-----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, Wt+YXRYc/HnFvtFtDx44XkkUDGGE/ORFv1fFdA1GTbEu5XY/a0m+BzThnwcgatZj hetig2pYJov6cli0QyHjkQ== 0001013762-06-000535.txt : 20060314 0001013762-06-000535.hdr.sgml : 20060314 20060314153641 ACCESSION NUMBER: 0001013762-06-000535 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060308 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: 20060314 DATE AS OF CHANGE: 20060314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLIED DNA SCIENCES INC CENTRAL INDEX KEY: 0000744452 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] 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: 06684981 BUSINESS ADDRESS: STREET 1: 25 HEALTH SCIENCES DRIVE STREET 2: SUITE 113 CITY: STONY BROOK STATE: NY ZIP: 11790 BUSINESS PHONE: 631 444 6862 MAIL ADDRESS: STREET 1: 25 HEALTH SCIENCES DRIVE STREET 2: SUITE 113 CITY: STONY BROOK STATE: NY ZIP: 11790 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 mar1320068k.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): March 8, 2006 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.) 25 Health Sciences Drive, Suite 113, Stony Brook, New York 11790 (Address of principal executive offices and Zip Code) Registrant's telephone number, including area code (631) 444-6862 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. Item 2.03 Creation of a Direct Financial Obligation. Item 3.02 Unregistered Sales of Equity Securities. On March 8, 2006, we completed a private placement offering in which we sold an aggregate of 30 units (the "Units") of our securities, each Unit consisting of (i) a $50,000 Principal Amount 10% Secured Convertible Promissory Note (the "Notes") and (ii) warrants (the "Warrants") to purchase 100,000 shares of our common stock, or an aggregate of $1,500,000 in principal amount of Notes and Warrants to purchase 3,000,000 shares of common stock, for aggregate gross proceeds of $1,500,000. The Units were sold pursuant to Subscription Agreements, by and between each of the purchasers and Applied DNA Operations Management, Inc., our wholly owned subsidiary. The Notes bear interest at the rate of 10% per annum and mature 18 months after the date of issuance. The Notes, and interest accrued thereon, are convertible into shares of our common stock at a price of $0.50 per share by the holder anytime from issuance through the first anniversary of issuance of the Notes and automatically convert on the maturity date at a 20% discount to the average bid price for our common stock for the ten trading days prior to conversion. In addition, the holders have the right anytime after the 15th month and through the 18th month after the date of issuance to request payment of accrued interest and principal in cash and, anytime prior to conversion, we have the irrevocable right to repay accrued interest and principal under the Notes on 3 days notice, subject to the holders' voluntary right to convert the Notes during such three day period. All principal and accrued interest under the Notes will be due and payable in the event that we consolidate or merge with another entity, unless (i) we shall be the surviving entity in such consolidation or merger, or (ii) the other entity controls, is under common control with or is controlled by us immediately prior to the consolidation or merger whether or not we shall be the surviving entity in such consolidation or merger, in which event the Notes shall remain outstanding as an obligation of the consolidated or surviving entity. Upon an event of default under the Notes, all principal and accrued but unpaid interest under the Notes will automatically be due and payable, and the Notes shall bear interest until repaid at a default interest rate of 12%. The Notes are secured by all of our assets, including, but not limited to, our patents, trademarks, equipment, fixtures, inventory and accounts receivable, for the benefit of the holders, subject to our right to issue up to an additional $11,500,000 in principal amount of indebtedness with a security interest in our assets which is pari passu with the security interest of the holders of the Notes. The Warrants are exercisable from March 8, 2006 until March 7, 2011 at a price of $0.50 per share, subject to adjustment in certain events, including, without limitation, upon our consolidation, merger or sale of all of substantially all of our assets, a reclassification of our common stock, or any stock splits, combinations or dividends with respect to our common stock. The Warrants are callable at a price equal to $1.25 per share on the earlier of (i) one year from issuance or (ii) the date that the shares of common stock issuable upon exercise of the Warrants are registered for resale and our common stock has traded at or above $1.25 per share for 20 consecutive trading days. In addition, we have agreed to file a registration statement on Form SB-2 to effect the registration of 100% of our shares of common stock issuable upon conversion of the Notes and exercise of the Warrants within 30 days of the effective date of our pending registration statement on Form SB-2 (SEC File 333-122848) being declared effective by the SEC. We have agreed to use our reasonable best efforts to cause the registration statement to be declared effective no later than 180 days after the filing date. If we fail to file a registration statement with the SEC on or before the time frame described, the holders will be entitled to liquidated damages from Applied DNA Operations Management, Inc. in an amount equal to 2% per month for each month that we are delinquent in filing the registration statement. Arjent Limited, a registered broker dealer firm, (the "Selling Agent") acted as our selling agent in connection with the Offering. We paid the Selling Agent: (a) a commission equal to $180,000, representing 12% of the Offering proceeds; (b) a 3% non-accountable expense allowance in the amount of $45,000; (c) $75,000 for the Selling Agent's legal fees; (d) shares of common stock equal to 10% of the number of shares issuable upon conversion of the Notes on the date of issuance of the Notes; and (e) $90,000 for consulting and management fees, which will be paid to Vertical Capital Partners under the Selling Agent's exclusive banking agreement with Vertical Capital Partners. In addition, we issued 2,000,000 shares of common stock to the Selling Agent in its capacity as our investment banker. The Selling Agent had no obligation to buy any Notes or Warrants from us. In addition, we agreed to indemnify the Selling Agent and other persons against specific liabilities under the Securities Act of 1933, as amended (the "Act"). We claim an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Regulation S promulgated thereunder since, among other things, the investors were offshore accredited investors. 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 - ------- ------------------------------------------------------------------------ 10.1 Form of Subscription Agreement by and among Applied DNA Operations Management, Inc. and the investors named on the signature pages thereto. 10.2 Form of 10% Secured Convertible Promissory Note of Applied DNA Sciences, Inc. 10.3 Form of Warrant Agreement of Applied DNA Sciences, Inc. 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: March 14, 2006 /s/ JAMES HAYWARD ------------------ James Hayward Chief Executive Officer 4 EX-10 2 mar1320068kex101.txt Exhibit B --------- SUBSCRIPTION BOOKLET -------------------- APPLIED DNA OPERATIONS MANAGEMENT, INC. (A Nevada Corporation) Dear Investor: On behalf of Applied DNA Operations Management, Inc. (the "Company"), I am pleased to provide the enclosed Confidential Private Offering Memorandum and Subscription Supplement with respect to the private placement offering of 70 units (the "Units") for sale to accredited investors at a price of $50,000 per Unit (the "Offering") on a "best efforts" no minimum, with a $3,500,000 maximum offering basis. Each Unit consists of (i) a $50,000 Principal Amount 10% Secured Convertible Promissory Note ("Note" or "Notes") and (ii) warrants to purchase 100,000 shares of common stock of the Company's parent corporation, Applied DNA Sciences, Inc., a Nevada corporation ("Applied DNA" and together with the Operations Company hereinafter, the "Company"), exercisable for a period of five years at a price of $0.50 per share (the "Warrants"). The Warrants will be callable at $1.25 on the earlier of (i) one year from issuance or (ii) once the underlying shares are registered and if Applied DNA's stock trades at or above $1.25 per share for 20 consecutive trading days. The Notes, and interest accrued thereon, are convertible into shares of common stock of Applied DNA at a price of $0.50 per share, by the holder anytime from issuance through the first anniversary and shall automatically convert on the eighteenth month after issuance at a 20% discount of the average BID price for the ten trading days prior to conversion. In addition, the holder will have the right anytime after the 15th month and through the 18th month to request payment of accrued interest and principal in cash and, anytime prior to conversion, the Company will have the irrevocable right to repay the note and interest on 3 days notice, such notice will allow the Note Holders to convert in to common shares of Applied DNA Sciences, Inc. or be repaid their respective principal and interest. Your attention is directed to the following: [ ] Payment for the Units: You may pay for your Units by check or wire transfer. To expedite the closing of this offering, however, the Company kindly requests that payment be tendered via wire transfer. [ ] To deposit funds by wire transfer, please contact Verity San Souci at 212 446-0006 to receive the wiring instructions. or/ Checks should be made payable to Applied DNA Operations Managements, Inc. and sent with your Subscription Documents directly to the Company at the address listed below. [ ] Execution of Subscription Documents: You must carefully review and complete, in full, the Subscription Agreement and Confidential Offering Questionnaire that is included as part of this booklet. Please be sure to execute pages (6). Please return the executed Subscription Agreement and Confidential Offering Questionnaire to: Applied DNA Operations Management, Inc. Attn: Jim Hayward 25 Health Sciences Drive, Suite 113 Stony Brook, New York 11790 Telephone: (516) 971-3634 Upon acceptance of your subscription, the Company will send to you fully executed copies of the Subscription Agreement. Your payment for the Units and your properly completed Subscription Documents must be received on or before January 30, 2005. This expiration date to reach the minimum subscriptions may be extended for three additional periods, each such period not to exceed thirty (30) days, at the sole decision of the Company without notice to any subscriber. The enclosed Confidential Private Offering Memorandum and exhibits describe the material rights and obligations between the Company and you in connection with this Offering. Please review the Confidential Private Offering Memorandum and exhibits carefully before deciding if this investment is appropriate for you. We are pleased to offer you this opportunity and hope that you will consider the proposed investment in the Company. Sincerely, Applied DNA Operations Management, Inc. Jim Hayward, Chief Executive Officer SUBSCRIPTION AGREEMENT Applied DNA Sciences, Inc. 25 Health Sciences Drive, Suite 113 Stony Brook, New York 11790 Gentlemen and Ladies: The undersigned (the "Subscriber") hereby subscribes for ________ $50,000 Units, each consisting of (i) a $50,000 Principal Amount 10% Secured Convertible Promissory Note ("Note" or "Notes") and (ii) warrants to purchase 100,000 shares of common stock of Applied DNA Sciences, Inc., a Nevada corporation ("Applied DNA" and together with the Operations Company, the "Company"), exercisable for a period of five years at a price of $0.50 per share (the "Warrants"). The Warrants will be callable at $1.25 on the earlier of (i) one year from issuance or (ii) once the underlying shares are registered and if Applied DNA's stock trades at or above $1.25 per share for 20 consecutive trading days. The Notes, and interest accrued thereon, are convertible into shares of common stock of Applied DNA at a price of $0.50 per share, by the holder anytime from issuance through the first anniversary and shall automatically convert on the eighteenth month after issuance at a 20% discount of the average BID price for the ten trading days prior to conversion. In addition, the holder will have the right anytime after the 15th month and through the 18th month to request payment of accrued interest and principal in cash and, anytime prior to conversion, the Company will have the irrevocable right to repay the note and interest on 3 days notice, such notice will allow the Note Holders to convert in to common shares of Applied DNA or be repaid their respective principal and interest. 1. Subscription. Subject to the terms and conditions hereof, Subscriber agrees to pay $__________________ by check or wire transfer of immediately available funds as consideration for his Note. Subscriber tenders herewith a check made payable to the order of, Applied DNA Operations Management, Inc. or wire transfer, in the amount of $__________________. Subscriber acknowledges and agrees that this subscription is irrevocable by Subscriber but is subject to acceptance by the Company. 2. Security. Borrower agrees that until the principal and interest owed under this promissory note are paid in full, this note will be secured by a security agreement and Uniform Commercial Code Financing statement giving Lender a security interest in all the patents, trademarks, equipment, fixtures, inventory and accounts receivable of the business's known as Applied DNA Sciences, Inc and / or any of its subsidiaries. The Borrower, by execution of this note and subscription agreement certifies under penalty of perjury that to the best of their knowledge the security pledged under this is not pledged, encumbered or hypothecated to any parties . 3. Closing. The undersigned Subscriber understands and agrees that the Company intends to make an initial closing of this offering of Units in the Company on or before__________, but may be extended for three additional periods, each such period not to exceed thirty (30) days, at the sole decision of the Company without notice to any subscriber. If the Company does not accept Subscriber prior to the initial closing, this Subscription Agreement and Confidential Offering Questionnaire, together with Subscriber's funds and any other documents delivered to the Company, shall be promptly returned to Subscriber. 4. Subscription Compliance. The undersigned Subscriber agrees that this subscription is subject to the following terms and conditions: The Company shall have the right, in its sole discretion, to: (i) accept or reject this subscription; (ii) determine whether this Subscription Agreement has been properly completed by Subscriber and (iii) determine whether Subscriber has met all of the Company's requirements for investment in a Note. If the Company deems this subscription to be defective, deficient or otherwise non-compliant with the terms of this offering, Subscriber's funds will be returned promptly to Subscriber without interest or deduction. 2 5. Receipt of Information. a. The undersigned Subscriber and Subscriber's purchaser representative, if any, have received a copy of the Confidential Private Offering Memorandum. The Subscriber, either alone or together with Subscriber's purchaser representative, if any, have such knowledge and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the Company. b. The undersigned Subscriber and Subscriber's purchaser representative, if any, have had the opportunity to ask questions of and receive answers from the Company concerning the terms and conditions of the offering of the Units by the Company and to obtain any additional information Subscriber has requested which is necessary to verify the accuracy of the information furnished to the undersigned Subscriber concerning the Company and such offering. 6. Representations of Subscriber. In connection with the purchase of the Note, the undersigned Subscriber hereby represents and warrants to the Company as follows: a. If the undersigned Subscriber is an individual purchaser of the Unit(s), Subscriber represents and warrants that he/she is at least twenty-five years of age and a resident of the Country of _____________________________________ and is not nor has ever been a United States person, as defined in Rule 902 of Regulation S promulgated under the Securities Act of 1933 (the "1933 Act"). b. If the undersigned Subscriber is a Company, trust or other corporate entity purchaser of the Unit(s), Subscriber represents and warrants that it is duly organized and validly existing under the laws of the Country of ____________________________, and has all requisite powers to purchase the Unit(s). If the subscriber is a trust, none of the trustees are United States persons, as defined in Rule 902 of Regulation S promulgated under the 1933 Act. c. The undersigned Subscriber is an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the 1933 Act. d. The Unit(s) is being purchased for the Subscriber's own account without the participation of any other person, with the intent of holding the Unit(s) for investment and without the intent of participating, directly or indirectly, in a distribution of the Unit(s) and not with a view to, or for a resale in connection with, any distribution of the Unit(s) or any portion thereof, nor is the undersigned aware of the existence of any distribution of the Company's securities. Furthermore, the undersigned has no present intention of dividing such Unit(s) with others or reselling or otherwise disposing of any portion of such Unit(s), either currently or after the passage of a fixed or determinable period of time, or upon the occurrence or nonoccurrence of any predetermined event or circumstance. e. The undersigned Subscriber has no need for liquidity with respect to his purchase of a Unit(s), is able to bear the economic risk of an investment in the Unit(s) for an indefinite period of time and is able to afford a complete loss of such investment. f. The undersigned represents that his financial commitment to all investments (including his investment in the Company) is reasonable relative to his net worth and liquid net worth. g. The undersigned Subscriber recognizes that the Unit(s) will be: (i) sold to Subscriber without registration under any state or federal law relating to the registration of securities for sale; (ii) issued and sold in reliance on the exemption from registration under the Nevada Securities Act (the "Act"); (iii) issued and sold in reliance on the exemption from registration under the 1933 Act provided by Section 4(2) of the 1933 Act; and (iv) issued and sold to non-United States persons, as defined in Section 902(k) under Regulation S promulgated under the 1933 Act. 3 h. The undersigned Subscriber is aware that any resale of the Unit(s) cannot be made except in accordance with Rule 904 under Regulation S promulgated under the 1933 Act. i. The undersigned is not acquiring the Unit(s) based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Unit(s) but rather upon an independent examination and judgment as to the prospects of the Company. j. The undersigned Subscriber understands that the Company is a newly formed Company and lacks an operating history. Subscriber appreciates and understands the risks involved with investing in a Company with no operating history. k. The Company, by and through itself and/or legal counsel, has made no representations or warranties as to the suitability of the undersigned Subscriber's investment in the Company, the length of time the undersigned will be required to own the Unit(s), or the profit to be realized, if any, as a result of investment in the Company. Neither the Company nor its counsel has made an independent investigation on behalf of Subscriber, nor has the Company, by and through itself and counsel, acted in any advisory capacity to Subscriber. l. The Company, by and through itself and/or legal counsel, has made no representations or warranties that the past performance or experience on the part of the Company, or any partner or affiliate, their partners, salesmen, associates, agents, or employees or of any other person, will in any way indicate the predicted results of the ownership of the Unit(s). m. The Company has made available for inspection by the undersigned, and his purchaser representative, if any, the books and records of the Company. Upon reasonable notice, such books and records will continue to make available for inspection by investors upon reasonable notice during normal business hours at the principal place of business of the Company. n. The Unit(s) was not offered to the undersigned Subscriber by means of publicly disseminated advertisement or sales literature, nor is Subscriber aware of any offers made to other persons by such means. o. All information which the undersigned Subscriber has provided to the Company concerning the Subscriber is correct and complete as of the date set forth at the end of this Subscription Agreement, and if there should be any material adverse change in such information prior to receiving notification that this subscription has been accepted, the undersigned will immediately provide the Company with such information. 7. Agreements of Subscriber. The undersigned Subscriber agrees as follows: a. The sale of the Unit(s) by the Company has not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Subscription Agreement or the Confidential Private Offering Memorandum. 4 b. The Unit(s) will not be offered for sale, sold, or transferred other than pursuant to: (i) an effective registration under the Act or in a transaction which is otherwise in compliance with the Act; (ii) an effective registration under the 1933 Act or in a transaction otherwise in compliance with the 1933 Act; and (iii) evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws. c. The Company is under no obligation to register the Unit(s) or to comply with any exemption available for sale of the Unit(s) without registration, and the information necessary to permit routine sales of securities of the Company under Rule 144 of the 1933 Act are not now available, and no assurance has been given that they will become available. The Company is under no obligation to act in any manner so as to make Rule 144 available with respect to the Unit(s). d. There is no established market for the Units and it is not anticipated that any public market for the Units will develop in the future. e. The Company may, if it so desires, refuse to permit the transfer of the Unit(s) unless the request for transfer is accompanied by an opinion of counsel acceptable to the Company to the effect that neither the sale nor the proposed transfer will result in any violation of the 1933 Act or the applicable securities laws of any other jurisdiction. f. A legend indicating that the Unit(s) has not been registered under such securities laws and referring to the restrictions and transferability of Unit(s) may be placed on the certificates delivered to the undersigned Subscriber or any substitutes therefore and any transfer agent of the Company may be instructed to require compliance therewith. The Unit(s) is further subject to restriction of transfer as set forth in the By-laws, a copy of which the Subscriber has read and approved. 7. Indemnification of the Company. The undersigned understands the meaning and legal consequences of the representations and warranties contained herein, and hereby agrees to indemnify and hold harmless the Company, its respective agents, officers, managers and affiliates from and against any and all damages, losses, costs and expenses (including reasonable attorneys' fees) which they or any of them may incur by reason of the failure of the undersigned Subscriber to fulfill any of the terms of this Subscription Agreement, or by reason of any breach of the representations and warranties made by the Subscriber herein, or in any document provided by the Subscriber to the Company. 8. Representative Capacity. If an investment in the Company is being made by a corporation, trust or estate the undersigned individual signing on behalf of the Subscriber, represents that he has all right and authority, in his capacity as an officer, managing member, trustee, executor or other representative of such corporation, trust or estate, as the case may be, to make such decision to invest in the Company and to execute and deliver this Subscription Agreement on behalf of such corporation, trust or estate as the case may be, enforceable in accordance with its terms. The undersigned individual also represent that any such corporation, trust or estate was not formed for the purpose of buying the Unit(s) hereby subscribed. 8. Special Power of Attorney. a. The undersigned Subscriber, by executing this Subscription Agreement, irrevocably makes, constitutes and appoints any executive officer of the Company, and each of them individually, as the undersigned's true and lawful attorney, for the undersigned and in the undersigned's name, place and stead, and for the use and benefit of the undersigned, to execute and acknowledge and, to the extent necessary, to file and record: 5 1. such certificates, instruments and documents as may be required to be filed by the Company or which the Company deems advisable to file under the laws of the State of Nevada or any other state or jurisdiction in which the Company transacts business; and 2. all conveyances or other instruments or documents necessary, appropriate or convenient to effect the dissolution and termination of the Company. b. Such a power of attorney: 1. is a special power of attorney coupled with an interest and is irrevocable; and; 2. shall survive the death or disability of the undersigned Subscriber. c. The undersigned Subscriber hereby agrees to be bound by any representations made by the Company or its substitutes acting pursuant to this Special Power of Attorney, and the undersigned hereby waives any and all defenses which may be available to him to contest, negate or disaffirm its actions or the actions of his substitutes under this Special Power of Attorney. The powers herein granted are granted for the sole and exclusive benefit of the undersigned and not on behalf of any other person, in whole or in part. 10. Subscription Not Revocable. The undersigned hereby acknowledges and agrees that the undersigned is not entitled to cancel, terminate or revoke this Subscription Agreement or any agreements of the undersigned hereunder and that this Subscription Agreement shall survive the dissolution, death or disability of the undersigned. 11. Restrictions on Transferability. The undersigned understands and agrees that the purchase and resale, pledge, hypothecation or other transfer of the Unit(s) is restricted by certain provisions of the By-laws of Applied DNA Operations Management, Inc. and that the Unit(s) shall not be sold, pledged, hypothecated or otherwise transferred unless the Unit(s) is registered under the Securities Act of 1933, as amended, and applicable state securities laws or an exemption from such registration is available. 12. Governing Law. This Subscription Agreement is being delivered and is intended to be performed in the state of Nevada, and shall be construed and enforced in accordance with, and the law of such state shall govern the rights of parties. 13. Numbers and Gender. In this Agreement, the masculine gender includes the feminine gender and the neuter and the singular includes the plural, where appropriate to the context. 6 APPLIED DNA OPERATIONS MANAGEMENT, INC. SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT Subscriber hereby elects to subscribe under the Subscription Agreement for a total of $______________ of UNITS (NOTE: to be completed by subscriber) and executes the Subscription Agreement. IN Witness WHEREOF, the undersigned has executed this Subscription Agreement on the date set forth below. Date of Execution: ___________, 2006 IF INDIVIDUAL INVESTOR: ----------------------------------- (Signature) ----------------------------------- (Printed Name) IF CORPORATION, TRUST, ESTATE OR REPRESENTATIVE: -------------------------------- Name of Investor By: ________________________________ Name: ________________________________ Title: ________________________________ (Investors do not write below this line) APPROVED THIS ____ DAY OF ___________, 2006 Applied DNA Operations Management, Inc. By: _______________________ Name: _______________________ Title:_______________________ 7 EX-10 3 ex102.txt THIS NOTE AND THE COMMON STOCK REFERENCED HEREIN HAVE NOT BEEN REGISTERED WITH OR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY AND ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE, "SECURITIES ACT"). THE SALE, ASSIGNMENT, CONVEYANCE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS NOTE OR THE UNDERLYING COMMON STOCK TO U.S. PERSONS, AS DEFINED IN RULE 902(k) OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, IS PROHIBITED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S AS PROMULGATED UNDER THE SECURITIES ACT; (2) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT; OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. This note is one of a series of notes (the "Serial Notes") issued in the aggregate principal amount of $1,500,000.00. APPLIED DNA SCIENCES, INC. March 8, 2006 $__________ 10% SECURED CONVERTIBLE PROMISSORY NOTE Applied DNA Sciences, Inc., a Nevada corporation (the "Company"), for value received, hereby promises to pay to _________________ or registered assigns (the "Holder") on September 7, 2007, the "Maturity Date"), , the principal sum of _____ THOUSAND DOLLARS ($______) 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, 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 on file with the Company 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. 1 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 set forth in Section 4(f) hereof ("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 and the provisions of the Uniform Commercial Code of the State of Nevada including, without limitation, powers with respect to the enforceability and collectibility of all amounts due hereunder. Reference to the Uniform Commercial Code of the State of Nevada is made for a complete description of the rights, powers and obligations of the Holder. 1. Transfers of Note to Comply with the Securities Act The Holder agrees that this Note may not be sold, transferred, pledged, hypothecated or otherwise disposed of except (1) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S AS PROMULGATED UNDER THE SECURITIES ACT; (2) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT; OR (3) PURSUANT TO AN AVAILABLE EXEMPTION 2. Prepayment; Holders' Premaking Rights; Repayment Upon Consolidation or Merger (a) The principal amount of this Note may be prepaid by the Company, in whole or in part, on three days prior written notice 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." Notwithstanding the foregoing right of payment, upon receipt of the three day notice, the Holder shall have the conversion rights set forth under Section 3(b) hereof, regardless of when said three day notice is given. (b) The Holder shall have the right, but not the obligation from the commencement of the fifteenth (15th) month from the date hereof until the Maturity Date to request payment of accrued interest and principal hereunder in full payment of this Note prior to the automatic conversion provided in Section 3(a) hereof. (c) 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. 2 3. Conversion of Note (a) This Note shall automatically convert into shares of Common Stock of the Company at the Maturity Date.. The conversion rate shall be calculated at a twenty (20%) percent discount from the average closing bid price for the ten (10) trading days prior to conversion, and the entirety of the debt (consisting of principal and accrued interest) 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 first anniversary of the date hereof, 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; 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; 3 (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. (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) Sell, transfer or dispose of, any of its assets other than in the ordinary course of its business and for fair value; or (ii) 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 Agreement. The Company hereby grants to the holders of the Serial Notes a security interest in all of the assets of the Company including, but not limited to, patents, trademarks, equipment, fixtures, inventory and accounts receivable with all of the rights and powers of a secured party under the Uniform Commercial Code of the State of Nevada. 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 to repay with the proceeds of these Notes, the Company represents 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. Subject to the rights of the Company set forth at the end of this paragraph, 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. The Company reserves the right to issue up to $11,500,000 of additional debt secured by a security interest in the assets of the Company which is pari passu with the security interest of the holder of this Note granted herein. 4 (g) Registration Under the Securities Act of 1933. The Company will prepare and file a registration statement with the Securities and Exchange Commission covering the Common Stock of the Company underlying the Serial Notes within thirty (30) days of the effective date of the Company's pending registration statement on Form SB-2 (SEC File 333-122848) being declared effective by the SEC, and it agrees to use its reasonable best efforts to have the registration statement declared effective by the SEC by no later than one hundred and eighty (180) days after filing. If the Company fails to file a registration statement with the SEC on or before the time frame described, the Holder will be entitled to liquidated damages in the amount of 2% per month for each month the Company is delinquent in filing the registration statement. 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 5 (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 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 $250,000 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 prepare and file a registration statement with the Securities and Exchange Commission covering the Common Stock within thirty (30) days of the effective date of the Company's pending registration statement on Form SB-2 (SEC File 333-122848) being declared effective by the SEC, or to use its reasonable best efforts to have the registration statement declared effective by the SEC by no later than one hundred and eighty (180) days after filing. (xi) Except as permitted herein, the Company shall encumber or hypothecate the collateral subject to the Security Agreement to any party; (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. 6 (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. 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. (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. 7 7. 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 Holder at the address in the records of the Company, to the Company at 25 Health Sciences Dr., Stoney Brook, N.Y. 11790 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. 8 (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. (h) The Company and the Holder(i) agree 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) waive any objection which the Holder or 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 Holder and the Company further agree 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 agree 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 HOLDER AND THECOMPANY HEREBY WAIVE 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. IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Note as of the day and year first above written. [THIS SPACE INTENTIONALLY LEFT BLANK] 9 APPLIED DNA SCIENCES, INC By /s/James Hayward -------------------------- Name: James Hayward Title:CEO EX-10 4 ex103.txt APPLIED DNA SCIENCES, INC. WARRANT AGREEMENT, dated March __, 2006 (the "Agreement"), by and between Applied DNA Sciences, Inc., a Nevada corporation (the "Company"), and __________________ (individually the "Warrant Holder" and collectively with others, the "Warrant Holders"). NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and the Warrant Holder hereby agree as follows: 1. Exercise of Warrant. This warrant (the "Warrant") shall entitle the Warrant Holder thereof to purchase an aggregate of _________ shares of common stock par value $0.001 per share of the Company ("Common Stock") at an exercise price of $0.50 per share (the "Exercise Price") per share. This Warrant may be exercised in whole or in part at any time or from time to time during the period commencing on March 8, 2006 and expiring at 5:00 p.m., New York City time, on March 7, 2011 (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 Warrant 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 Warrant Holder shall be deemed to be the Warrant 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 Warrant Holder. Certificates for the Warrant Shares shall be delivered to the Warrant 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, subject to compliance by the Warrant Holder with the restrictions on offer and sale referred to in Section 11 hereof, the Warrant 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. or the equivalent governing body for broker -dealers in other nations, 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 Warrant Holder and endorsed by the Warrant 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 fractional 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 Warrant 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 Warrant 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 Warrant 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 11 hereof, upon surrender of this Warrant Agreement to the Company at its principal office or at the office of its stock transfer agent, if any, with a duly executed assignment form and funds sufficient to pay the applicable transfer tax, if any, the Company shall, without charge, execute and deliver new Warrant Agreement(s) in the name of the assignee named in such instrument of assignment and the original Warrant Agreement shall promptly be canceled. The Warrants may be divided or combined with other Warrants which carry the same rights upon presentation of the Warrant Agreement 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 Warrant Holder hereof specifying the names and denominations in which new Warrant Agreements 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 Agreements of like tenor and date. 6. Rights of the Warrant Holder. The Warrant Holder shall not, by virtue hereof, be entitled to any rights of a share holder of the Company until exercise of any Warrants. 7. Adjustments of Purchase Price and Number of Shares. (a) Subdivision and Combination. If 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 Price 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 paragraph 7(a), the number of shares of Common Stock issuable upon the exercise of each Warrant shall be adjusted to the nearest full share of Common Stock by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of 2 Common Stock 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 Warrant 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 Warrant 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 Warrant 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 the holders of its Common Stock 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 Warrant 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(e). (e) Warrant Agreement 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, this Warrant Agreement 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. 3 (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 Warrant Holder. 8. Call Rights. The Company has the right, but not the obligation, to call this Warrant for $1.25 per share at the earlier of (i) one year from the date first set forth above or (ii) from and after the date that the Warrant Shares are registered for public sale in the United States and the Common Stock trades at or above $1.25 per share for twenty (20) consecutive trading days. The Company may exercise this right of redemption by written notice to the registered holder of this Warrant together with payment of $1.25 or its Sterling equivalent. 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 Company will prepare and file a registration statement with the Securities and Exchange Commission covering the Warrant Shares and the shares of Common Stock issuable upon conversion of the 10% Secured Convertible Promissory Notes due September 7, 2007 of the Company within thirty (30) days of the effective date of the Company's pending registration statement on Form SB-2 (SEC File 333-122848) being declared effective by the SEC., and it agrees to use its reasonable best efforts to have the registration statement declared effective by the SEC by no later than one hundred and eighty (180) days after filing. If the Company fails to file a registration statement with the SEC on or before the time frame described, the Warrant Holders will be entitled to liquidated damages in the amount of 2% per month for each month the Company is delinquent in filing the registration statement. 11. Restrictions on Offer and Sale. THE OFFER AND SALE OF THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH OR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY AND ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE, "SECURITIES ACT"). THE SALE, ASSIGNMENT, CONVEYANCE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS WARRANT TO U.S. PERSONS, AS DEFINED IN RULE 902(k) OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, IS PROHIBITED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S AS PROMULGATED UNDER THE SECURITIES ACT; (2) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT; OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND ANY CERTIFICATE REPRESENTING WARRANT SHARES SHALL BEAR A LEGENT TO SUCH EFFECT. 4 12. Notices to Warrant Holders. Nothing contained in this Agreement shall be construed as conferring upon the Warrant Holder the right to vote or to consent or to receive notice as a share holder in respect of any meetings of share holders for the election of directors or any other matter, or as having any rights whatsoever as a share holder 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 share holders 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 Operations Management, Inc. Attn: Jim Hayward, Chief Executive Officer 25 Health Sciences Drive, Suite 113 Stony Brook, New York 11790 If to the Warrant Holder, to the address of such Warrant 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 Warrant 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. 17. 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 6 Company has obtained the written consent or waiver of the Warrant 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. [THE REST OF THIS PAGE IS LEFT BLANK INTENTIONALLY] 7 APPLIED DNA SCIENCES, INC. By: /s/ James Hayward ---------------------- Name: James Hayward Title: CEO 8 APPLIED DNA SCIENCES, INC. WARRANT EXERCISE FORM (To be executed upon exercise Warrant) The undersigned, the record holder of this Warrant, hereby irrevocably elects to exercise the right, represented by this Warrant, to purchase ___ of the Warrant Shares and herewith pays the Exercise Price in accordance with the terms of this Warrant by tendering payment for such Warrant Shares to the order of APPLIED DNA SCIENCES, INC. in the amount of $_________. The undersigned requests that a certificate for the Warrant Shares being purchased be registered in the name of ______________ and that such certificate be delivered to __________. Dated:_____________ Signature:_________________________ 9 -----END PRIVACY-ENHANCED MESSAGE-----