execution Date and
ending on the Termination Date, the Company agrees that any transaction or
arrangement between the Company or any of the Pledged Subsidiaries and any
Affiliate or employee of the Company shall be effected on an arms’ length basis
and shall be approved by the Board of Directors, including a majority of the
Company’s directors not having an interest in such transaction.

 

4.10                           Disposition
of Assets. During the period beginning on the Execution Date and ending on
the Termination Date, the Company shall not, nor will it permit any Subsidiary
to, contribute, sell or otherwise transfer any of its material Properties to
any of its direct or indirect subsidiaries, including, without limitation, the
Pledged Subsidiaries, Non-Material Subsidiaries and any newly created
subsidiaries of the Company.

 

20

 

4.11                           Use of Investor Name.  Except as may be required by applicable law
and/or this Agreement, the Company shall not use, directly or indirectly, any
Investor’s name or the name of any of its Affiliates in any advertisement,
announcement, press release or other similar communication unless it has
received the prior written consent of such Investor or its Affiliate, as the
case may be, for the specific use contemplated or as otherwise required by
applicable law or regulation.

 

4.12                           Limitations on Disposition.  No
Investor shall sell, transfer, assign or dispose of any Notes, unless:

 

(a)                                  there
is then in effect an effective registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or

 

(b)                                 such
Investor has notified the Company in writing of any such disposition and
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such Notes
under the Securities Act; provided, however,
that no such opinion of counsel will be required (A) if the sale, transfer
or assignment is made to an Affiliate of such Investor in compliance with
applicable securities laws, provided that such Affiliate provides the Company
with customary accredited investor and investment representations and agrees to
be bound by the terms and conditions of this Agreement, (B) if the sale,
transfer or assignment is made pursuant to Rule 144 and such Investor
provides the Company with customary representations and/or other evidence
reasonably satisfactory to the Company that the proposed transaction satisfies
the requirements of Rule 144, or (C) in connection with a bona fide pledge or hypothecation of any
Notes under a margin arrangement with a broker-dealer or other financial
institution or the sale of any such Notes by such broker-dealer or other
financial institution following such Investor’s default under such margin
arrangement.

 

4.13                           Disclosure
of Information. The Company agrees that it will not at any time following
the Execution Date disclose material non-public information to any Investor
without first obtaining such Investor’s written consent to such disclosure.

 

4.14                           Indemnification
of Investors.   The Company will
indemnify and hold each Investor and its directors, managers, officers,
shareholders, members, partners, employees and agents (each, an “Investor Party”) harmless from any
and all losses, liabilities, obligations, claims, contingencies, damages, costs
and expenses, including all judgments, amounts paid in settlements, court costs
and reasonable attorneys’ fees and costs of investigation that any such
Investor Party may suffer or incur as a result of or relating to (a) any
breach of any of the representations, warranties, covenants or agreements made
by the Company in this Agreement or in the other Transaction Documents or (b) any
action instituted against an Investor, or any of them or their respective
Affiliates, by any shareholder of the Company who is not an Affiliate of such
Investor, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such
Investor’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Investor may have with any
such shareholder or any violations by such Investor of state or federal
securities laws or any conduct by such Investor which constitutes fraud, gross
negligence, willful misconduct or malfeasance). 
If any action shall be brought against

 

21

 

any Investor Party in respect of which indemnity may be sought pursuant
to this Agreement, such Investor Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof
with counsel of its own choosing and to control any settlement of the claim;
provided, however, that the Company will not settle any claim unless it first
obtains the consent of the relevant Investor Parties, which consent shall not be
unreasonably withheld if such settlement (i) does not require the Investor
Parties to make any payment that is not indemnified under this Agreement, (ii) does
not impose any non-financial obligations on the Investor Parties and (iii) does
not require an acknowledgment of wrongdoing on the part of the Investor
Parties.  Any Investor Party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Investor Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time following such Investor
Party’s written request that it do so, to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Investor Party.  The Company will not be liable to any Investor
Party under this Agreement (i) for any settlement by an Investor Party
effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed (it being agreed that it shall not be
unreasonable for the Company to withhold or delay such consent if the Company
(x) has acknowledged in writing its obligation to indemnify such Investor Party
with respect to such matter, (y) the Company has assumed and is actively and in
good faith pursuing the defense of such matter as herein provided, and (z)
provided to such Investor Party reasonably acceptable evidence that the Company
is able to comply with its indemnification obligations hereunder); or (ii) to
the extent, but only to the extent that a loss, claim, damage or liability is
attributable to such Investor Party’s wrongful actions or omissions, or gross
negligence or to such Investor Party’s breach of any of the representations,
warranties, covenants or agreements made by such Investor in this Agreement or
in the other Transaction Documents.

 

5.                                       CONDITIONS TO CLOSING.

 

5.1                                 Conditions
to Investors’ Obligations at the Closing. 
Each Investor’s obligations to effect the  Closing, including, without limitation, its
obligation to purchase a Note at the Closing, are conditioned upon the
fulfillment (or waiver by such Investor in its sole and absolute discretion) of
each of the following events as of the Closing Date:

 

5.1.1                                                the
representations and warranties of the Company set forth in this Agreement and
in the other Transaction Documents shall be true and correct in all material
respects as of such date as if made on such date (except that to the extent
that any such representation or warranty relates to a particular date, such
representation or warranty shall be true and correct in all material respects
as of that particular date);

 

5.1.2                                                the Company shall have complied with or performed in
all material respects all of the agreements, obligations and conditions set
forth in this Agreement and in the other Transaction Documents that are 

 

22

 

required to be complied with or
performed by the Company on or before the Closing;

 

5.1.3                                                the Closing Date shall occur on a date that is not
later than December 29, 2005;

 

5.1.4                                                the Company shall have delivered to such Investor a
certificate, signed by the Chief Executive Officer and Chief Financial Officer
of the Company, certifying that the conditions specified in subparagraphs
5.1.1, 5.1.2, 5.1.9 and 5.1.10 of this Section 5.1
have been fulfilled as of the Closing, it being understood that such Investor
may rely on such certificate as though it were a representation and warranty of
the Company made herein;

 

5.1.5                                                the Company shall have delivered to such Investor an
opinion or opinions of counsel for the Company, dated as of the Closing Date,
that is in form and substance reasonably acceptable to such Investor (including
perfection opinions with respect to the security interests granted under the
Security Documents);

 

5.1.6                                                the Company shall have delivered to such Investor the
duly executed Note being purchased by such Investor at the Closing;

 

5.1.7                                                the Company shall have executed and delivered to such
Investor all of the Transaction Documents;

 

5.1.8                                                the Company shall have delivered to such Investor a
certificate, signed by the Secretary or an Assistant Secretary of the Company,
attaching (i) the Certificate of Incorporation, By-Laws or similar
governing documents of the Company, and (ii) resolutions passed by the
Board of Directors, authorizing the transactions contemplated hereby and by the
other Transaction Documents, and certifying that such documents are true and
complete copies of the originals and that such resolutions have not been
amended or superseded, it being understood that such Investor may rely on such
certificate as a representation and warranty of the Company made herein;

 

5.1.9                                                there shall have occurred no material adverse change
in the Company’s consolidated business or financial condition since the date of
the Company’s most recent financial statements contained in the Disclosure
Documents; and

 

5.1.10                                          there shall be no injunction, restraining order or
decree of any nature of any court or Government Authority of competent
jurisdiction that is in effect that restrains or prohibits the

 

23

 

consummation of the transactions
contemplated hereby or by the other Transaction Documents.

 

5.2                                 Conditions
to Company’s Obligations at the Closing. 
The Company’s obligations to effect the Closing with each Investor are
conditioned upon the fulfillment (or waiver by the Company in its sole and
absolute discretion) of each of the following events as of the Closing Date:

 

5.2.1                                                the representations and warranties of such Investor
set forth in this Agreement and in the other Transaction Documents shall be
true and correct in all material respects as of such date as if made on such
date (except that, to the extent that any such representation or warranty
relates to a particular date, such representation or warranty shall be true and
correct in all material respects as of that particular date);

 

5.2.2                                                such Investor shall have complied with or performed
all of the agreements, obligations and conditions set forth in this Agreement
and in the other Transaction Documents that are required to be complied with or
performed by such Investor on or before the Closing;

 

5.2.3                                                there shall be no injunction, restraining order or
decree of any nature of any court or Government Authority of competent
jurisdiction that is in effect that restrains or prohibits the consummation of
the transactions contemplated hereby or by the other Transaction Documents;

 

5.2.4                                                such Investor shall have executed each Transaction
Document to which it is a party and shall have delivered the same to the
Company; and

 

5.2.5                                                such Investor shall have tendered to the Company the
Purchase Price for the Note being purchased by it at the Closing by
wire transfer of immediately available funds.

 

24

 

6.                                       MISCELLANEOUS.

 

6.1                                 Survival;
Severability.  The representations,
warranties and covenants made by the parties herein and in the other
Transaction Documents shall survive the Closing notwithstanding any due
diligence investigation made by or on behalf of the party seeking to rely
thereon; provided,
however, that the representations and warranties made by the parties
herein and in the other Transaction Documents shall survive only until the
Termination Date. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without said
provision; provided that in such case the parties shall negotiate in good faith
to replace such provision with a new provision which is not illegal,
unenforceable or void, as long as such new provision does not materially change
the economic benefits of this Agreement to the parties.

 

6.2                                 Successors and
Assigns.  The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties.  Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. After the Closing, each Investor may
assign its rights and obligations hereunder, in connection with any private
sale or transfer of the Notes in accordance with the terms hereof, as long as (i) such
transfer does not result in more than five holders of the Notes (provided that
all holders of the Notes that are funds managed and controlled by Satellite
shall be deemed to count as one holder for purposes of this sentence), and (ii) 
the transferee executes an acknowledgment agreeing to be bound by the
applicable provisions of this Agreement, in which case the term “Investor”
shall be deemed to refer to such transferee as though such transferee were an
original signatory hereto. The Company may not assign its rights or obligations
under this Agreement.

 

 6.3                              No Reliance.  Each party acknowledges that (i) it has
such knowledge in business and financial matters as to be fully capable of
evaluating this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of any other party in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction Documents), (iii) it
has not received from any other party any assurance or guarantee as to the
merits (whether legal, regulatory, tax, financial or otherwise) of entering
into this Agreement or the other Transaction Documents or the performance of
its obligations hereunder and thereunder, and (iv) it has consulted with its
own legal, regulatory, tax, business, investment, financial and accounting
advisors to the extent that it has deemed necessary, and has entered into this
Agreement and the other Transaction Documents based on its own independent
judgment and on the advice of its advisors as it has deemed necessary, and not
on any view (whether written or oral) expressed by any other party.

 

6.4                                 [Intentionally
Omitted]

 

6.5                                 Injunctive Relief.  Each Investor, on the one hand, and the
Company, on the other hand, each acknowledges and agrees that a breach by it of
its obligations hereunder will cause

 

25

 

irreparable harm to the non-breaching party and that the remedy or
remedies at law for any such breach will be inadequate and agrees, in the event
of any such breach, in addition to all other available remedies, the
non-breaching party shall be entitled to an injunction restraining any breach
and requiring immediate and specific performance of such obligations without
the necessity of showing economic loss.

 

6.6                                 Governing Law;
Jurisdiction.  This Agreement shall
be governed by and construed under the laws of the State of New York applicable
to contracts made and to be performed entirely within the State of New
York.  Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City and County of New
York, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby 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 in effect for 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.

 

6.7                                 Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.  This Agreement may be executed and delivered by
facsimile transmission.

 

6.8                                 Headings.  The headings used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.

 

6.9                                 Notices.  Any notice, demand or request required or
permitted to be given by the Company or the Investors pursuant to the terms of
this Agreement shall be in writing and shall be deemed delivered (i) when
delivered personally or by verifiable facsimile transmission, unless such
delivery is made on a day that is not a Business Day, in which case such
delivery will be deemed to be made on the next succeeding Business Day and (ii) on
the next Business Day after timely delivery to an overnight courier, addressed
as follows:

 

If to the Company:

 

Applied Digital Solutions, Inc.

1690
S. Congress Avenue, Suite 200 

Delray Beach, FL 33445

Attn: Scott R. Silverman

Tel: 561-805-8000

Fax:561-805-0002

 

26

 

with a copy to:

 

Holland & Knight LLP

701 Brickell Avenue, Suite 3000 

Miami, FL  33131

Attn: Harvey A. Goldman, Esq.

Tel:  305-374-8500

Fax: 305-789-7799

 

and if to any Investor, to such address for such Investor as shall
appear on the signature page hereof executed by such Investor, or as shall
be designated by such Investor in writing to the Company in accordance with
this Section 6.9.

 

6.10                           Expenses.  The Company and each Investor shall pay all
costs and expenses that it incurs in connection with the negotiation,
execution, delivery and performance of this Agreement or the other Transaction
Documents, provided, however, that the Company
shall, at the Closing, pay Satellite $60,000 for out-of-pocket expenses
(including without limitation the reasonable legal fees and expenses of Mazzeo
Song LLP) incurred or to be incurred by Satellite in connection with its due
diligence investigation of the Company and the negotiation, preparation,
execution, delivery and performance of this Agreement and the other Transaction
Documents. At the Closing, such expenses may be netted out of the Purchase Price
payable by any Investor managed by Satellite or one of its Affiliates.

 

6.11                           Entire Agreement;
Amendments.  This Agreement and the
other Transaction Documents constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties.  Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended or waived
except pursuant to a written instrument executed by the Company and the holders
of at least two-thirds (2/3) of the unpaid principal of the Notes then
outstanding.  Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.

 

[Signature Pages to Follow]

 

27

 

IN WITNESS WHEREOF, the undersigned have executed this
Note Purchase Agreement as of the date first-above written.

 

 

	
  APPLIED DIGITAL SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Evan C. McKeown

  	
   

  
	
   

  	
  Name: Evan C. McKeown

  
	
   

  	
  Title: Senior Vice President and Chief Financial
  Officer

  

 

 

IN WITNESS WHEREOF, the undersigned have executed this
Note Purchase Agreement as of the date first-above written.

 

 

	
  SATELLITE SENIOR INCOME
  FUND, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Satellite Asset Management, L.P., its Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Simon Raykher

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Simon Raykher

  	
   

  
	
   

  	
   

  	
  Title: General Counsel

  	
   

  
	
   

  	
   

  	
   

  
	
  ADDRESS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  c/o Satellite Asset Management, L.P.

  	
   

  
	
   

  	
  623 Fifth Avenue, 20th Floor

  	
   

  
	
   

  	
  New York, New York 10022

  	
   

  
	
   

  	
  Tel:

  	
  212-209-2000

  	
   

  
	
   

  	
  Fax:

  	
  212-209-2021

  	
   

  
						

 

 

Principal Amount of Note to be Purchased: $12,000,000.00

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