-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ETDHj5AawZkUL0iAj9I5E2E4Fu9OfloRMwKFQqmlohWKO6QCNXXKhDnnl/smf97V fPjg+IVsdax/S2kjMFEcgA== 0001013762-05-000099.txt : 20050128 0001013762-05-000099.hdr.sgml : 20050128 20050128170225 ACCESSION NUMBER: 0001013762-05-000099 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050128 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050128 DATE AS OF CHANGE: 20050128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLIED DNA SCIENCES INC CENTRAL INDEX KEY: 0000744452 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 592262718 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-90539 FILM NUMBER: 05558990 BUSINESS ADDRESS: STREET 1: 9229 WEST SUNSET BOULEVARD, SUITE 830 CITY: LOS ANGELES STATE: CA ZIP: 90069 BUSINESS PHONE: 3108601362 MAIL ADDRESS: STREET 1: 9229 WEST SUNSET BLVD, SUITE 830 CITY: LOS ANGELES STATE: CA ZIP: 90069 FORMER COMPANY: FORMER CONFORMED NAME: PROHEALTH MEDICAL TECHNOLOGIES INC DATE OF NAME CHANGE: 20010504 FORMER COMPANY: FORMER CONFORMED NAME: DCC ACQUISITION CORP DATE OF NAME CHANGE: 19990211 FORMER COMPANY: FORMER CONFORMED NAME: DATALINK CAPITAL CORP/TX/ DATE OF NAME CHANGE: 19980306 8-K 1 jan2820058k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 28, 2005 Applied DNA Sciences, Inc. (Exact name of registrant as specified in its charter) Nevada 002-90539 59-2262718 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 9229 Sunset Boulevard, Suite 83, Los Angeles, CA 90069 (Address of principal executive offices and Zip Code) Registrant's telephone number, including area code (310) 860-1362 Copies to: Andrea Cataneo, Esq. Sichenzia Ross Friedman Ference LLP 1065 Avenue of the Americas New York, New York 10018 Phone: (212) 930-9700 Fax: (212) 930-9725 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement. On January 28, 2005, Applied DNA Sciences, Inc. (the "Company"), sold an aggregate of $5,970,000 in secured convertible promissory notes (the "Notes") to 43 investors. The investors received 5,970,000 warrants (the "Warrants"), or one warrant for each dollar of Notes purchased. The Notes and the Warrants were issued in a private placement transaction pursuant to Section 4(2) under the Securities Act of 1933. The Notes bear interest at 10% per annum, mature one year from the date of issuance, and are convertible: into shares of common stock of the Company at a price of $0.50 per share (i) at the holder's option; or (ii) automatically upon the Company's filing of a registration statement registering the shares underlying the Notes and Warrants. In the event that Company fails to repay the Notes and accrued interest when due, the Notes shall be convertible into shares of the Company's common stock at the holder's option at a price of $0.33 per share. The full principal amount of the Notes, plus a default interest rate of 12%, is due upon a default under the terms of the Notes. In addition, we granted the investors a security interest in substantially all of our assets and intellectual property. We are required to file a registration statement with the Securities and Exchange Commission on of before February 15, 2005, which will include the common stock underlying the Notes and Warrants. If the registration statement is not declared effective within 120 days from February 15, 2005, the Company is required to pay liquidated damages to the investors in the amount of 3.5% per month of the face amount of the Notes, which liquidated damages shall be paid in shares of Company common stock or cash, at the election of the Company. Each Warrant is exercisable for a period of five years at a price of $0.75 per share, subject to certain adjustments. The exercise price of the Warrants is subject to adjustment for subsequent lower price issuances by the Company, as well as customary adjustment provisions for stock splits, combinations, dividends and the like. The investors may exercise the warrants on a cashless basis if the shares of common stock underlying the Warrants are registered pursuant to an effective registration statement. At any time after the registration statement is effective, the Warrants are callable by the Company, upon 10 days written notice, should the common stock trade at or above $1.25 per share for 20 consecutive trading days. The Company paid the placement agent of the offering, Vertical Capital Partners, Inc., a commission fee of 10% of the proceeds of the offering and a 3% non-accountable expense allowance. In addition, Vertical Capital Partners received 1,194,000 shares of common stock. Item 2.03 Creation of a Direct Financial Obligation. See Item 1.01 above. Item 3.02 Unregistered Sales of Equity Securities. See Item 1.01 above. 2 Item 9.01 Financial Statements and Exhibits. (a) Financial statements of business acquired. Not applicable. (b) Pro forma financial information. Not applicable. (c) Exhibits. Exhibit Number Description - -------------- ----------------------------------------------------------------- 4.1 Form of Subscription Agreement 4.2 Form of 10% Secured Convertible Promissory Note 4.3 Form of Warrant Agreement 4.4 Registration Rights Agreement, dated January 28, 2005, between the Company and Vertical Capital Partners, Inc., on behalf of the investors 4.5 Security Agreement, dated January 28, 2005, between the Company and Vertical Capital Partners, Inc., on behalf of the investors 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Applied DNA Sciences, Inc. Date: January 28, 2005 /s/ PETER BROCKLESBY --------------------- Peter Brocklesby President EX-4 2 jan2820058kex41.txt - -------------------------------------------------------------------------------- Exhibit 4.1 SUBSCRIPTION AGREEMENT Investor Financial Questionnaire - -------------------------------------------------------------------------------- Before you make an investment, you must complete this questionnaire. Please check the appropriate box below and sign this questionnaire before a notary. We require that this be returned with your Subscription Agreement for your purchase of Common Shares of Applied DNA Sciences, Inc. (the "Company"). Information will be held in strict confidence and used solely to ensure that all prospective investors are qualified under the relevant sections of the Securities Act of 1933. [ ] I am a natural person who has had individual income of more than Two Hundred Thousand US Dollars (US $200,000.00) in each of the most recent two years, or joint income with my spouse in excess of Three Hundred Thousand US Dollars (US $300,000.00) in each of the most recent two years and reasonably expect to reach that same income level for the current year ("income" for purposes hereof should be computed as follows: individual adjusted gross income as reported, or to be reported, on a federal income tax return, increased by (i) any deduction of long-term capital gains under section 1202 of the Internal Code of 1936 (the "Code"), (ii) any deduction or depletion under Section 611 et. seq. of the Code, (iii) any exclusion for interest under Section 103 of the Code and (iv) any losses of a partnership as reported in Schedule E of Form 1040; [ ] The Subscriber is a natural person whose individual net worth (i.e. total assets in excess of total liabilities), or joint net worth with my spouse, will at the time of purchase of the Common Shares be in excess of One Million US Dollars (US $1,000,000.00); [ ] The Subscriber is an investor satisfying the requirements of Section 501(a)(1)(2) or (3) of Regulation D promulgated under the Securities Act of 1933, which includes, but is not limited to, a self-directed employee benefit plan where investment decisions are made solely by persons who are "accredited investors" as otherwise defined in Regulation D; [ ] The Subscriber is a trust, which trust has total assets in excess of Five Million US Dollars (US $5,000,000.00) which was not formed for the specific purpose of acquiring the Common Shares offered hereby and whose purchase is directed by a sophisticated person as described in Rule 506(b)(ii) of Regulation D and who has such knowledge and experience in financial and business matters that he is capable of evaluating the risks and merits of an investment in the Common Shares; [ ] The Subscriber is a director or executive officer of the Company; [ ] The Subscriber is an entity (other than a trust) in which all of the equity owners meet the requirements of at least one of the above paragraphs; or [ ] The Subscriber is not a resident of the United State of America, but acknowledges he/she meets or exceeds at least one of the minimum financial requirements set forth above. I represent that I have reviewed the Company's information as filed with the US Securities and Exchange Commission, and that I understand the merits and the risks involved in this offering, that I have sufficient knowledge and experience in similar programs or investments to evaluate the merits and risks of an investment in the Company (or that I have retained an attorney, accountant, financial advisor or consultant as my purchaser representative); that because of my background, employment experience, family or financial situation or economic bargaining power, 1 I have received and have had access to material and relevant information enabling me to make an informed investment decision, and that all information I have requested has been furnished to me; and that I am able to bear the economic risk of loss of the entire investment which I may make in the Company. By,_______________________________________ PRINT NAME ________________________________________ Investor Signature With a current address of__________________________________________________ In the City of____________________________, State/Province of ____________, Country of_______________ DATE:_____, December, 2004 IN WITNESS WHEREOF, I have hereunto witnessed the signature of the above Investor; By,___________________________________________ ______________________________________________ Witness Signature Date:___________________ 2 - -------------------------------------------------------------------------------- APPLIED DNA SCIENCES, INC. SUBSCRIPTION AGREEMENT - -------------------------------------------------------------------------------- 1. Subscription. Subject to the terms and conditions hereof, __________________ __________________________, the undersigned Investor ("Investor") hereby subscribes to purchase _____ units of the Private Placement offering by Applied DNA Sciences Inc., dated December 30, 2004. to which the terms and conditions of the offer are: Applied DNA Sciences, Inc., a Nevada corporation (the "Company"), is offering up to One Hundred and twenty (120 units (the "Units") for sale to accredited investors at a price of US Dollars Fifty Thousand US ($50,000.00) per Unit (the "Offering") on a "best efforts" no minimum, with a maximum offering basis of Six Million US Dollars (US $6,000,000.00). Each Unit consists of (i) a US Dollars Fifty Thousand US ($50,000.00) Principal Amount Ten Percent (10.0%) Secured Convertible Promissory Note ("Note" or "Notes") and (ii) warrants to purchase One Hundred Thousand (100,000) shares of the Company's common stock, exercisable for a period of five (5) years at a price of US Seventy Five Cents (US $0.75) per share ("Warrants"). The warrants are callable anytime after the underlying shares are registered if the stock trades above $1.25 per share for twenty (20) trading days. The Notes are convertible into shares of common stock of the Company at a price of US Fifty Cents (US $0.50) per share, and shall automatically convert on the filing of the registration statement indicated below. 2. Private Placement. The parties acknowledge that this offering has been made and this Subscription Agreement has been entered into as a private placement negotiated between the parties dated December 30, 2004. 3. Registration Rights. By accepting this subscription, and as set forth in greater detail in the Registration Rights Agreement, the Company hereby agrees to include any shares purchased in its next registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended and which registration statement the Company commits to file on Form S-1, SB2 or other required form on or before February 15th, 2005. The Company will pay liquidated damages in the amount of Three and a Half Percent (3.5%) per month for each month or part thereof that the registration statement is delayed beyond February 15th, 2005 and said penalty will also take effect if the company does not have the Registration statement declared effective within 120 days of February 15, 2005. 4. Knowledge of Financial and Business Status of Company. Investor acknowledges that he has been involved with the Company for a period of time, has met in person or telephonically with management immediately prior to this investment, and has reviewed the current financial condition of the Company and its business plan. Investor is aware that the Company and the Company's subsidiary requires net capital and the Company, as a whole, needs operating capital without which it may become insolvent. 5. Representations and Warranties. In consideration of the sale of such common shares, intending to be legally bound and intending the Company to rely thereupon, Investor hereby represents, warrants, and covenants, to the Company as follows: Neither the Company nor any person acting on behalf of the Company has offered to sell, offered for sale or sold the Units, Notes, Warrants or Underlying Common Stock (collectively, the "Securities") by means of general solicitation or general advertising. Investor has not received, paid or given, directly or indirectly, any commission or remuneration for or because of any sale or the solicitation of any sale of the Securities. 3 Company represents and warrants that the Common Shares being issued herein are restricted under SEC Rule 144, and Investor is aware of restricted sale provisions that make up Rule 144. Investor has been offered full access to all underlying documents in connection with this transaction as well as such other information as Investor has deemed necessary or appropriate for a prudent and knowledgeable investor to evaluate the purchase of the Common Shares. Investor acknowledges that the Company has made available to Investor the opportunity to obtain additional information from, to ask questions of, and receive satisfactory answers from the officers of the Company concerning the terms and conditions of the private placement and to verify the information given. Investor is satisfied that there is no material information concerning the condition, properties, operations and prospects of the Company of which Investor is unaware. In making his or her investment decision, Investor has relied solely upon his or her independent investigation of the investment. Investor is aware that an investment in the Securities is a highly speculative investment that involves a substantial degree of risk. Investor warrants that he/she has such sufficient requisite knowledge and experience in business and financial matters that Investor is capable of evaluating the merits and risks of an investment in the Company, which is an early stage business. Investor understands that the Company is relying on Investor's representations for the purposes of confirming Investor's suitability as an investor in the Company. Investor is aware that the Securities have not been registered under the Securities Act of 1933 (the "Act"), and that Investor must therefore bear the economic risk of the investment indefinitely because the Securities cannot be sold unless subsequently registered under the Act or under an available exemption from registration. Investor agrees not to sell his Common Shares without registration under the Act and applicable state securities laws unless in a transaction exempt therefrom. The Units for which Investor hereby subscribes are being acquired for investment purposes, solely for Investor's own account and not on behalf of other persons, and not with a view to or for the resale, distribution, subdivision, or fractionalization thereof; Investor has no present plans to enter into any contract, undertaking, agreement, or arrangement for any such resale, distribution, subdivision, or fractionalization thereof. Investor agrees that he or she will not sell, assign, pledge, give, transfer or otherwise dispose of any or all of the Common Shares or any interest therein unless and until Investor has complied with all applicable provisions of federal and state securities laws. Investor has reviewed his or her financial condition and commitments. Based upon such review, Investor is satisfied that he or she has adequate means of providing for his or her financial needs and possible contingencies as well as those of any dependents, and that he or she does not have any current or foreseeable future need for liquidity of the funds being utilized in the purchase of the Common Shares. Investor is capable of bearing the economic risk of the investment in the Common Shares for the indefinite future. At this time, Investor has assets or sources of income that, if taken together, are more than sufficient so that Investor could bear the risk of loss of its, his or her entire investment in the Common Shares. 4 Investor is aware that this transaction is a "private placement" and has not been reviewed by the United States Securities and Exchange Commission or by any state securities authorities. No agency, federal or state, has passed upon the fairness or merits of this investment. Investor is aware that the assets of the Company are presently encumbered by the Bridge Note investors and that up to US Dollars One Million Six Hundred Thousand (US $1,600,000.00) of this investment may be allocated to pay back the Bridge Note holders. On December 10th 2004 the Company signed a letter agreement with Vertical Capital Partners to act on a non-exclusive basis as a Placement Agent for all or part of this Placement. Further, the Investor acknowledges as does the Company that a pre-existing relationship exists between the parties that dates back prior to the engagement of Vertical. As part of the Agreement, Vertical has committed to use its best efforts to raise Two Million US Dollars (US $2,000,000.00) of the Six Million US Dollars (US $6,000,000.00) contemplated in this Subscription Agreement. Vertical has also committed to use its best efforts to cause its Bridge Note Holders to convert on or about December 31st, 2004, thereby removing the need to repay the Bridge Note holders referred to herein. Neither this Subscription Agreement nor Investor's rights hereunder, may be assigned, sold or transferred in any manner and this Subscription Agreement may not be altered, amended or revoked without the prior written consent of the President of the Company. Investor is a bona fide resident as set forth next to Investor's signature, such location is Investor's principal residence, and Investor is at least 18 years of age. Investor understands and agrees that if Investor's subscription is accepted, Investor will be required to execute such additional documents as may be necessary to effect the issuance of the Company's Common Shares which Investor has purchased. The foregoing representations, warranties and covenants are true and accurate as of the date hereof and shall be true and accurate as of the date of completion of the Private Placement. If such representations and warranties shall not be true and accurate in any respect prior to completion of the Private Placement, Investor shall give written notice of such fact to the Company, specifying which representations and warranties are not true and accurate and the reasons therefore. 6. Escrow Account. Funds should be sent by wire transfer to the following escrow account: Bank: Bank of New York, Mt. Freedom New Jersey Name: Escrow Account Applied DNA Sciences Inc. Account # 2 Routing number: 021000018 Account Number: 6175822540 7. Miscellaneous. This Subscription Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations and understandings which are deemed to have been merged herein. No representations were made or relied upon by either party, other than those expressly set forth herein. The investor has been provided with a copy of the Private Placement Memorandum outlining the business of the Company along with the terms of the offering. 5 This writing shall be amended only by a further writing. No agent, employee, or other representative of any party is empowered to alter any of the terms hereof, including specifically this Paragraph, unless done in writing and signed by both parties. Whenever required by the context hereof: the masculine gender shall be deemed to include the feminine and neuter; and the singular member shall be deemed to include the plural. Time is expressly declared to be of the essence of this Agreement. This Agreement shall be deemed to have been mutually prepared by all parties and shall not be construed against any particular party as the draftsman. The invalidity of any one or more of the words, phrases, sentences, clauses, sections or subsections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part hereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses, sections or subsections contained in this Agreement shall be declared invalid by a court of competent jurisdiction, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, section or sections, or subsection or subsections had not been inserted. The validity, interpretation, and performance of this Agreement shall be controlled by and construed under the laws of the State of Nevada. Venue and jurisdiction of any controversy or claim arising out of, or relating to this Subscription Agreement, or the breach thereof, that cannot be resolved by negotiation, shall be in the County of Las Vegas, State of Nevada. In any legal action or other proceeding involving, arising out of or in any way relating to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs, and expenses of litigation. The failure of any party to object to, or to take affirmative action with respect to, any conduct of any other party which is in violation of the terms of this Agreement shall not be construed as a waiver of such violation or breach, or of any future breach, violation, or wrongful conduct. No delay or failure by any party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver or exhaustion of that or any other right, unless otherwise expressly provided herein. Headings in this Subscription Agreement are for convenience only and shall not be used to interpret or construe its provisions. This Subscription Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The provisions of this Subscription Agreement shall be binding upon and inure to the benefit of each of the parties and their respective successors and assigns. 8. Company Contact Details. Applied DNA Sciences, 9229 West Sunset Boulevard, Suite #830, Los Angeles, CA 90069 Facsimile: 818-860-1303 Tel: 310-860-1362 President: Peter Brocklesby, ext 123 or COO & Secretary: Ms. Karin Klemm, ext 124 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 6 IN WITNESS WHEREOF, the undersigned has executed and delivered this Subscription Agreement dated this day of December, in the year 2004. By, _______________________________________ PRINT NAME: __________________________ (Signature of INVESTOR) With a current address of _________________________________________________ In the City of_________________________, State/Province of _______________, Country of_______________ ACCEPTED: APPLIED DNA SCIENCES, INC. By, __________________ Title:____________________________ Signature of Officer ________________________ Name: DATE,__________ __, December, 200__ 7 - -------------------------------------------------------------------------------- Securities Issuance Instructions - -------------------------------------------------------------------------------- THE UNDERSIGNED, AS A CONDITION TO PURCHASE ________ UNITS (THE "SECURITIES") OF APPLIED DNA SCIENCES, INC., A NEVADA CORPORATION (THE "COMPANY"), HEREBY CERTIFIES TO THE COMPANY AS FOLLOWS: 1. I, __________________________ (Purchaser Name) am purchasing the Units (the "Securities") on this ________day of ____________, in the year 20____, in my own name and for my own account (or for a trust account if I am a trustee), and no other person has any interest in or right with respect to the Securities, nor have I agreed to give any person any such interest or right in the future. 2. I am acquiring the Securities for investment and not with a view to or for sale in connection with any distribution of the Securities. I recognize that the Securities have not been registered under the Federal Securities Act of 1933, that any disposition of the Securities is subject to restrictions imposed by federal and state law and that the certificates representing the Securities will bear a restrictive legend. I also recognize that I cannot dispose of the Securities absent registration and qualification, or an available exemption from registration and qualification. I understand that the availability of an exemption in the future will depend in part on circumstances outside my control and that I may be required to hold the Securities for a substantial period. I understand that the United States Securities and Exchange Commission has made no finding or determination relating to the fairness for investment of the Securities offered by the Company and that the Commission has not and will not recommend or endorse the Securities. 3. I have not seen or received any advertisement or general solicitation with respect to the sale of the Securities. 4. I believe, by reason of my business or financial experience that I am capable of evaluating the merits and risks of this investment and of protecting my own interests in connection with this investment. 5. I acknowledge that during the course of this transaction and prior to purchasing the Securities I have been provided with financial and other written information about the Company, I have been given the opportunity by the Company to obtain such information and ask such questions concerning the Company, the Securities, and my investment as I felt necessary, and to the extent I availed myself of such opportunity, I received satisfactory information and answers. If I requested any additional information, which the Company possessed or could acquire without unreasonable effort or expense and which was necessary to verify the accuracy of the financial and other written information furnished to me by the Company, that additional information was provided to me. In reaching the decision to invest in the Securities, I have carefully evaluated my financial resources and investment position and the risks associated with this investment, and I acknowledge that I am able to bear the economic risks of this investment. I further acknowledge that my financial condition is such that I am not under any present necessity or constraint to dispose of the Securities to satisfy any existent or contemplated debt or undertaking. 8 Please PRINT below the exact information regarding the Purchaser: INDIVIDUAL ___________________________________________________________________________ Individual Name(s) ___________________________________________________________________________ Citizenship ___________________________________________________________________________ Street Address, City, State/Province/Country and Postal Code ___________________________________________________________________________ Signature (All record holders should sign) Telephone Number: ______________ Fax Number:__________________________ E-Mail Address: ___________________________________________________________ I wish to receive news announcements and information about the company YES ____ NO ______ (check one) If yes to the above, Applied DNA, Inc. may contact me via: Fax: _____e-mail ____Telephone ___ (check one or more) CORPORATION, PARTNERSHIP, TRUST, OR OTHER ENTITY ___________________________________________________________________________ Name of Entity Name, Address(es), and Country of Citizenship of each of the beneficial Owners of the Entity: ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ Address(es) to Which Correspondence should be Directed ___________________________________________________________________________ ___________________________________________________________________________ Type of Entity (i.e., corporation, partnership etc) ___________________________________________________________________________ State/Province/ Country of Formation of Entity By:____________________________________ Printed Name:______________________ Its:____________________________________ Title: _________________________________ Telephone Number: ____________________Fax Number:__________________________ E-Mail Address: ___________________________________________________________ I wish to receive news announcements and information about the company YES ____ NO ______ (check one) If yes to the above, Applied DNA, Inc. may contact me via: Fax: _____e-mail ____ Telephone ______(check one or more) If Securities are being subscribed for by an entity, the Certificate of Signatory below must be completed. CERTIFICATE OF SIGNATORY To be completed if Securities are being subscribed for by an entity. I,________________________________, am the ________________________________ of_________________________________________________________(the "Entity "). I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Subscription Agreement and Securities Issuance Instructions to purchase and hold the Securities, and certify that the Subscription Agreement and Securities Issuance Instructions have been duly and validly executed on behalf of the Entity and constitute legal and binding obligations of the Entity. IN WITNESS WHEREOF, I have hereto set my hand this ____day of______, 20___. __________________________________ Signature EX-4 3 jan2820058kex42.txt EXHIBIT 4.2 THIS NOTE AND THE COMMON STOCK REFERENCED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS, BUT HAS BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE 1933 ACT, AND UNDER ANY APPLICABLE STATE SECURITIES LAWS. NEITHER THE NOTE NOR THE COMMON STOCK MAY BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER PROVISIONS OF THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THIS NOTE. This note is one of a series issued in the aggregate principal amount of $_________. APPLIED DNA SCIENCES, INC. ___________ __, 2005 $50,000 10% SECURED CONVERTIBLE PROMISSORY NOTE Applied DNA Sciences, Inc. (the "Company"), for value received, hereby promises to pay to _________________ or registered assigns (the "Holder") twelve months from the date hereof on _______________, 2006, the "Maturity Date"), at the principal offices of the Holder, the principal sum of FIFTY THOUSAND DOLLARS ($50,000) in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the outstanding principal sum hereof at the rate of ten percent (10%) per annum. Any principal payment or interest payment on the unpaid principal amount of this Note not paid when due, whether at the Maturity Date, on the effective date of an Early Termination Event, by acceleration or otherwise, shall bear interest at twelve percent (12%) or the maximum rate permissible by law, whichever is less. Payment of Principal and accrued interest, if any, shall be payable on the Maturity Date in like coin or currency to the Holder hereof at the address of the Holder designated above or at such other place as the Holder shall have notified the Company in writing at least five (5) days before the Maturity Date, provided that any payment otherwise due on a Saturday, Sunday or legal Bank holiday may be paid on the following business day. This Note is secured by all the assets of the Company including but not limited to patents, licenses, equipment, fixtures, inventory and accounts receivable, for the benefit of the Holder pursuant to a Security Agreement of even date herewith ("Security Agreement"). Reference herein to the Security Agreement shall in no way impair the absolute and unconditional obligation of the Company to pay both principal and interest hereon as provided herein. The rights and remedies of the Holder hereunder are subject to the terms and conditions of the Security Agreement including, without limitation, powers with respect to the enforceability and collectibility of all amounts due hereunder. Reference to the Security Agreement is made for a complete description of the rights, powers and obligations of the Holder. 1 1. Transfers of Note to Comply with the 1933 Act The Holder agrees that this Note may not be sold, transferred, pledged, hypothecated or otherwise disposed of except as follows: (1) to a person whom the Note may legally be transferred without registration and without delivery of a current prospectus under the 1933 Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section 1 with respect to any resale or other disposition of the Note; or (2) to any person upon delivery of a prospectus then meeting the requirements of the 1933 Act relating to such securities and the offering thereof for such sale or disposition, and thereafter to all successive assignees. 2. Prepayment; Repayment Upon Consolidation or Merger. (a) The principal amount of this Note may be prepaid by the Company, in whole or in part without premium or penalty, at any time. Upon any prepayment of the entire principal amount of this Note, all accrued, but unpaid, interest shall be paid to the Holder on the date of prepayment. The date upon which the Company prepays the principal plus all accrued and unpaid interest due on this Note shall be hereinafter referred to as the "Prepayment Date." (b) This Note shall be paid in full, without premium, in the event the Company consolidates or merges with another corporation, unless (i) the Company shall be the surviving corporation in such consolidation or merger or (ii) the other corporation controls, is under common control with or is controlled by the Company immediately prior to the consolidation or merger whether or not the Company shall be the surviving corporation in such consolidation or merger, in which event this Note shall remain outstanding as an obligation of the consolidated or surviving corporation. 3. Conversion of Note (a) This Note shall automatically convert into shares of Common Stock of the Company upon the filing of a registration statement with the Securities and Exchange Commission for Common Stock of the Company. The conversion rate shall be $.50 per share, and the entirety of the debt shall be applied to purchase of Common Stock at such price. (b) The Holder shall have the right from time to time, and at any time on or prior to the Maturity Date, to convert all or any part of the entirety of the debt then outstanding under this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the issue date, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be changed or reclassified at a conversion price equal to $.50 per share; 2 (c) Notwithstanding the foregoing, in the event that any sums due under this Note are not repaid on the Maturity Date, the Holder will have the option to convert the entirety of the debt then outstanding under this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the issue date, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be changed or reclassified at a conversion price equal to the number of Shares derived by dividing the sum of such debt by the dollar value equal to 80% of the closing ask price of the Shares on the last trading day immediately preceding the Maturity Date as reported on the market upon which the Shares shall then be trading, provided, however, that the conversion price shall never be less than $0.33 per share. . 4. Covenants of Company The Company covenants and agrees that, so long as any principal of, or interest on, this Note shall remain unpaid, unless the Holder shall otherwise consent in writing, it will comply with the following terms: (a) Reporting Requirements. The Company will furnish to the Holder: (i) as soon as possible, and in any event within ten (10) days after obtaining knowledge of the occurrence of (A) an Event of Default, as hereinafter defined, (B) an event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default, or (C) a material adverse change in the condition or operations, financial or otherwise, of the Company, taken as whole, the written statement of the Chief Executive Officer or the Chief Financial Officer of the Company, setting forth the details of such Event of Default, event or material adverse change and the action which the Company proposes to take with respect thereto; (ii) promptly after the sending or filing thereof, copies of all financial statements, reports, certificates of its Chief Executive Officer, Chief Financial Officer or accountants and other information which the Company or any subsidiary sends to any holders (other than the Notes) of its securities; (iii) promptly after the commencement thereof, notice of each action, suit or proceeding before any court or other governmental authority or other regulatory body or any arbitrator as to which there is a reasonable possibility of a determination that would (A) materially impact the ability of the Company or any subsidiary to conduct its business, (B) materially and adversely affect the business, operations or financial condition of the Company taken as a whole, or (C) impair the validity or enforceability of the Notes or the ability of the Company to perform its obligations under the Notes; (iv) promptly upon request, such other information concerning the condition or operations, financial or otherwise, of the Company as the Holder from time to time may reasonably request. 3 (b) Taxes. The Company has filed or will file all federal, state and local tax returns required to be filed or sent or has obtained extensions thereof. Except as otherwise disclosed, the Company has timely paid or made provision for all taxes shown as due and payable on its tax returns required to be filed prior to the date hereof and all assessments received by the Company and will timely pay all taxes that will be shown as due and payable on its tax returns required to be filed after the date hereof, except to the extent that the Company shall be contesting such taxes and assessments in good faith by appropriate proceedings. (c) Compliance with Laws. The Company will comply, in all material respects with all applicable laws, rules, regulations and orders, except to the extent that noncompliance would not have a material adverse effect upon the business, operations or financial condition of the Company taken as a whole. (d) Keeping of Records and Books of Account. The Company will keep adequate records and books of account, with complete entries made in accordance with generally accepted accounting principles, reflecting all of its financial and other business transactions. (e) Negative Covenants. The Company covenants and agrees that while this Note is outstanding it will not directly or indirectly: (i) Incur any indebtedness (other than in the ordinary course of its business) or grant any liens with respect to any of its assets, without the written consent of the Holder (which shall not be unreasonably withheld); (ii) Guaranty or otherwise in any way become or be responsible for indebtedness for borrowed money, or for obligations, in either case of any of its officers, directors or principal stockholders or any of their affiliates, contingently or otherwise, other than such guaranties existing as of the date hereof, or in any way fail to comply with the provisions of the Sarbanes-Oxley Act of 2002; (iii) Declare or pay cash dividends; (iv) Sell, transfer or dispose of, any of its assets other than in the ordinary course of its business and for fair value; (v) Purchase, redeem, retire or otherwise acquire for value any of its capital stock now or hereafter outstanding; or (vi) Repay out of the proceeds of this Note any indebtedness for borrowed funds or any related party obligations except for Notes heretofore issued to persons to investors through offerings in which Vertical Capital Partners, Inc acted as placement agent. (f) Security Interest. Except with respect to prior Notes of the Company sold through offerings in which Vertical Capital Partners, Inc. acted as placement agent and which the Company intends either to repay with the proceeds of these Notes or effect a conversion into Common Stock, the Company represents 4 and warrants that it has not granted any other party a security interest in any of its (or its subsidiaries) patents, licenses, equipment, fixtures, inventory or accounts receivable. The Company certifies under penalty of perjury that the security interest in the collateral is not pledged and the Holder will assume a senior security position on such collateral. 5. Events of Default and Remedies (a) Any one or more of the following events which shall have occurred and be continuing shall constitute an event of default (Event of Default): (i) Default in the payment of the principal or accrued interest on this Note or upon any other indebtedness of the Company after the date hereof that is greater than $100,000, as and when the same shall become due, whether by default or otherwise, which Default shall have continued for a period of five (5) business days; or (ii) Any representation or warranty made by the Company or any officer of the Company in the Notes, or in any agreement, report, certificate or other document delivered to the Holder pursuant to the Notes shall have been incorrect in any material respect when made which shall not have been remedied ten (10) days after written notice thereof shall have been given by the Holder; or (iii) The Company shall fail to perform or observe any affirmative covenant contained in Section 4 of this Note or any of the Notes and such Default, if capable of being remedied, shall not have been remedied ten (10) days after written notice thereof shall have been given by the Holder; or (iv) The Company or any subsidiary (A) shall institute any proceeding or voluntary case seeking to adjudicate it bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of any order for relief or the appointment of a receiver, trustee, custodian or other similar official for such the Company or any subsidiary or for any substantial part of its property, or shall consent to the commencement against it of such a proceeding or case, or shall file an answer in any such case or proceeding commenced against it consenting to or acquiescing in the commencement of such case or proceeding, or shall consent to or acquiesce in the appointment of such a receiver, trustee, custodian or similar official; (B) shall be unable to pay its debts as such debts become due, or shall admit in writing its inability to apply its debts generally; (C) shall make a general assignment for the benefit of creditors; or (D) shall take any action to authorize or effect any of the actions set forth above in this subsection 5(a)(iv); or (v) Any proceeding shall be instituted against the Company seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for the Company or for any substantial part of its property, and either such proceeding shall not have been dismissed or shall not have been stayed for a period of 5 sixty (60) days or any of the actions sought in such proceeding (including, without limitation, the entry of any order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property) shall occur; or (vi) One or more final judgments, arbitration awards or orders for the payment of money in excess of $100,000 in the aggregate shall be rendered against the Company, which judgment remains unsatisfied for thirty (30) days after the date of such entry. (vii) Delisting of the Common Stock from the principal market or exchange on which the Common Stock is listed for trading; Company's failure to comply with the conditions for listing; or notification that the Company is not in compliance with the conditions for such continued listing. (viii) The issuance of an SEC stop trade order or an order suspending trading of the Common Stock from the principal market or exchange on which the Common Stock is listed for trading for longer than five (5) trading days. (ix) The failure by the Company to issue shares of Common Stock to the Holder upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, or the failure to transfer or cause its transfer agent to transfer (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or the failure to remove any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, and any such failure shall continue uncured for ten (10) days after the Company shall have been notified thereof in writing by the Holder; (x) The failure by the Company to file the Registration Statement on or about February 15, 2005, or obtain effectiveness with the Securities and Exchange Commission of the Registration Statement within 120 days from that date or such Registration Statement lapses in effect (or sales cannot otherwise be made there under effective, whether by reason of the Company's failure to amend or supplement the prospectus included therein) for more than thirty (30) consecutive days after the Registration Statement becomes effective which shall include Common Stock into which this Note may be converted; or (xi) The Company shall encumber or hypothecate the collateral subject to the Security Agreement to any party; (xii) A default by the Company of a material term, covenant, warranty or undertaking of any other agreement to which the Company and Holder are parties, or the occurrence of an event of default under any such other agreement; or (xiii) A default by the Company under its license agreement with Biowell Technology, Inc. 6 (b) In the event of and immediately upon the occurrence of an Event of Default, the Note shall become immediately due and payable without any action by the Holder and the Note shall bear interest until paid at the rate of 12% per annum or such amount as shall be allowed by law (the "Default Interest Rate"). If an Event of Default occurs and is continuing, Holder may pursue any available remedy to collect the payment of all amounts due under the Note or to enforce the performance of any provision of the Note. No waiver of any default under the Note shall be construed as a waiver of any subsequent default, and the failure to exercise any right or remedy thereunder shall not waive the right to exercise such right or remedy thereafter. (c) The Company covenants that in case the principal of, and accrued interest on, the Note becomes due and payable by declaration or otherwise, then the Company will pay in cash to the Holder of this Note, the whole amount that then shall have become due and payable on this Note for principal or interest, as the case may be, and in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable fees and disbursements of the Holder's legal counsel. In case the Company shall fail forthwith to pay such amount, the Holder may commence an action or proceeding at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree against Company or other obligor upon this Note, wherever situated, the monies adjudicated or decreed to be payable. (d) The Company agrees that it shall give notice to the Holder at its registered address by facsimile, confirmed by certified mail, of the occurrence of any Event of Default within ten (10) days after such Event of Default shall have occurred. 6. Waiver of Automatic Stay The Company acknowledges and agrees that should a proceeding under any bankruptcy or insolvency law be commenced by or against the Company, or if any of the Collateral (as defined in the Security Agreement) should become the subject of any bankruptcy or insolvency proceeding, then the Holder should be entitled to, among other relief to which the Holder may be entitled under the Note, Security Agreement, Subscription Agreement and any other agreement to which the Company and Holder are parties, (collectively "Loan Documents") and/or applicable law, an order from the court granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section 362 to permit the Holder to exercise all of its rights and remedies pursuant to the Loan Documents and/or applicable law. THE COMPANY EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, THE COMPANY EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. The Company hereby consents to any motion for relief from stay which may be filed by the Holder in any bankruptcy or insolvency proceeding initiated by or against the Company and, 7 further, agrees not to file any opposition to any motion for relief from stay filed by the Holder. The Company represents, acknowledges and agrees that this provision is a specific and material aspect of the Loan Documents, and that the Holder would not agree to the terms of the Loan Documents if this waiver were not a part of this Note. The Company further represents, acknowledges and agrees that this waiver is knowingly, intelligently and voluntarily made, that neither the Holder nor any person acting on behalf of the Holder has made any representations to induce this waiver, that the Company has been represented (or has had the opportunity to be represented) in the signing of this Note and the Loan Documents and in the making of this waiver by independent legal counsel selected by the Company and that the Company has had the opportunity to discuss this waiver with counsel. The Company further agrees that any bankruptcy or insolvency proceeding initiated by the Company will only be brought in courts within the geographic boundaries of New York State. 7. Failure to Pay Upon Maturity In the event that the sum due under the Note is not repaid on the Maturity Date, the Holder will have the option to either have the Note accrue interest at 12% or such amount as legally allowed until paid, or to convert the entirety of the debt then outstanding under the Note into the number of Shares derived by dividing the sum of such debt by the dollar value equal to 80% of the closing ask price of the Shares on the last trading day immediately preceding the Maturity Date as reported on the market upon which the Shares shall then be trading, provided, however, that the conversion price shall never be less than $0.33 per share. Any Shares acquired thereby shall carry with them the demand and piggy back registration rights granted to the Holder hereby. 8. Unconditional Obligation; Fees, Waivers, Other. (a) The obligations to make the payments provided for in this Note are absolute and unconditional and not subject to any defense, set-off, counterclaim, rescission, recoupment or adjustment whatsoever. (b) If, following the occurrence of an Event of Default, Holder shall seek to enforce the collection of any amount of principal of and/or interest on this Note, there shall be immediately due and payable from the Company, in addition to the then unpaid principal of, and accrued unpaid interest on, this Note, all costs and expenses incurred by Holder in connection therewith, including, without limitation, reasonable attorneys' fees and disbursements. (c) No forbearance, indulgence, delay or failure to exercise any right or remedy with respect to this Note shall operate as a waiver or as an acquiescence in any default, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. (d) This Note may not be modified or discharged (other than by payment or conversion) except by a writing duly executed by the Company and Holder. 8 (e) Holder hereby expressly waives demand and presentment for payment, notice of nonpayment, notice of dishonor, protest, notice of protest, bringing of suit, and diligence in taking any action to collect amounts called for hereunder, and shall be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission with respect to the collection of any amount called for hereunder or in connection with any right, lien, interest or property at any and all times which the Company had or is existing as security for any amount called for hereunder. 9 9. Miscellaneous (a) The headings of the various paragraphs of this Note are for convenience of reference only and shall in no way modify any of the terms or provisions of this Note. (b) This Note has been issued by the Company pursuant to authorization of the Board of Directors of the Company. All notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when personally delivered or sent by registered or certified mail (return receipt requested, postage prepaid), facsimile transmission or overnight courier to the address of the intended recipient as set forth in the preamble to this Note or at such other address as the intended recipient shall have hereafter given to the other party hereto pursuant to the provisions of this Note.(c) The Company may consider and treat the entity in whose name this Note shall be registered as the absolute owner thereof for all purposes whatsoever (whether or not this Note shall be overdue) and the Company shall not be affected by any notice to the contrary. Subject to the limitations herein stated, the registered owner of this Note shall have the right to transfer this Note by assignment, and the transferee thereof shall, upon his registration as owner of this Note, become vested with all the powers and rights of the transferor. Registration of any new owners shall take place upon presentation of this Note to the Company at its principal offices, together with a duly authenticated assignment. In case of transfer by operation of law, the transferee agrees to notify the Company of such transfer and of his address, and to submit appropriate evidence regarding the transfer so that this Note may be registered in the name of the transferee. This Note is transferable only on the books of the Company by the holder hereof, in person or by attorney, on the surrender hereof, duly endorsed. Communications sent to any registered owner shall be effective as against all holders or transferees of the Note not registered at the time of sending the communication. (d) Payments of principal and interest shall be made as specified above to the registered owner of this Note. No interest shall be due on this Note for such period of time that may elapse between the maturity of this Note and its presentation for payment. (e) The Holder shall not, by virtue, hereof, be entitled to any rights of a shareholder in the Company, whether at law or in equity, and the rights of the Holder are limited to those expressed in this Note. (f) Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Note, if mutilated, the Company shall execute and deliver a new Note of like tenor and date. (g) This Note shall be construed and enforced in accordance with the laws of the State of New York, without giving effect to the conflicts of law principles thereof or the actual domiciles of the parties. The Company and the Holder hereby consent to the jurisdiction of the Courts of the State of New York and the United States District Courts situated therein in connection with any action concerning the provisions of this Note instituted by the Holder against the Company. 10 (h) The Company (i) agrees that any legal suit, action or proceeding arising out of or relating to this Note shall be instituted exclusively in the New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York, (ii) waives any objection which the Company may have now or hereafter based upon forum non conveniens or to the venue of any such suit, action or proceeding, and (iii) irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York and the United States District Court for the Southern District of New York in any such suit, action or proceeding. The Company further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York and agrees that service of process upon the Company, mailed by certified mail to the Company's address, will be deemed in every respect effective service of process upon Payor, in any suit, action or proceeding. FURTHER, THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY ACTION TO ENFORCE THIS NOTE AND IN CONNECTION WITH ANY DEFENSE, COUNTERCLAIM OR CROSSCLAIM ASSERTED IN ANY SUCH ACTION. (i) No recourse shall be had for the payment of the principal or interest of this Note against any incorporator or any past, present or future stockholder officer, director, agent or attorney of the Company, or of any successor corporation, either directly or through the Company or any successor corporation, otherwise, all such liability of the incorporators, stockholders, officers, directors, attorneys and agents being waived, released and surrendered by the Holder hereof by the acceptance of this Note. (j) This Note shall bind the Company and its successors and assigns. [THIS SPACE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Note as of the day and year first above written. APPLIED DNA SCIENCES, INC. By: ________________________________ Name: Title: 11 EX-4 4 jan2820058kex44.txt Exhibit 4.4 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made as of January 28, 2005, by and among APPLIED DNA SCIENCES, INC. (the "Company") and VERTICAL CAPITAL PARTNERS, INC. (the "Investor Representative") on behalf of the holders of Registrable Securities (as hereinafter defined) including but not limited to the Note Holders listed or Schedule A herein (the "Note Holders"). The Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute as each may be in effect from time to time (collectively, the "Securities Act"), and applicable state securities laws for holders of Registrable Securities. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor Representative agree as follows: ARTICLE 1 - DEFINITIONS 1.1. Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "Agreement" has the meaning set forth in the preamble hereto. (b) "Business Day" means any day other than a Saturday, Sunday or holiday on which banking institutions in New York, New York are closed. (c) "Company" has the meaning set forth in the preamble hereto. (d) "Common Stock" shall mean the common stock of the Company. (e) "Exchange Act" means the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, or any similar successor statute, as each may be in effect from time to time. (f) "Investor Representative" has the meaning set forth in the preamble hereto. (g) "Investors" means, collectively, the persons represented by the Investor Representative including, without limitation, the Note Holders and any of their transferees or assignees who have registration rights under this Agreement in accordance with the terms hereof. "Investor" means any such persons, individually. (h) "register," "registered," and "registration" refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and the declaration or ordering of effectiveness of such Registration Statement or Statements by the SEC. (i) "Registrable Securities" means (i) the Warrant Shares, (ii) any Common Stock or other securities of the Company issued or issuable in respect of any Convertible Note of the Company or other securities issued or issuable in respect of such Common Stock upon any stock split, stock dividend, recapitalization, or similar event; (iii) any Warrant, Convertible Notes or Common Stock Issued under the conversion of any notes or exercise of any Warrants, Bridge Notes or other notes sold through the Investor Representative, (iv) any and all Common Stock, Warrants or other Securities issued to the Investor Representative, Affiliates of the Investor Representative or any assignee or designee of the Investor Representative (v) any capital stock or other securities otherwise issued or issuable with respect to the Warrant Shares or such other securities; (vi) any Common Stock acquired by a Note Holder by reason of conversion of a Note or exercise of any Warrant; provided, however, that shares of Common Stock or other securities shall only be treated as Registrable Securities if and for so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution, or (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(l) thereof, in the case of either clause (A) or clause (B) in such a manner that, upon the consummation of such sale, all transfer restrictions and restrictive legends with respect to such shares are removed upon the consummation of such sale. For the avoidance of doubt, "Registrable Securities" does not include any unexercised option(s) or warrant(s) for the purchase of any capital stock of the Company. (j) "Registration Statement" means any registration statement of the Company under the Securities Act subject to or pursuant to Article 2 or another provision of this Agreement, as applicable. (k) "SEC" means the United States Securities and Exchange Commission. (l) "Selling Securityholder" means any Investor participating in any registration of Registrable Securities pursuant to this Agreement. (m) "Convertible Note" has the meaning set forth in the first recital hereof. (n) "Warrant Shares" means the shares of Common Stock issued or issuable upon exercise or conversion of the warrants issued by the Company from time to time in connection with sales of Registrible Securities. 1.2. Capitalized Terms. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the agreements with respect to sale of Registirable Securities. 2 ARTICLE 2 - REGISTRATION 2.1. "Registration". The Company has contractually committed to file with the SEC an S-1, SB-2 or other registration statement on or before February 15, 2005 with respect to the Registratible Securities (as defined herein) in an offering of up to $6,000,000 of Units in December 2004 and January 2005 shares underlying the Notes and Warrants includes in Units and by the Company. 2.2 Penalty for Not Going Effective. If within 120 days of February 15, 2005, the Registration Statement referenced herein is not declared effective, the Company will pay each investor a penalty equal to 3.5% per month to the holders of the 2003 Bridge Note, the $1,000,000 Convertible Note referenced herein and all the investors who subscribe to the December 2004 Convertible Note offering. Said penalty can be paid in cash or stock solely at the discretion of the company. ARTICLE 3 - OBLIGATIONS OF THE COMPANY In connection with the registration of the Registrable Securities, the Company shall have the following obligations: 3.1. Availability of Registration Statement. The Company shall prepare promptly and file with the SEC any Registration Statement required by Article 2, and use commercially reasonable efforts to cause such Registration Statement relating to Registrable Securities to become effective within 120 days after such filing, and keep the Registration Statement continuously effective and available for use at all times, except as set forth herein, until such date as all of the Registrable Securities have been sold pursuant to such Registration Statement (the "Registration Period"). 3.2. Amendments to Registration Statement. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective and such prospectus available for use at all times during the Registration Period (including, without limitation, amendments and supplements necessary in connection with a change in the "Plan of Distribution" section in any Registration Statement or prospectus) and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by the Registration Statement until the termination of the Registration Period. The Company shall cause any such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. 3.3. Information. Upon written request, the Company shall furnish to any Selling Securityholder and its legal counsel, promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of the Registration Statement and any amendment thereto, and such number of copies of each prospectus, including each preliminary prospectus, and all amendments and supplements thereto, and such other documents as such Selling Securityholder may reasonably request in order to facilitate the disposition of the Registrable Securities. The Company shall promptly notify all Selling Securityholders of the effectiveness of any Registration Statement or post-effective amendments thereto. 3 3.4. Blue Sky. The Company shall (a) register and qualify the Registrable Securities covered by any Registration Statement under the securities laws of such jurisdictions in the United States as each Selling Securityholder who holds any such Registrable Securities reasonably requests, (b) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof and availability for use during the Registration Period, (c) take such other actions as may be reasonably necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (d) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.4, (ii) subject itself to general taxation in any such jurisdiction, or (iii) file a general consent to service of process in any such jurisdiction. 3.5. Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not enter into any agreement granting any holder or prospective holder of any securities of the Company registration rights with respect to such securities without the prior written consent of more than 50% of the number of Registrable Securities then outstanding, unless such new registration rights, including standoff obligations, are subordinate to the rights of the Investors hereunder. 3.6. Correction of Statements or Omissions. As soon as practicable after becoming aware of such event, the Company shall publicly announce or notify all Selling Securityholders of the happening of any event, of which the Company has actual knowledge, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or fails to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and use commercially reasonable efforts as soon as possible to (but in any event it shall within five Business Days or three Business Days of the receipt by the Company from its accountants of financial information required to correct such untrue statement or omission, as applicable) prepare a supplement or amendment to the Registration Statement (and make all required filings with the SEC and all applicable state securities or blue sky commissions) to correct such untrue statement or omission if not otherwise satisfied through the filing of a report to the SEC or otherwise pursuant to applicable securities laws (but such a supplement or amendment or other filing shall not be required if, notwithstanding the Company's commercially reasonable efforts to so prepare and file such supplement, amendment or other filing, such a supplement, amendment or other filing is no longer required by applicable law to correct such untrue statement or omission because such untrue statement or omission no longer exists) and the Company shall simultaneously (and thereafter as requested) deliver such number of copies of such supplement or amendment to each Investor (or other applicable document) as such Investor may request in writing. 3.7. Stop Orders. The Company shall use commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, and, if such an order is issued, to obtain the withdrawal of such order at the earliest practicable time, and the Company shall immediately notify all Selling Securityholders and, in the event of an underwritten offering, the managing underwriter(s), of the issuance of such order and the resolution thereof. 4 3.8. Inspection of Records. The Company shall provide each Selling Securityholder, and any underwriter who may participate in the distribution of Registrable Securities, and their respective representatives, the opportunity to conduct a reasonable inquiry of the Company's financial and other records during normal business hours and make available its officers, directors and employees for questions regarding information which the Selling Securityholders and any such underwriter may reasonably request in connection with the Registration Statement; provided, however, the Selling Securityholders and any such underwriter shall hold in confidence and shall not make any disclosure of any record or other information which the Company determines in good faith to be confidential, and of which determination the inspectors are so notified in writing, unless (a) the disclosure of such records is necessary to avoid or correct a misstatement or omission in any Registration Statement, (b) the release of such records is ordered pursuant to a subpoena or other order from a court or government body of competent jurisdiction, or is otherwise required by applicable law or legal process, or (c) the information in such records has been made generally available to the public other than by disclosure in violation of this or any other agreement (to the knowledge of the relevant inspector). 3.9. Investor Information. The Company shall hold in confidence and not make any disclosure of non-public information concerning any Investor provided to the Company by such Investor unless (a) disclosure of such information is necessary to comply with federal or state securities laws, rules, statutes or regulations, (b) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement or other public filing by the Company, (c) the release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction or is otherwise required by applicable law or legal process, (d) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement, or (e) such Investor consents to the form and content of any such disclosure. The Company agrees that it shall, upon learning that disclosure of such information concerning any Investor is sought in or by a court or governmental body of competent jurisdiction in or through other means, give prompt notice to such Investor prior to making such disclosure, and allow such Investor, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information. 3.10. Listing. The Company shall use commercially reasonable efforts to cause the listing and the continuation of listing of all the Registrable Securities covered by any Registration Statement on each securities exchange or quotation system upon which any other securities of the Company is then listed or quoted. 3.11. Transfer Agent. The Company shall provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than the effective date of the Registration Statement. 3.12. Delivery of Certificates; Opinions of Counsel. The Company shall cooperate with any and all Selling Securityholders who hold Registrable Securities being offered and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as such Selling 5 Securityholders or the managing underwriter or underwriters, if any, may reasonably request and registered in such names as such Selling Securityholders or the managing underwriter or underwriters, if any, may request, and, upon the written request of the transfer agent for the Company or the managing underwriter or underwriters, as applicable, within two Business Days of such request, the Company shall cause legal counsel selected by the Company to deliver to the transfer agent or the managing underwriter or underwriters, as applicable, and the Selling Securityholders an opinion (a "Transfer Opinion") of such counsel in a form reasonably acceptable to the transfer agent or managing underwriter or underwriters, as applicable, and the Selling Securityholders. Such opinion shall include, without limitation, opinions to the effect that (i) the Registration Statement has become effective under the Securities Act and no order suspending the effectiveness of the Registration Statement, preventing or suspending the use of the Registration Statement, any preliminary prospectus, any final prospectus, or any amendment or supplement thereto has been issued, nor has the SEC or any securities or blue sky authority of any jurisdiction instituted or threatened to institute any proceedings with respect to such an order, (ii) all of the Registrable Securities covered by such Registration Statement may be sold or otherwise transferred pursuant to the Plan of Distribution set forth in the prospectus forming a part of the Registration Statement, and (iii) the Registration Statement and each prospectus forming a part thereof (including each preliminary prospectus), and any amendment or supplement thereto, complies as to form with the Securities Act. Such Transfer Opinion shall also state the jurisdictions in which the Registrable Securities have been registered or qualified for sale. 3.13. Compliance with Laws. The Company shall comply with all applicable laws related to a Registration Statement and offering and sale of securities covered by the Registration Statement and all applicable rules and regulations of governmental authorities in connection therewith (including, without limitation, the Securities Act and the Exchange Act). ARTICLE 4 - OBLIGATIONS OF THE INVESTORS 4.1. Obligations of the Investors. Each Investor electing to participate in any registration of Registrable Securities as a Selling Securityholder generally agrees as follows: (a) Information Concerning Investors; Cooperation. Each Selling Securityholder agrees to cooperate with the Company in connection with the preparation and filing of any Registration Statement hereunder, and for so long as the Company is obligated to keep any such Registration Statement effective, such Selling Securityholder will provide to the Company, in writing, for use in the Registration Statement, all information regarding such Selling Securityholder, the Registrable Securities held by him, her or it, the intended method of distribution of such Registrable Securities and such other information as may be necessary to enable the Company to prepare the Registration and prospectus covering the Registrable Securities and to maintain the currency and effectiveness thereof. At least 30 days prior to the first anticipated filing date of a Registration Statement, the Company shall notify each Selling Securityholder of the information the 6 Company so requires from each such Selling Securityholder and each Selling Securityholder shall deliver to the Company such requested information within 20 days of request therefor or shall be excluded from such registration. (b) SEC. Each Selling Securityholder agrees to use reasonable efforts to cooperate with the Company (at the Company's expense) in responding to comments of the staff of the SEC relating to such Investor. (c) Suspension of Offering or Distribution. On notice from the Company of the happening of any of the events specified in Sections 3.6 or 3.7, the Company requires the suspension by such Selling Securityholder of the distribution of any of the Registrable Securities, then such Selling Securityholder shall cease offering or distributing the Registrable Securities until such time as the Company notifies such Selling Securityholder that offering and distribution of the Registrable Securities may recommence. ARTICLE 5 - EXPENSES OF REGISTRATION 5.1. Expenses. With respect to each registration of Registrable Securities hereunder, all expenses (other than underwriting discounts and commissions and transfer taxes), including, without limitation, the reasonable fees and disbursements of one counsel to the Selling Securityholders, all registration, listing and qualification fees, printers and accounting fees, and the fees and disbursements of counsel for the Company, shall be borne by the Company. ARTICLE 6 - INDEMNIFICATION In the event any Registrable Securities are included in a Registration Statement under this Agreement: 6.1. Indemnification by the Company. The Company will indemnify, hold harmless and defend (a) each Selling Securityholder, (b) each underwriter of Registrable Securities, and (c) the directors, officers, partners, members, employees, agents and persons who control each such Selling Securityholder and any such underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, if any (each, a "Investor Indemnified Person"), against any losses, claims, damages, liabilities or expenses (collectively, together with actions, proceedings or inquiries whether or not in any court, before any administrative body or by any regulatory or self-regulatory organization, whether commenced or threatened, in respect thereof, "Claims") to which any of them may become subject insofar as such Claims arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission 7 to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities (the matters in the foregoing clauses (i) through (iii) being, collectively, "Violations"). The Company shall reimburse each such Investor Indemnified Person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees and other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the Company shall not be required to indemnify or hold harmless a Investor Indemnified Person (A) with respect to a Claim arising out of or based upon (1) any violation of federal or state securities laws, rules or regulations committed by such Investor Indemnified Persons (or any person who controls any of them or any agent, broker-dealer or underwriter engaged by them) or in the case of a non-underwritten offering, any failure by such Investor Indemnified Person to give any purchaser of Registrable Securities at or prior to the written confirmation of such sale, a copy of the most recent prospectus, (2) an untrue statement or omission contained in any Registration Statement or prospectus which statement or omission was made in reliance upon and in conformity with written information provided by or on behalf of such Investor Indemnified Person specifically for use or inclusion in the Registration Statement or any prospectus, (3) any prospectus used after such time as the Company advised such Investor Indemnified Person that the filing of a post effective amendment or supplement thereto was required, except the prospectus as so amended or supplemented, or (4) any prospectus used after such time as the Company's obligation to keep the Registration Statement effective and current has expired or been suspended hereunder, provided, that the Company has so advised such Investor Indemnified Person; (B) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld; and (C) with respect to any preliminary prospectus, shall not inure to the benefit of a Investor Indemnified Person if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely made available by the Company pursuant to Section 3.6 hereof, and such Investor Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a Claim and such Investor Indemnified Person, notwithstanding such advice, used it. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Investor Indemnified Person and shall survive the transfer of the Registrable Securities by a Investor pursuant to Article 9. 6.2. Indemnification by Investors. An Investor shall indemnify, hold harmless and defend, to the same extent and in the same manner set forth in Section 6.1, the Company, each of its directors, each of its officers who signs the Registration Statement, its employees, agents and persons, if any, who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and any other securityholder selling securities pursuant to the Registration Statement and any underwriter of securities covered by such Registration Statement, together with its directors, officers and members, and any person who controls such securityholder or underwriter within the meaning of the Securities Act or the Exchange Act (each, a "Company Indemnified Person"), against any Claim to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and such Investor will reimburse any legal or other expenses (promptly as such expenses are incurred and are due and payable) reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6.2 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior 8 written consent of such Investor, which consent shall not be unreasonably withheld; and provided, further, however, that such Investor shall be liable under this Agreement (including this Section 6.2 and Article 7) for only that amount as does not exceed the net proceeds actually received by such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Indemnified Person and shall survive the transfer of the Registrable Securities by such Investor pursuant to Article 9. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6.2 with respect to any preliminary prospectus shall not inure to the benefit of any Company Indemnified Person if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, and the Company Indemnified Person failed to utilize such corrected prospectus. 6.3. Notices. Promptly after receipt by a Investor Indemnified Person or Company Indemnified Person under this Article 6 of notice of the commencement of any action (including any governmental action), such Investor Indemnified Person or Company Indemnified Person shall, if a Claim in respect thereof is to be made against any indemnifying party under this Article 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right (at its expense) to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume and continue control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Investor Indemnified Person or the Company Indemnified Person, as the case may be; provided, however, that such indemnifying party shall diligently pursue such defense and an indemnifying party shall not be entitled to assume (or continue) such defense if the representation by such counsel of the Investor Indemnified Person or Company Indemnified Person and the indemnifying party would be inappropriate due to actual or potential conflicts of interest between such Investor Indemnified Person or Company Indemnified Person and any other party represented by such counsel in such proceeding or the actual or potential defendants in, or targets of, any such action include both the Investor Indemnified Person or the Company Indemnified Person and the indemnifying party, and any such Investor Indemnified Person or Company Indemnified Person reasonably determines that there may be legal defenses available to such Investor Indemnified Person or Company Indemnified Person which are different from or in addition to those available to such indemnifying party. Notwithstanding any assumption of such defense and without limiting any indemnification obligation provided for in Section 6.1 or 6.2, the Company Indemnified Person or Investor Indemnified Person, as the case may be, shall be entitled to be represented by counsel (at its own expense if the indemnifying party is permitted to assume and continue control of the defense and otherwise at the expense of the indemnifying party) and such counsel shall be entitled to participate in such defense. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Investor Indemnified Person or Company Indemnified Person under this Article VI, except to the extent that the indemnifying party is actually materially prejudiced in its ability to defend such action. The indemnification required by this Article 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable. ARTICLE 7 - CONTRIBUTION 7.1. To provide for just and equitable contribution, if (i) an indemnified party makes a claim for indemnification pursuant to Section 6.1 or 6.2 (subject to the limitations thereof) but it is found in a final judicial determination, not subject to further appeal, that such indemnification may not be enforced in such case, even though this Agreement expressly provides for indemnification in such case, or (ii) any indemnified or indemnifying party seeks contribution under the Securities Act, the Exchange Act or otherwise, then the Company (including for this purpose any contribution made by or on behalf of any director of the Company, any officer of the Company who signed any such registration statement, and any controlling person of the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act), as one entity, and the Selling Securityholders whose Registrable Securities are included in such registration in the aggregate (including for this purpose any contribution by or on behalf of an indemnified party), as a second entity, shall contribute to the losses, liabilities, claims, damages, and expenses whatsoever to which any of them may be subject, on the basis of relevant equitable considerations such as the relative fault of the Company and such Selling Securityholders in connection with the facts which resulted in such losses, liabilities, claims, damages, and expenses. The relative fault, in the case of an untrue statement, alleged untrue statement, omission, or alleged omission, shall be determined by, among other things, whether such statement, alleged statement, omission, or alleged omission relates to information supplied by the Company or by such Selling Securityholders, and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement, alleged statement, omission, or alleged omission. Subject to the following sentence, the Company and Investors agree that it would be unjust and inequitable if the respective obligations of the Company and the Selling Securityholders for contribution were determined by pro rata or per capita allocation of the aggregate losses, liabilities, claims, damages, and expenses (even if the Selling Securityholders and the other indemnified parties were treated as one entity for such purpose) or by any other method of allocation that does not reflect the equitable considerations referred to in this Section 7.1. In no case shall any Selling Securityholder be responsible for a portion of the contribution obligation imposed on all Selling Securityholders in excess of the net proceeds actually received by such Selling Securityholder as a result of the sale of Registrable Securities pursuant to such Registration Statement. No person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. For purposes of this Section 7.1, each person, if any, who controls any Selling Securityholder within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act and each officer, director, partner, employee, agent, and counsel of each such Selling Securityholder or control person shall have the same rights to contribution as such Selling Securityholder or control person and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, each officer of the Company who signs the Registration Statement, each director of the Company, and its or their respective counsel shall have the same rights to contribution as the Company, subject in each case to the provisions of this Section 7.1. Anything in this Section 7.1 to the contrary notwithstanding, no party shall be liable for contribution with respect to the settlement of any claim or action effected without its written consent. This Section 7.1 is intended to supersede any right to contribution under the Securities Act, the Exchange Act or otherwise. ARTICLE 8 - MARKET STAND-OFF 8.1. "Market Stand-Off". Each Investor hereby agrees that, during the period specified by the Company and any underwriter of Common Stock or other securities of the Company following the effective date of a Registration Statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except Common Stock included in such registration; provided, that (i) such market stand-off time period shall not exceed 180 days following the effective date of such registration if such registration relates to the Company's initial public offering of securities, and shall not exceed 90 days following the effective date of such registration in all other cases; (ii) the directors, officers and holders of more than 2% of the Company's then outstanding capital stock (each such director, officer and stockholder, a "Lockup Party") shall have agreed to be at least as restricted with respect to the offer, sale or other transfer of such persons' securities in the Company (a "lockup"); and (iii) the Company shall promptly provide notice to each Investor of any discretionary waiver or early termination by the Company or its underwriter of the lockup of any Lockup Party, and cause each Investor to receive, on a proportionate basis, the benefit of any such waiver or termination. ARTICLE 9 - REPORTS UNDER THE EXCHANGE ACT 9.1. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the SEC which may at any time permit the sale of the Registrable Securities to the public without registration after such time as a public market exists for the Common Stock of the Company, the Company agrees to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act; (b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and (c) So long as any Investor owns any Registrable Securities, to furnish to such Investor forthwith upon written request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as any such Investor may reasonably request in availing itself of any rule or regulation of the SEC allowing such Investor to sell any such securities without registration. 9 ARTICLE 10 - AMENDMENT AND ASSIGNMENT OF REGISTRATION RIGHTS 10.1. Assignment of Registration Rights. The rights of any Investor hereunder as to Registrable Securities transferred by such Investor, including the right to have the Company register Registrable Securities pursuant to this Agreement, shall be automatically assigned by the Investor to any transferee of all or any portion of the Registrable Securities, whether such transfer occurs before or after the Registration Statement becomes effective, if: (a) the transferring Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within 10 days after such assignment, (b) the Company is, within 10 days after such transfer or assignment, furnished with written notice of (i) the name and address of such transferee or assignee, and (ii) the securities with respect to which such registration rights are being transferred or assigned, (c) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act or applicable state securities laws, and (d) at or before the time the Company receives the written notice contemplated by clause (b) of this sentence, the transferee or assignee agrees in writing for the benefit of the Company to be bound by all of the provisions contained herein. The rights of any Investor hereunder with respect to any Registrable Securities retained by such Investor shall not be assigned by virtue of the transfer of other Registrable Securities. 10.2. Amendment of Registration Rights. Except as expressly provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought; provided, however, that holders of more than 50% of the Registrable Securities may, with the written consent of the Company, waive, modify or amend on behalf of all holders, any provisions hereof benefitting such holders, so long as the effect thereof will be that all such holders will be treated equally. ARTICLE 11 - MISCELLANEOUS 11.1. Registered Holders. A person or entity is deemed to be a holder (or a holder in interest) of Registrable Securities whenever such person or entity owns of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities. 11.2. Notices, etc. All notices and other communications required or permitted under this Agreement shall be sent by registered or certified mail, postage prepaid, overnight courier, confirmed facsimile or other electronic transmission or otherwise delivered by hand or by messenger, addressed (a) if to a Investor, at such Investor's address set forth on the signature page hereto or at such other address as such Investor shall have furnished to the Company in 10 writing, (b) if to the Company at its offices to the attention of the President or at such other address as the Company shall have furnished to the Investors in writing, or (c) if any transferee or assignee of a Investor pursuant to Section 10.1, at such address as such transferee or assignee shall have furnished to the Company in writing. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been received or given, as applicable, (i) when delivered if delivered personally, (ii) if sent by mail, at the earlier of its receipt or three Business Days after the registration or certification thereof, (iii) if sent by overnight courier, one Business Day after the same has been deposited with a nationally recognized courier service, or (iv) when sent by confirmed facsimile or other electronic transmission, on the day sent (if a Business Day) if sent during normal business hours of the recipient, and if not, then on the next Business Day (provided, that such facsimile or other electronic transmission is followed by delivery via another method permitted by this Section 11.2). 11.3. Delays or Omissions. Except as expressly provided in this Agreement, no delay or omission to exercise any right, power or remedy accruing to any Investor upon any breach or default of the Company under this Agreement shall impair any such right, power or remedy of such Investor nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Investor of any breach or default under this Agreement, or any waiver on the part of any Investor of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any Investor shall be cumulative and not alternative. 11.4. Governing Law; Jurisdiction. This Agreement shall be governed in all respects by the laws of the State of New York without giving effect to the conflicts of laws principles thereof. All suits, actions or proceedings arising out of, or in connection with, this Agreement or the transactions contemplated by this Agreement shall be brought in any federal or state court of competent subject matter jurisdiction sitting in New York, New York Each of the parties hereto by execution and delivery of this Agreement, expressly and irrevocably (i) consents and submits to the personal jurisdiction of any such courts in any such action or proceeding; (ii) consents to the service of any complaint, summons, notice or other process relating to any such action or proceeding by delivery thereof to such party as set forth in Section 11.2 hereof; and (iii) waives any claim or defense in any such action or proceeding based on any alleged lack of personal jurisdiction, improper venue, forum non conveniens or any similar basis. 11.5. Entire Agreement; Amendment. This Agreement and the other documents delivered pursuant to this Agreement at the Closing constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede all prior agreements and merge all prior discussions, negotiations, proposals and offers (written or oral) between them, and no party shall be liable or bound to any other party in any manner by any representations, warranties, covenants or agreements except as specifically set forth herein or therein. Except as expressly provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. 11 11.6. Successors and Assigns. Subject to Article 10 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the permitted successors, assigns, heirs, executors and administrators of the parties to this Agreement, except that the Company may not assign this Agreement without the written consent of the Holders of at least 50% of the then outstanding Registrable Securities. 11.7. Titles and Subtitles. The headings in this Agreement are used for convenience of reference only and shall not be considered in construing or interpreting this Agreement. 11.8. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. This Agreement may be delivered by facsimile, and facsimile signatures shall be treated as original signatures for all applicable purposes. 11.9. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 11.10. Consents. Unless otherwise provided herein, all consents and other determinations to be made pursuant to this Agreement shall be made on the basis of a majority in interest (determined by number of securities) with respect to the Registrable Securities. 11.11. Severability. 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. 11.12. No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the parties hereto, each investor, their permitted successors and assigns and parties eligible for indemnification under Article 6, and only in accordance with the express terms of this Agreement. 11.13. Confidentiality of Agreement, Press Releases and Public Announcements. Except as set forth below, the parties shall, and shall cause their officers, employees and representatives to, treat and hold as confidential the existence and terms of this Agreement at all times. No party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the Company and the holders of at least 50% of the number of Registrable Securities; provided, however, that any party may make any public disclosure it believes in good faith is required by applicable law (including applicable securities laws) or any listing or trading agreement concerning its publicly-traded securities to make such disclosure (in which case the disclosing party will use its reasonable efforts to advise the other parties in writing prior to making the disclosure). 12 11.14. Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder and any applicable common law, unless the context requires otherwise. The word "including" shall mean including without limitation and is used in an illustrative sense rather than a limiting sense. Terms used with initial capital letters will have the meanings specified, applicable to singular and plural forms, for all purposes of this Agreement. Reference to any gender will be deemed to include all genders and the neutral form. 11.15. Incorporation of Exhibits, Annexes and Schedules. The Exhibits, Annexes and Schedules identified in this Agreement, if any, are incorporated herein by reference and made a part hereof. [Remainder of page left intentionally blank. Signature page(s) to follow.] 13 IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of the date first above written. COMPANY: APPLIED DNA SCIENCES, INC. By:/S/ Peter Brockelsby -------------------- Name: Peter Brockelsby Title: President INVESTOR REPRESENTATIVE: VERTICAL CAPITAL PARTNERS, INC. By:/S/ Robert DePalo Name:Robert DePalo Title:Chairman Address for Notice Purposes: VERTICAL CAPITAL PARTNERS, INC. 488 Madison Avenue, 8th Floor New York, New York 10022 Fax: (212) 446-0020 EX-4 5 jan2820058kex43.txt Exhibit 4.3 APPLIED DNA SCIENCES, INC. WARRANT AGREEMENT, dated _________, 2005 (the "Agreement"), by and between Applied DNA Sciences, Inc., a Nevada corporation (the "Company"), and __________________ the holder of one (1) unit of the Company sold in connection with the Company's Private Placement (as defined below) (individually a "Holder" and collectively with the holders of other Units, the "Holders"). WHEREAS, the Company has proposed to offer, pursuant to the Company's private placement offering (the "Private Placement"), a maximum of 120 units of the Company (the "Units"), each Unit consisting of (i) a $50,000 principal amount Secured Convertible 10% Promissory Note, and (ii) warrants to purchase 100,000 shares of the Company's common stock, exercisable for a period of five years at a price of $0.75 per share; WHEREAS, purchasers of the Units have been issued Warrant Certificates evidencing the Warrants; and WHEREAS, the Warrant Certificates incorporate by reference the terms of this Warrant Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Company and the Holder hereby agree as follows: 1. Exercise of Warrant. This warrant (the "Warrant") shall entitle the Holder thereof to purchase an aggregate of 100,000 shares of Common Stock at an exercise price of $0.75 (the "Exercise Price") per share. The Warrants may be exercised in whole or in part at any time or from time to time during the period commencing on 2005 and expiring at 5:00 p.m., New York City time, on , 2010 (the "Exercise Term"), or if such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day, by presentation and surrender of the Warrant Certificate evidencing the Warrant to be exercised to the Company at its principal office or at the office of its stock transfer agent, if any, with the Exercise Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of shares specified in such form. . If any Warrant should be exercised in part only, the Company shall, upon surrender of the Warrant Certificates for cancellation and presentment of the Exercise Form, execute and deliver new a Warrant Certificate or Certificates, as the case may be, evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable thereunder. Upon receipt by the Company of a Warrant Certificate at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise and accompanied by the appropriate payment for the shares of Common Stock underlying the Warrants (the "Warrant Shares"), the Holder shall be deemed to be the holder of record of such Warrant Shares, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Holder. Certificates for the Warrant Shares shall be delivered to the Holder within a reasonable time following the exercise of the Warrants in accordance with the foregoing. 2. Alternative Exercise Provisions. Anything contained herein to the contrary notwithstanding, provided that the shares underlying this Warrant have been registered, the Holder, at his option, may exercise the Warrants, in whole or in part, during the Exercise Term by delivering to the Company a confirmation slip issued by a brokerage firm that is a member of the National Association of Securities Dealers, Inc. with respect to the sale of those number of Warrant Shares for which the Warrants are being exercised, and, in such case, the Company shall deliver certificates representing such Warrant Shares on settlement date at the office of the Company's stock transfer agent against payment for such Warrant Shares by such brokerage firm or its clearing broker, made payable to the Company or made payable to the order of the Holder and endorsed by the Holder to the Company. 3. Reservation and Listing of Shares. The Company hereby agrees that at all times there shall be reserved for issuance and delivery upon exercise of the Warrants, such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of the Warrants. As long as the Warrants shall be outstanding, the Company shall use its best efforts to cause all shares of Common Stock issuable upon the exercise of the Warrants to be listed on the Over The Counter Bulletin Board or on Nasdaq or a national securities exchange, if such shares of Common Stock, as a class, are theretofore so listed. 4. Fractional Shares. No tractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrants. Any fraction of a share called for upon any exercise hereof shall be canceled. The Holder, by his acceptance hereof, expressly waives any right to receive any fractional share of stock or fractional Warrant upon exercise of the Warrants. 5. Exchange. Transfer. Assignment or Loss of Warrant. The Warrants are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of the Warrant Certificates evidencing such Warrants to the Company at its office or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the Holder thereof to purchase in the aggregate the same number of shares of Common Stock as are purchasable thereunder at the same respective Exercise Price. Subject to Section 10 hereof, upon surrender of the Warrant Certificates to the Company at its principal office or at the office of its stock transfer agent, if any, with a duly executed Assignment Form which is annexed hereto and funds sufficient to pay the applicable transfer tax, if any, the Company shall, without charge, execute and deliver new Warrant Certificates in the name of the assignee named in such instrument of assignment and the original Warrant Certificate shall promptly be canceled. The Warrants may be divided or combined with other Warrants which carry the same rights upon presentation of the Warrant Certificate evidencing such Warrants at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice signed by the Holder hereof specifying the names and denominations in which new Warrant Certificates are to be issued. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of the Warrants, and, in the case of loss, theft or destruction, of reasonably satisfactory indemnification, and upon surrender and cancellation of the Warrants, if mutilated, the Company will execute and deliver new Warrant Certificates of like tenor and date. Any such new Warrant Certificates, when executed and delivered, shall constitute an additional contractual obligation on the part of the Company, whether or not the Warrant Certificates so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone 2 6. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder of the Company until exercise of any Warrants. 7. Adjustments of Purchase Price and Number of Shares. (a) Subdivision and Combination. In case the Company shall at any time subdivide or combine the outstanding shares of Common Stock by way of stock split, reverse stock split or the like, the Exercise Prices shall forthwith be proportionately increased or decreased. (b) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 7, the number of Shares issuable upon the exercise of each Warrant shall be adjusted to the nearest full Share by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. (c) Reclassification. Consolidation. Merger. etc. In case of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or in the case of a sale or conveyance to another corporation of all or a substantial part of the property of the Company, the Holder shall thereafter have the right to purchase the kind and number of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance as if the Holder were the owner of the shares of Common Stock underlying the Warrants immediately prior to any such events at a price equal to the product of (x) the number of shares issuable upon exercise of the Warrants and (y) the Exercise Price in effect immediately prior to the record date for such reclassification, change, consolidation, merger, sale or conveyance as if such Holder had exercised the Warrants. (d) Dividends and Other Distributions with Respect to Outstanding Securities. In the event that the Company shall at any time prior to the exercise of all Warrants declare a dividend (other than a dividend consisting solely of shares of Common Stock or a cash dividend or distribution payable out of current or retained earnings) or otherwise distribute to its shareholders any monies, assets, property, rights, evidences of indebtedness, securities (other than shares of Common Stock), whether issued by the Company or by another person or entity, or any other thing of value, the Holder of the unexercised Warrants shall thereafter be entitled, in addition to the shares of Common Stock or other securities receivable upon the exercise thereof, to receive, upon the exercise of such Warrants, the same monies, property, assets, rights, evidences of indebtedness, securities or any other thing of value that they would have been entitled to receive at the time of such dividend or distribution. At the time of any such dividend or distribution, the Company shall make appropriate reserves to ensure the timely performance of the provisions of this Subsection 7(d). 3 (e) Warrant Certificate After Adjustment. Irrespective of any change pursuant to this Section 7 in the Exercise Price or in the number, kind or class of shares or other securities or other property obtainable upon exercise of the Warrants, the Warrants may continue to express as the Exercise Price and as the number of shares obtainable upon exercise, the same price and number of shares as are stated herein. (f) Statement of Calculation. Whenever the Exercise Price shall be adjusted pursuant to the provisions of this Section 7, the Company shall forthwith file at its principal office, a statement signed by an executive officer of the Company specifying the adjusted Exercise Price determined as above provided in such section. Such statement shall show in reasonable detail the method of calculation of such adjustment and the facts requiring the adjustment and upon which the calculation is based. The Company shall forthwith cause a notice setting forth the adjusted Exercise Price to be sent by certified mail, return receipt requested, postage prepaid, to the Holder. 8. Call Rights of Company. Upon 10 days written notice the Company may call the Warrant for redemption by the Company at any time after the underlying Common Stock (i) has been registered for public sale and (ii) has traded at or above $1.25 per share on 20 consecutive trading days and providing that the underlying Registration has and is effective during such time period. 9. Definition of "Common Stock." For the purpose of the Warrants, the term "Common Stock" shall mean, in addition to the class of stock designated as the Common Stock, $.001 par value, of the Company on the date hereof, any class of stock resulting from successive changes or reclassifications of the Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. If at any time, as a result of an adjustment made pursuant to one or more of the provisions of Section 7 hereof, the shares of stock or other securities or property obtainable upon exercise of the Warrants shall include securities of the Company other than shares of Common Stock or securities of another corporation, then thereafter the amount of such other securities so obtainable shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in Section 7 hereof and all other provisions of the Warrants with respect to Common Stock shall apply on like terms to any such other shares or other securities. 10. Registration Under the Securities Act of 1933. The Warrant Shares issuable upon exercise of the Warrants are subject to the Company's registration obligations as set forth in a Registration Rights Agreement of even date herewith, the terms of which are incorporated by reference into this Warrant Agreement as if such terms are set forth at length herein. 11. Transfer to Comply with the Act. Neither Warrants nor the Warrant Shares nor any other security issued or issuable upon exercise of the Warrants may be sold or otherwise disposed of except as follows: 4 (a) to a person who, in the opinion of counsel for the Company, is a person to whom the Warrants or Warrant Shares may legally be transferred without registration and without the delivery of a current prospectus under the Act with respect thereto and then only against receipt of a letter from such person in which such person represents that he is acquiring the Warrants or Warrant Shares for his own account for investment purposes and not with a view to distribution and provides any other information and representations required by the Company, and in which such person agrees to comply with the provisions of this Section 10 with respect to any resale or other disposition of such securities; or (b) to any person upon delivery of a prospectus then meeting the requirements of the Act relating to such securities and the offering thereof for such sale or disposition. 12. Notices to Warrant Holders. Nothing contained in this Agreement shall be construed as conferring upon the Holder or Holders the right to vote or to consent or to receive notice as a shareholder in respect of any meetings of shareholders for the election of directors or any other matter, or as having any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of the Warrants and their exercise, any of the following events shall occur: (a) The Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or (b) The Company shall offer to all the holders of its Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any warrant, right or option to subscribe therefor; or (c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business shall be proposed; or (d) There shall be any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another entity, then, in anyone or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, warrants or options, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to give such notice or any defect therein shall not affect the validity of any action taken in connection with the declaration or payment of any such dividend or distribution, or the issuance of any convertible or exchangeable securities or subscription rights, warrants or options, or any proposed dissolution, liquidation, winding up or sale. 5 13. Notices. (a) All communications under this Agreement shall be in writing and shall be mailed by certified mail, postage prepaid, return receipt requested, or telecopied with confirmation of receipt or delivered by hand or by overnight delivery service: If to the Company, at: Applied DNA Sciences, Inc. 9255 West Sunset Blvd., Suite 805 Los Angeles, CA 90069 Attn: Peter Brocklesby, President If to the Holder, to the address of such Holder as it appears in the stock or warrant ledger of the Company. (b) Any notice so addressed, when mailed by registered or certified mail shall be deemed to be given three days after so mailed, when telecopied shall be deemed to be given when transmitted, or when delivered by hand or overnight shall be deemed to be given when hand delivered or on the day following deposit with the overnight delivery service. 14. Successors. All the covenants and provisions of this Warrant Agreement by or for the benefit of the Holder shall inure to the benefit of his successors and assigns hereunder. 15. Termination. This Warrant Agreement will terminate on the earlier of (a) the expiration date of the Warrants or (b) the date all of the Warrants shall have been exercised. 16. Governing Law. This Warrant Agreement shall be deemed to be made under the laws of the State of New York and for all purposes shall be construed in accordance with the laws of said State, excluding choice of law principles thereof. [THIS SPACE INTENTIONALL Y LEFT BLANK] 16. Entire Agreement: Amendment: Waiver. This Warrant Agreement and all attachments hereto and all incorporation by references set forth herein, set forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. This Warrant Agreement may be amended, the Company may take any action herein prohibited or omit to take any action herein required to be performed by it, and any breach of any covenant, agreement, warranty or representation may be waived, only if the Company has obtained the written consent or waiver of the Holder. No course of dealing between or among any persons having any interest in this Warrant Agreement will be deemed effective to modify, amend or discharge any part of this Warrant Agreement or any rights or obligations of any person under or by reason of this Warrant Agreement. APPLIED DNA SCIENCES, INC. By: ___________________________ Name: Title: Dated: , 2005 Attest: ______________________________ EX-4 6 jan2820058kex45.txt Exhibit 4.5 SECURITY AGREEMENT SECURITY AGREEMENT dated January 28, 2005, between Vertical Capital Partners, Inc., a Delaware corporation, as agent (the "Agent") for the benefit of the individuals or entities listed on Schedule A hereto ("Creditor"), and Applied DNA Sciences, Inc., a Nevada corporation (collectively, "Obligor"). 1. GENERAL DEFINITIONS. 1.1 As used herein, "UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York. 1.2 All capitalized terms contained in this Agreement, but not specifically defined in this Agreement, shall have the meanings provided by the UCC to the extent the same are used or defined therein. Without limitation, the following terms are used herein as defined in the UCC: Account, Chattel Paper, Deposit Accounts, Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit Rights, Payment Intangibles, Proceeds, and Supporting Obligations. 1.3 As used herein: a. "Person" means any individual, corporation, partnership, limited liability company, trust, unincorporated organization, or any other entity or organization. b. "Other Obligor" means any other person obligated as direct or indirect obligor or guarantor of any Obligations, or of any indebtedness, obligations and liabilities guaranteed by Obligor. c. "Receivable" means any right to payment, including any Account, whether or not evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance. (2) OBLIGATIONS SECURED. The Collateral (as defined below) shall secure any and all indebtedness, obligations and liabilities of Obligor to Creditor, including: a. all unpaid principal of and interest on, and all other obligations or liabilities of Obligor which may arise under or in connection with the 10% Secured Convertible Promissory Notes in the aggregate principal amount of $5,970,000 issued on January 28, 2005 by Obligor. b. all interest, fees, costs, expenses, reimbursement obligations, indemnities and other liabilities relating to any of the foregoing, including attorneys' fees and costs or expenses incurred in connection with collection and enforcement and sums advanced by Creditor to protect the Collateral or otherwise as permitted to be made by Creditor under this Agreement; and c. all indebtedness, obligations and liabilities under this Agreement; in each case, whether now existing or hereafter arising, joint or several, absolute or contingent, liquidated or unliquidated, and however arising (all such indebtedness, obligations and liabilities being collectively referred to herein as the "Obligations"; and any agreement, instrument, guaranty or other document now or hereafter evidencing or securing any of the Obligations, being collectively referred to herein as the "Financing Documents"). 3. GRANT OF SECURITY INTEREST. To secure the punctual payment and performance of the Obligations when due whether at the stated maturity, by acceleration or otherwise Obligor hereby grants to Creditor a security interest in and to, and a lien upon (the "Security Interest"), all right, title and interest of Obligor in and to the following property, whether now owned and existing or hereafter acquired or arising, and wherever located (collectively, the "Collateral"): (a) All now owned and hereafter acquired right, title and interest of Obligor in, to and in respect of all: accounts, interests in goods represented by accounts, returned, reclaimed or repossessed goods with respect thereto and rights as an unpaid vendor; contract rights; chattel paper; investment property; general intangibles (including but not limited to, tax and duty claims and refunds, registered and unregistered patents, trademarks, service marks, copyrights trade names, applications for the foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer lists, licenses, whether as licensor or licensee, choses in action and other claims, and existing and future leasehold interests in equipment, real estate and fixtures) (collectively, the "General Intangibles"); documents; instruments; letters of credit, bankers' acceptances or guaranties; cash moneys, deposits; securities, bank accounts, deposit accounts, credits and other property now or hereafter held in any capacity by Lender, its affiliates or any entity which, at any time, participates in Lender's financing of Obligor at any other depository or other institution; agreements or property securing or relating to any of the items referred to above; (b) All now owned and hereafter acquired right, title and interest of Obligor in, to and in respect of goods, including, but not limited to: (i) All inventory, wherever located, whether now owned or hereafter acquired, of whatever kind, nature or description, including all raw materials, work-in-process, finished goods, and materials to be used or consumed in Obligor's business; and all names or marks affixed to or to be affixed thereto for purposes of selling same by the seller, manufacturer, lessor or licensor thereof and all inventory which may be returned to Obligor by its customers or repossessed by Obligor and all of Obligor's right, title and interest in and to the foregoing (including all of Obligor's rights as a seller of goods); (ii) All equipment and fixtures, wherever located, whether now owned or hereafter acquired, including, without limitation, all machinery, equipment, motor vehicles, furniture and fixtures, and any and all additions, substitutions, replacements (including spare parts), and accessions thereof and thereto (including, but not limited to Obligor's rights to acquire any of the foregoing, whether by exercise of a purchase option or otherwise); (iii) All consumer goods, farm products, crops, timber, minerals or the like (including oil and gas), wherever located, whether now owned or hereafter acquired, of whatever kind, nature or description; (c) All now owned and hereafter acquired right, title and interests of Obligor in, to and in respect of any real or other personal property in or upon which Obligor has or may hereafter have a security interest, lien or right of setoff; (d) All present and future books and records relating to any of the above including, without limitation, all computer programs, printed output and computer readable data in the possession or control of the Obligor, any computer service bureau or other third party; and (e) All Proceeds of any of such property in whatever form, whether derived from voluntary or involuntary disposition, all products of any of such property, all renewals, replacements, substitutions, additions, accessions, rents, issues, royalties and profits of, to or from any such property and all dividends or other income from Investment Property, collections thereon or distributions or payments with respect thereto. 2 The Security Interest created herein is subject to any applicable restriction to the creation of a Security Interest to the extent that such restriction is not made ineffective by UCC Sections 9-406, 9-407, 9-408, or 9-409. 4. PERFECTION OF SECURITY INTEREST. Obligor shall execute and deliver to the Agent UCC-1 Financing Statements ("Financing Statements") assigning to the Agent security interests in Obligor's right, title and interest in and to the Collateral. Obligor hereby authorize the Agent to file such Financing Statements at the Obligor's expense, in such filing locations as the Agent deems appropriate. 5. REPRESENTATIONS AND WARRANTIES. Obligor represents and warrants to Agent and Creditor that: 5.1 Authority. Obligor has full power and authority to grant security interests in the Collateral and to execute, deliver, and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person except as may have been specifically disclosed to Creditor in writing. 5.2 Absence of Other Encumbrances. The Collateral is free and clear of all liens and adverse claims other than the Security Interest, which shall be a first lien on the Collateral except for (i) purchase money security interests on Inventory or Equipment not financed by Creditor, (ii) liens imposed by law such as materialmen's, suppliers', mechanics', carriers', repairmen's or other like liens imposed in the ordinary course of business, and (iii) liens for taxes, assessments or governmental charges not yet due or delinquent. 5.3 Information Regarding Names. Obligor has disclosed to Agent and Creditor on Exhibit 5.3 hereto complete and correct information regarding Obligor's exact legal name and all prior or current names and trade names used by Obligor. Exhibit 5.3 also lists the names of all Persons from whom Obligor acquired any assets during the period of five (5) years ended on the date hereof (other than acquisitions in the ordinary course of business of Obligor). 5.4 Location of Collateral and Principal Place of Business. All Collateral which is tangible and all related books and records related to the Collateral are located solely in the states listed in Exhibit 5.4 hereto (the "Collateral States"), except for Inventory in transit to Obligor and, in the case of other Collateral which is movable, as required in the operation of the Obligor's business consistent with past practices. No inventory of any Person other than Obligor is located on any premises owned or leased by Obligor. Obligor's principal place of business is located in the state identified in Exhibit 5.4. 5.5 Jurisdiction of Incorporation. Obligor has disclosed to Agent and Creditor in Exhibit 5.5 hereto complete and correct information regarding the Obligor's jurisdiction of incorporation and its identification number in the records of such jurisdiction. 6. COVENANTS AND AGREEMENTS OF OBLIGOR. Obligor covenants and agrees as follows: 6.1 Restriction on Further Encumbrances. Obligor shall not, without the prior written consent of Creditor, create, grant or suffer to exist any other liens in or to any of the Collateral except for Permitted Liens. 6.2 Records and Inspection. Obligor shall keep and cause to be kept accurate and complete records of the Collateral and its proceeds at its principal place of business, which Collateral and records will be made available for inspection and copying upon such premises by Agent at any reasonable time. 3 6.3 Restrictions on Removal of Collateral. Obligor shall not remove Collateral or any related books and records from the Collateral States except for removal of incidental items of Collateral in the ordinary course of Obligor's business, consistent with past practice. 6.4 Restriction on Changing State of Organization. Obligor shall not change the state of its incorporation or its jurisdiction of organization (as applicable) or convert into a different type of entity. 6.5 Information Regarding Names. At least 30 days before changing its name or adopting a new name, Obligor shall give written notice to Agent of any new name or trade name of Obligor. 6.6 Information on Collateral and Business. Obligor shall deliver to Agent such other data and information (financial and otherwise) as Agent from time to time may reasonably request bearing upon or related to the Collateral or Obligor's business operations or financial condition. 6.7 Duty of Care. Obligor shall be responsible for preserving and maintaining the Collateral and Agent shall have no duty of care with respect to the Collateral, except that Agent shall have an obligation to exercise reasonable care with respect to Collateral in its possession; provided that (i) Agent shall be deemed to have exercised reasonable care if Collateral in its possession is accorded treatment substantially comparable to that which Agent accords its own property or treatment substantially in accordance with actions requested by Obligor in writing, although Agent shall not be obligated to comply with any such requests and (ii) Agent shall not be obligated to take steps to preserve rights against any other parties or property. 6.8 Taxes. Obligor shall pay when due all governmental taxes, assessments or charges upon the Collateral. 6.9 Further Assurances and Authority of Creditor. Obligor shall from time to time execute, deliver, file and record all such further agreements, instruments, financing statements, notices and other documents (collectively, "Supplemental Documentation") as may be requested by Agent to perfect or preserve the Security Interest, to enable Agent to notify any third parties of the existence of the Creditor's Security Interest, or otherwise to carry out the intent of this Agreement. Obligor authorizes Agent to file financing statements where desirable in Agent 's judgment to perfect the Security Interest without the signature of Obligor. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be immediately delivered to Agent, duly indorsed in a manner satisfactory to Agent, to be held as Collateral pursuant to this Agreement. 6.10 Power of Attorney. Obligor hereby irrevocably makes, constitutes and appoints Agent (and all persons designated by Creditor for that purpose) as Obligor's true and lawful attorney (and agent-in-fact) to (i) sign the name of Obligor on any Supplemental Documentation and to deliver any Supplemental Documentation to such persons as Agent, in its sole discretion, may elect and (ii) to obtain hold, direct or redirect delivery of or otherwise administer, and control any agreement, instrument or document evidencing any portion of the Collateral or Obligor's rights with respect thereto, including documents of title, warehouse receipts and security agreements (collectively "Special Collateral"), as Agent, in its sole discretion, may elect. 6.11 Insurance. Obligor shall, at its sole expense, maintain the Collateral insured against such risks and in such amounts, subject to such deductibles, and for such periods as is customarily carried by other owners or users of such properties comparable to Obligor in similar businesses. Within 30 days after the date of this Agreement, such policies shall be endorsed to 4 provide that: (i) the insurance carrier shall give at least 30 days prior notice to Agent before any such policy shall be altered or canceled, (ii) no act or default of Obligor shall affect the right of Agent to recover under such policy in case of loss or damage, and (iii) from and after the date, if any, on which the insurance carrier receives notice from Agent that an "Event of Default" has occurred under this Agreement, all proceeds payable under such policy shall be payable directly to Agent (subject to the rights of holders of Permitted Liens). Any amounts received under such policies may be applied by Agent to the Obligations in such order and at such times as Agent may determine or, at the option of Agent, released to Obligor, provided that no such application or release shall cure or waive any Event of Default and no amount released shall be deemed a payment of any obligations. In the event Obligor at any time fails to maintain any of the policies of insurance required above or equivalent replacement policies or fails to pay any premium in whole or in part, then Agent, without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto that Agent deems advisable. 6.12 Performance by the Agent. If Obligor fails to perform any material covenant, agreement, duty or obligation of Obligor under this Agreement, the Agent may, at any time or times in its discretion, take action to effect performance of such obligation. All reasonable expenses of the Agent incurred in connection with the foregoing authorization shall be payable by Obligor. No discretionary right, remedy or power granted to the Agent under any part of this Agreement shall be deemed to impose any obligation whatsoever on the Agent with respect thereto, such rights, remedies and powers being solely for the protection of the Agent. 7. REMEDIAL PROVISIONS. 7.1 Right to Satisfy Other Claims and Taxes. If Obligor fails to pay any governmental taxes, assessments or other charges when due, or fails to pay any claims secured by any lien against any Collateral when due, Obligor shall so advise Creditor in writing and Creditor may, without waiving or releasing any obligations of Obligor or any Event of Default, in its sole discretion (and without any obligation to do so), make such payment or any part thereof or obtain such discharge and take any other action with respect thereto that the Creditor deems advisable. 7.2 Certain Matters Relating to Receivables. Creditor shall have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and Obligor shall furnish all such assistance and information as Creditor may require in connection with such test verifications. At any time and from time to time, upon Creditor's request, at any time after the occurrence and during the continuance of an Event of Default and at the expense of Obligor, Obligor shall cause independent public accountants or others satisfactory to Creditor to furnish to the Creditor statements showing reconciliations, aging and test verifications of, and trial balances for, the Receivables. At Creditor's request, Obligor shall deliver to Creditor all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including, without limitation, all original orders, invoices and shipping receipts. Creditor in its own name or in the name of others may at any time communicate with obligors under the Receivables to verify with them to Creditor's satisfaction the existence, amount and terms of any Receivables, provided that Creditor will not make communications in its own name unless an Event of Default has occurred and is continuing. Anything herein to the contrary notwithstanding, Obligor shall remain liable under each of the Receivables to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Creditor shall not have any obligation or liability under any Receivable (or any agreement giving rise thereto), by reason of or arising out of this Agreement or the receipt by Creditor of any payment relating thereto, nor shall Creditor be obligated in any manner to perform any of the obligations of Obligor under or pursuant to any Receivable (or any agreement giving rise thereto) to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 5 8. RELEASE OF COLLATERAL. Except for (i) sales or other dispositions of Inventory made prior to the occurrence of an Event of Default that are in the ordinary course of Obligor's business and not prohibited by any provision contained in the Financing Documents and (ii) sales or other dispositions of Collateral for which Obligor obtains the prior written consent of Agent (collectively, "Permitted Sales"), Obligor shall not sell, lease, license or otherwise dispose of the Collateral, or any part thereof or any interest therein. Concurrently with any Permitted Sale, the Security shall automatically be released from the property so disposed of; provided however, that the Security Interest shall continue in the proceeds thereof. 9. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default by Obligor: a. The occurrence of any event of default as defined in the Notes or Subscription Agreement. b. The failure of Obligor to pay any Obligation of Obligor to Creditor when due; c. The failure of any Other Obligor to pay any obligation, liability or indebtedness of such Other Obligor to Creditor when due; d. Any other failure to observe or perform any of the covenants or obligations imposed upon Obligor or any Other Obligor by any of the Financing Documents, which failure is unremedied for more than 10 days after receipt of notice thereof from Agent; e. The occurrence or existence of any other default or Event of Default under any Financing Document; f. Any representation or warranty contained in any Financing Document or any financial statements, certificates, schedules or other information now or hereafter furnished by Obligor or any Other Obligor proves false or misleading in any material respect; g. The termination of existence or cessation of business by Obligor or any Other Obligor; h. The making of an assignment for the benefit of creditors by Obligor or any Other Obligor; i. The commencement of any case or proceeding by or against Obligor or any Other Obligor under Title 11 of the United States Code (Bankruptcy) or of any other proceeding, suit or action (at law, in equity, in Bankruptcy or otherwise) for adjudication as a bankrupt, reorganization, composition, extension, arrangement, receivership, liquidation or dissolution by, of, or against Obligor or any Other Obligor; j. The appointment of a receiver, trustee, custodian or similar officer for or over Obligor or any Other Obligor or any of its property, which is not vacated within 10 days thereafter; k. The levy of any writ of execution or other judicial process upon any of the property of Obligor or any Other Obligor which is not released within 10 days thereafter; l. The uninsured damage to or material decline in the market value of the Collateral unless immediately replaced or supplemented by Obligor; 6 m. The failure by Obligor or any Other Obligor to make any payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any other indebtedness for borrowed money of, or guaranteed by, Obligor or any Other Obligor, or default by Obligor or any Other Obligor in the performance or observance of any obligation or condition with respect to any such other indebtedness if the effect of such default is to accelerate the maturity of any such indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders, to cause such indebtedness to become due and payable prior to its expressed maturity. 10. RIGHTS AND REMEDIES OF THE CREDITOR UPON EVENT OF DEFAULT. 10.1 Disposition of Collateral. Upon and after any Event of Default which is then continuing: (a) The Agent may exercise its rights with respect to each and every component of the Collateral, without regard to the existence of any other security or source of payment for the Obligations. In addition to other rights and remedies provided for herein or otherwise available to it, the Agent shall have all of the rights and remedies of a lender on default under the Uniform Commercial Code ("Code") then in effect in the State of New York; (b) If any notice to Obligor of the sale or other disposition of Collateral is required by then applicable law, five (5) days' prior notice (or, if longer, the shortest period of time permitted by then applicable law) to Obligor of the time and place of any public sale of Collateral or of the time after which any private sale or any other intended disposition is to be made, shall constitute reasonable notification; and (c) The Agent is authorized, at any such sale, if the Agent deems it advisable to do so, in order to comply with any applicable securities laws, to restrict the prospective bidders or purchasers to persons who will represent and agree, among other things, that they are purchasing the Collateral for their own account for investment, and not with a view to the distribution or resale thereof, or otherwise to restrict such sale in such other manner as the Agent deems advisable to ensure such compliance. Sales made subject to such restrictions shall be deemed to have been made in a commercially reasonable manner. 10.2 Application of Proceeds. Subject to the rights of any holders of Permitted Liens, any proceeds received by Agent in respect of any sale of collection from or other realization upon all or any part of the Collateral following the occurrence of an Event of Default may, in the discretion of Agent, be held by Agent as collateral for, and/or then or at any time thereafter applied by Agent as follows: (i) first, to pay all costs, expenses and charges of every kind (including attorneys' fees and costs) for pursuing, searching, protecting, taking, removing, storing, safekeeping, caring, preparing for sale, advertising, selling and delivering the Collateral and otherwise enforcing this Agreement and the other Financing Documents; (ii) second, to pay the Obligations in order determined by Agent in its sole discretion; and (iii) third, to pay the remaining funds, if any, after payment of all the Obligations in full, to Obligor or to whomever may be lawfully entitled to receive such surplus. Payments received from any third party on account of disposition of Collateral shall not reduce the Obligations until paid in cash to Agent. The application of proceeds by Agent shall be without prejudice to Agent 's rights as against Obligor or other persons with respect to any Obligations which may remain unpaid. Any such deficiency shall be paid forthwith to Agent by Obligor. 10.3 Notice. Any notice required to be given by Agent of a sale, lease, or other disposition of Collateral, or any other intended action by Agent, which is sent at least five (5) days prior to such proposed action, or such longer period as shall be specified by applicable law, shall constitute commercially reasonable and fair notice thereof to Obligor. 10.4 Appointment of Agent as Lawful Attorney: Other Rights Upon Event of Default. Obligor hereby irrevocably makes, constitutes and appoints Agent and all persons designated by Agent true and lawful attorney (and agent-in-fact) upon and after the occurrence of an Event of Default for the purposes set forth 7 in the following sentences of this Section. Upon and after the occurrence of an Event of Default, Agent or its agent may, without notice to Obligor and at such time or times thereafter as Agent or said agent in its sole discretion may determine, in Obligor's or Agent 's name: (i) give notice to account debtors and Other Obligors and demand payment of Accounts or other obligations included in the Collateral; (ii) enforce payment and exercise all of Obligor's rights and remedies with respect to the collection of Accounts, any Special Collateral and any other obligations by legal proceedings or otherwise; (iii) settle, adjust, compromise, discharge, release, extend or renew Accounts and other obligations; (iv) prepare, file and sign Obligor's name on any proof of claim or similar document in any insolvency or similar case against any Account debtor or any person indebted to Obligor; (v) endorse or sign the name of Obligor upon any checks, drafts, chattel paper, document, instrument, invoice, freight bill, bill of lading, or similar document or agreement relating to Accounts, Inventory, or Special Collateral; (vi) use Obligor's stationery and sign the name of Obligor to verifications of Accounts and other obligations to Account debtors and Other Obligors; (vii) use the information recorded on or contained in any data processing equipment and computer hardware and software to which Obligor has access relating to Accounts, Inventory, or Special Collateral; (viii) open any lock box; (ix) transfer into the name of Agent or the name of Agent 's agent or nominee any of the Collateral; (x) make, settle and adjust claims under policies of insurance, endorse or sign the name of Obligor on any check or other item of payment for the proceeds of such policies of insurance, and make all determinations and decisions with respect thereto and (xiii) receive and direct the disposition of any proceeds of any Collateral. 11. AGENT'S EXPENSES, INCLUDING ATTORNEYS FEES. Regardless of the occurrence or existence of an Event of Default, Obligor shall pay to Agent, on demand, the amount of any costs or expenses (including attorneys' fees and expenses) paid or incurred at any time or times in connection with: (i) any attempts to defend, protect or enforce the Security Interest or the priority thereof, including the discharging of any prior or subsequent lien or adverse claim against any Collateral thereof which is not permitted hereunder; (ii) any attempt to collect the Obligations or enforce any rights of Agent, whether under this Agreement or other Financing Documents, or otherwise, against Obligor or any other person under the Financing Documents; (iii) any litigation, dispute or proceeding (whether instituted by Agent or any other person) in any way relating to Collateral, this Agreement, the other Financing Documents or Obligor's affairs; or (iv) any amounts expended by Agent under this Agreement; or (v) the inspection, verification, protection, collection, sale, liquidation or other disposition of Collateral. Additionally, if any taxes or charges shall be payable on account of the execution or delivery of this Agreement, any other Financing Documents or the creation of any of the Obligations by reason of any existing or hereafter enacted federal, state or other regulation or statute (including any foreign country's regulations or statutes), Obligor will pay all such taxes and charges, including any interest and/or penalty thereon, and will indemnify and hold Agent harmless from and against liability in connection therewith. All obligations under this Section 11 shall constitute additional Obligations secured by the Collateral and shall bear interest at the same rate as provided for the largest amount of other Obligations. 12. ASSIGNMENT BY CREDITOR. Obligor agrees that Creditor may assign or otherwise transfer this Agreement, or any of other Financing Documents, and may deliver all or any of the Collateral to the transferee(s), who shall thereupon become vested with all the powers and rights in respect thereto given to the Creditor herein or in the Financing Documents transferred, and Creditor shall thereafter be fully discharged from any liability or responsibility with respect thereto, all without prejudice to the retention by Creditor of all rights and powers hereby given with respect to any Financing Documents, instruments, rights or property not so transferred. 13. REMEDIES NOT EXCLUSIVE: FORECLOSURES. No right or remedy hereunder is exclusive of any other right or remedy. Each and every right and remedy shall be cumulative and shall be in addition to and without prejudice to every other remedy given hereunder, under any other agreement between Obligor and Creditor or now or hereafter existing at law or in equity, and may be exercised from time to time as often as deemed expedient, separately or concurrently. The giving, 8 taking or enforcement of or execution against any other or additional security, collateral, or guaranty for the payment of the Obligations shall not operate to prejudice, waive or affect any rights, powers or remedies hereunder, nor shall Creditor be required to first look to, enforce, exhaust or execute against such other or additional security, or guarantees prior to so acting against the Collateral. Creditor may foreclose on or execute against the items of Collateral in such order as Creditor may, in its sole and unfettered discretion, determine. 14. WAIVERS. The failure or delay of Agent to insist in any instances upon the performance of any of the terms, covenants or conditions of this Agreement or other Financing Documents, or to exercise any right, remedy or privilege herein or therein conferred, shall not impair or be construed as thereafter waiving any such covenants, remedies, conditions or provisions, but every such term, condition and covenant shall continue and remain in full force and effect; nor shall any waiver of an Event of Default suspend, waive or affect any other Event of Default, whether the same is prior or subsequent thereto and whether of the same or of a different type. 15. SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective. If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement. 16. TERMINATION. Upon payment in full and performance of all Obligations owed by Obligor to Creditor pursuant to the Financing Documents (including payment in full and performance of all indebtedness, obligations and liabilities of other persons guaranteed by the Obligor) and the termination of all obligations of Creditor to extend credit under the Financing Documents, this Agreement shall be terminated; otherwise it shall remain in full force and effect. 17. NOTICE. All notices, demands and communications hereunder shall be in writing and shall be deemed to be duly delivered when personally delivered (including by courier or messenger), or two (2) business days after deposit in the United States mail by registered or certified mail, postage prepaid, return receipt requested, addressed to the parties at the addresses set forth on the signature page hereof, or at such other address as any party shall have furnished to the other parties in writing. 18. GOVERNING LAW. To the extent applicable, this Agreement shall be governed by the Uniform Commercial Code of the State of New York (or, to the extent applicable to the attachment, perfection, priority or enforcement of the Security Interest in any Collateral, the Uniform Commercial Code of any other state). With respect to any matters not so covered by the applicable Uniform Commercial Code, this Agreement shall otherwise be governed by the internal laws of the State of New York. 19. ATTORNEYS' FEES AND OTHER COSTS. Should either party hereto institute any action or proceeding to enforce this Agreement or any provisions hereof or for a declaration of rights under this Agreement, or for arbitration of any dispute arising under this Agreement, the prevailing party in any such action, proceeding or arbitration shall be entitled to receive from the other party all costs and expenses, including without limitation reasonable attorneys' fees, incurred by the prevailing party in connection with such action, proceeding or arbitration. 20. INDEMNIFICATION. Obligor hereby agrees to indemnify and hold harmless Creditor and Agent and their directors, officers, employees and agents against and from any and all claims, actions, liabilities, costs and expenses of any kind or nature whatsoever (including reasonable fees and disbursements of counsel) that may be imposed on, incurred by, or asserted against any of them, in any way relating to or arising out of this Agreement, any exercise of remedies hereunder or any other action taken or omitted by them hereunder, except to the extent a court holds in final and nonappealable judgment that such claims, actions, liabilities, costs and expenses directly resulted from the gross negligence or willful misconduct of such indemnified Persons. 9 21. WAIVERS BY THE OBLIGOR. Except as otherwise expressly provided in this Agreement or the other Financing Documents, the Obligor waives: (i) presentment, demand, and protest and notice of presentment, protest, default, non-payment, maturity, release, compromise, settlement, extension, or renewal of any or all Financing Documents under or pursuant to which Obligor may in any way be liable and hereby ratifies and confirms whatever Creditor may do in this regard; (ii) notice prior to taking possession or control of Collateral or any bond or security that might be required by any court prior to allowing Creditor to exercise any of Creditor's remedies; (iii) the benefit of all valuation, appraisement, and exemption laws; (iv) any right to require Creditor to proceed against any other person or collateral held from any other person; (v) any right to require Creditor to pursue any other remedy in Creditor's power whatsoever; or (vi) any defense arising out of any election by Creditor to exercise or not exercise any right or remedy it may have against Obligor, any other person or any security held by it, even though such election operates to impair or extinguish any right of reimbursement to subrogation or other right or remedy of Obligor against any other person or any such security. 22. MISCELLANEOUS. Obligor agrees that the following shall govern the interpretation and enforcement of this Agreement: 22.1 Binding; on Successors. This Agreement shall be binding upon Obligor, the heirs, executors, administrators, successors and assigns of Obligor, and shall inure to the benefit of and be enforceable by Creditor, its successors, transferees and assigns. 22.2 "Obligor." If this Agreement is executed by two or more parties (other than Creditor), they shall be jointly and severally liable hereunder, and the word "Obligor" wherever used herein shall be construed to refer to each of the parties separately, all in the same manner, and with the same effect as if each of them had signed separate instruments, and in any such case, this Agreement shall not be revoked or impaired as to any one or more of such parties by the death or dissolution of any of the others or by the revocation or release of any obligations hereunder of any one or more of such parties. 22.3 Partnerships. If any party hereto is a partnership, this Agreement shall remain in force and applicable notwithstanding any change in the individuals comprising the partnership and shall include any altered or successor partnership, but the predecessor partnerships and their partners shall not thereby be released from any liability. 22.4 No Oral Modifications. None of the terms or provisions of this Agreement may be waived, altered, modified, limited or amended except in writing. 22.5 Execution by the Obligor Sufficient. This Agreement shall take effect upon the execution solely by the Obligor but this Agreement may, at the option of Agent, be executed by Creditor if execution by Creditor is deemed desirable by Creditor or is required by the laws of any jurisdiction to create, perfect, preserve, validate or otherwise protect any security interest granted pursuant hereto or to enable Creditor to exercise or enforce its rights hereunder with respect to any such security interest. 22.6 Section Titles. The section titles contained in this Agreement are merely for convenience and shall be without substantive meaning or content. 22.7 Construction. The word "including" shall have the inclusive meaning represented by the phrase "including without limitation." Unless the context of this Agreement clearly otherwise requires, the word "or" shall have the meaning represented by the phrase "and/or," references to the plural include the singular and references to the singular include the plural. 23. WAIVER OF JURY TRIAL. Obligor and Creditor each irrevocably and unconditionally waive trial by jury in any action or proceeding relating to this Agreement or any other Financing Document and for any counterclaim therein. 10 IN WITNESS WHEREOF, this Agreement is executed and delivered as of the date first set forth above. CREDITOR: OBLIGOR: VERTICAL CAPITAL PARTNERS, INC., as Agent APPLIED DNA SCIENCES, INC. By:/S/Robert DePalo By:/S/ Peter Brockelsby ---------------- ------------------- Printed Name: Robert DePalo Printed Name: Peter Brockelsby Title: Chairman Title: President Mailing Address: Mailing Address: Facsimile: Telephone: Facsimile: Telephone: AGENT: VERTICAL CAPITAL PARTNERS, INC. By:/S/Robert DePalo ---------------- Printed Name: Robert DePalo Title: President Mailing Address: Facsimile: Telephone: 11 -----END PRIVACY-ENHANCED MESSAGE-----