Filed
Pursuant to Rule 424(b)(3) and 424(c)
Registration
No. 333-153133
PROSPECTUS
SUPPLEMENT
(To
prospectus dated February 23, 2009)
APPLIED
DNA SCIENCES, INC.
67,576,201
SHARES OF
COMMON
STOCK
We are
supplementing our Prospectus dated February 23, 2009, as initially filed with
the Securities and Exchange Commission (the “Commission”) on August 22, 2008 as
part of our Registration Statement on Form S-1
(File No. 333-153133), as amended by that certain Post-Effective
Amendment No. 1 to the Form S-1, as initially filed with the Commission on
February 11, 2009 (and effective as of February 23, 2009), as may be
supplemented from time to time, relating to the resale by certain selling
stockholders of up to 67,576,201 shares of common stock (the “Prospectus”), to
provide information contained in our Current Report on Form 8-K filed with the
Commission on April 20, 2009, a copy of which is attached hereto and
incorporated herein by reference.
You
should read this Prospectus Supplement No. 1 in conjunction with the Prospectus
which is required to be delivered with all supplements thereto. This
Prospectus Supplement No. 1 is qualified by reference to the Prospectus, except
to the extent the information in this supplement updates or supersedes the
information contained in the Prospectus.
The
purchase of the securities offered through this prospectus involves a high
degree of risk. See section entitled “Risk Factors” beginning on
page 4 of the Prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The
Date of This Prospectus Supplement Is April 21, 2009.
———————————————————————————
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): April 14, 2009
Applied
DNA Sciences, Inc
(Exact
Name of Registrant as Specified in Charter)
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Delaware
(State
or Other Jurisdiction
of
Incorporation)
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002-90539
(Commission
File Number)
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59-2262718
(IRS
Employer
Identification
No.)
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25
Health Sciences Drive, Suite 113
Stony
Brook, New York 11790
(Address
of Principal Executive Offices) (Zip Code)
631-444-
8090
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
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):
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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01
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Entry
into a Material Definitive Agreement
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Item
2.03
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Creation
of a Direct Financial Obligation
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Item
3.02
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Unregistered
Sales of Equity Securities
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Closing on Private
Placement. On April 14, 2009, we issued and sold an aggregate
of $300,000 principal amount secured promissory notes bearing interest at a rate
of 10% per annum to “accredited investors,” as defined in regulations
promulgated under the Securities Act of 1933, as amended. The
promissory notes and accrued but unpaid interest thereon shall automatically
convert into shares of our common stock on April 14, 2010 at a conversion
price of $0.070756456 per share, which is equal to a 20% discount to the average
volume, weighted average price of our common stock for the ten trading days
prior to issuance, and are convertible into shares of our common stock at the
option of the noteholders at any time prior to such automatic conversion at a
price equal to the greater of (i) 50% of the average price of our common stock
for the ten trading days prior to the date of the notice of conversion and (ii)
the automatic conversion price. In addition, any time prior to
conversion, we have the irrevocable right to repay the unpaid principal and
accrued but unpaid interest under the promissory notes on three days written
notice (during which period the holders can elect to convert the promissory
notes). The promissory notes bear interest at the rate of 10% per
annum and are due and payable in full on April 14, 2010. Until
the principal and accrued but unpaid interest under the promissory notes are
paid in full, or converted into shares of our common stock, the promissory notes
will be secured by a security interest in all of our assets.
We claim
an exemption from the registration requirements of the Securities Act of 1933,
as amended (the “Securities Act”), for the private placement of the promissory
notes pursuant to Section 4(2) of the Securities Act because each of the
promissory notes was made in a sale by the issuer not involving a public
offering.
Arjent
Services LLC, a registered broker dealer firm (the “Placement Agent”), acted as
our placement agent. In connection with the sale of the sale of
promissory notes described above, we paid the Placement Agent commissions and
discounts aggregating $45,000. In
addition, in connection with an engagement agreement dated February 20, 2009,
pursuant to which the Placement Agent agreed to act as our placement agent to
assist us in raising up to one and a half million dollars ($1,500,000) through
the issuance of convertible promissory notes in a private placement transaction,
we issued to an affiliate of the Placement Agent a warrant to purchase two
million (2,000,000) shares of our common stock at an exercise price equal to the
closing price of our common stock on the date of the engagement agreement, or
$0.06, exercisable for a four year period commencing on February 20, 2010. There can
be no assurances that the Placement Agent will be successful in raising
additional capital.
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Item
9.01
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Financial
Statements and Exhibits
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(d)
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Exhibits.
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Exhibit
10.1
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Form
of Subscription Agreement by and among Applied DNA Sciences, Inc. and the
investors named on the signature pages thereto.
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Exhibit
10.2
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Form
of 10% Secured Convertible Promissory Note of Applied DNA Sciences,
Inc.
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SIGNATURE
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.
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Applied
DNA Sciences, Inc.
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(Registrant)
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By:
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/s/ James A. Hayward
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James
A. Hayward
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Chief
Executive Officer
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Date:
April 20, 2009
Exhibit
10.1
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 $______________ of $100,000 principal amount 10% secured
convertible promissory notes (each a “Note,” or
collectively, the “Notes”) of Applied
DNA Sciences, Inc., a Delaware corporation (the “Company”). This
is an offering by the Company of up to a maximum aggregate amount of S1,500,000
in Notes to one or more subscribers (the “Offering”); provided
that the Company may increase the size of the Offering, in its discretion, to
$2.500,000. The Notes and accrued but unpaid interest thereon
automatically convert into shares of the Company’s common stock, $0.001 par
value (the “Common
Stock”), on the first anniversary of the date of the closing of the
purchase and sale of such Notes (the “Closing Date”) at a
price equal to 80% of the average volume weighted average price of the Common
Stock for the ten trading days prior to the Closing Date (the “Automatic Conversion
Price”). The Notes are convertible at the option of the holder
into shares of Common Stock at a price equal to the greater of (i) 50% of the
average price of the Common Stock for the ten trading days prior to the date of
the notice of conversion and (ii) the Automatic Conversion Price, at any time
prior to the first anniversary of the Closing Date. In addition, at
any time prior to conversion, the Company will have the right to prepay the
Notes and accrued but unpaid interest thereon upon three days notice, such
notice to allow the holders of the Notes to convert the Notes into shares of
Common Stock prior to such repayment.
Until the
principal and interest owed under the Notes are paid in full, or converted into
the Common Stock, the Notes will be secured by a security interest in all of the
assets of the Company. This security interest will be pari passu with the security
interest granted to the holders of an aggregate principal amount of $250,000 of
secured convertible promissory notes of the Company bearing interest at 10% per
annum issued on March 4, 2008 (the “March Notes”), with the security interest
granted to the holder of a $100,000 principal amount secured convertible
promissory note of the Company bearing interest at 10% per annum issued on May
7, 2008 (the “May Note”), with the security interest granted to the holders of
an aggregate principal amount of $250,000 of secured convertible promissory
notes of the Company bearing interest at 10% per annum issued on July 31, 2008
(the “July Notes”), and with the security interest granted to James A. Hayward,
the Chairman of the Board of Directors and the Company’s President and Chief
Executive Officer, for an aggregate principal amount of $650,000 of secured
convertible promissory notes of the Company bearing interest at 10% per annum
issued on October 21, 2008 and January 29, 2009 (the “Hayward
Notes”). Upon the automatic conversion (or earlier payment) of the
March Notes, the May Note, the July Notes and the Hayward Notes, all of the
Company’s obligations will be discharged, including the termination of the
noteholders’ security interest in the Company’s assets. The Company
may issue debt in addition to the amounts sold in the Offering that may be
secured by a security interest in all of the Company’s assets, which would be
pari passu to the
security interest granted to the holders of the Notes, the March Notes, the May
Note, the July Notes and the Hayward Notes.
The Notes
bear interest at the rate of 10% per annum, and the principal and all accrued
and unpaid interest shall be payable in full on the first anniversary of their
issuance in shares of Common Stock, unless paid in cash at the Company’s sole
discretion.
1.
Subscription. Subject to
the terms and conditions hereof, the Subscriber agrees to pay
$__________________ by check or wire transfer of immediately available funds as
consideration for the Subscriber’s Note(s). The Subscriber tenders
herewith a check made payable at the direction of the Company or wire transfer,
in the amount of $__________________. The Subscriber acknowledges and
agrees that this subscription is irrevocable by the Subscriber but is subject to
acceptance by the Company.
2.
Security. Until the
principal and interest owed under the Notes are paid in full, or converted into
Common Stock, the Notes will be secured by a security interest in all of the
assets of the Company. This security interest will be pari passu with the security
interest granted to the holders of the March Notes, the June Notes, the Hayward
Notes and the August Note.
3.
Closing. The
Subscriber understands and agrees that the Company intends to make an initial
closing of this offering of Notes of the Company on or before March 15, 2009,
but that the same 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 the Subscriber prior to
Closing Date, this Subscription Agreement and Confidential Offering
Questionnaire, together with the Subscriber’s funds and any other documents
delivered to the Company, shall be promptly returned to the
Subscriber.
4.
Subscription
Compliance. The 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 the Subscriber and (iii) determine whether the 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, the
Subscriber’s funds will be returned promptly to the Subscriber without interest
or deduction.
5.
Receipt of
Information.
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a.
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The
Subscriber and Subscriber’s purchaser representative, if any, have
received a copy of the Confidential Private Placement Term Sheet dated
February 20, 2009 and all exhibits thereto, including the Company’s most
recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q and
current reports on Form 8-K. 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.
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b.
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The
Subscriber and Subscriber’s 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 Notes 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 Subscriber concerning the Company and such
offering.
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6.
Representations of
Subscriber. In connection with the purchase of the Notes, the Subscriber
hereby represents and warrants to the Company as follows:
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a.
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The
Subscriber is an “accredited investor” as defined in Rule 501 of
Regulation D promulgated under the Act.
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b.
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The
Note(s) is being purchased for the Subscriber’s own account without the
participation of any other person, with the intent of holding the Note(s)
for investment and without the intent of participating, directly or
indirectly, in a distribution of the Note(s) and not with a view to, or
for a resale in connection with, any distribution of the Note(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 Note(s) with others
or reselling or otherwise disposing of any portion of such Note(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.
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c.
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The
Subscriber has no need for liquidity with respect to his purchase of a
Note(s) and is able to bear the economic risk of an investment in the
Note(s) for an indefinite period of time and is further able to afford a
complete loss of such investment.
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d.
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The
Subscriber 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.
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e.
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The
Subscriber recognizes that the Note(s) will be sold to the Subscriber
without registration under any United States federal or other law relating
to the registration of securities for sale.
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f.
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The
Subscriber is aware that any resale of the Note(s) cannot be made except
in accordance with the registration requirements of the United States
Securities Act of 1933, as amended (the “Securities Act”) or an exemption
therefrom.
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g.
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The
Subscriber represents and warrants that all offers and sales of the
Note(s) shall be made pursuant to an exemption from registration under the
Act or pursuant to registration under the Act, and the Subscriber will not
engage in any hedging or short selling transactions with regard to the
Note(s) or the underlying common stock.
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h.
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The
Subscriber is not acquiring the Note(s) based upon any representation,
oral or written, by any person with respect to the future value of, or
income from, the Note(s) but rather upon an independent examination and
judgment as to the prospects of the Company.
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i.
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The
Subscriber understands that the Company is an early stage company, has
limited operating funds and has a limited operating
history. The Subscriber appreciates and understands the risks
involved with investing in a Company with a limited operating history and
has read and understands the risk factors and other information set forth
in the Confidential Private Placement Term Sheet dated February 20, 2009
and in the Company’s Annual Report on Form 10-K, filed on December 16,
2008, the Company’s subsequent current reports on Form 8-K, and the
Company’s Quarterly Report on Form 10-Q, filed on February 17,
2009. Copies of such material are attached to the Confidential
Private Placement Term Sheet and these reports and any future filings made
with the SEC under Section 15(d) of the Securities Exchange Act of 1934,
as amended, can be obtained by visiting the Securities and Exchange
Commission’s website at http://www.sec.gov. The
Subscriber is not relying on any other written information which may have
been provided by the Company or the Company’s placement
agent.
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j.
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The
Subscriber represents, warrants and agrees that it will not sell or
otherwise transfer the Notes without registration under the Securities Act
or an exemption therefrom, and fully understands and agrees that the
Subscriber must bear the economic risk of its purchase because, among
other reasons, the Notes have not been registered under the Securities Act
or under the securities laws of any state and, therefore, cannot be
resold, pledged, assigned or otherwise disposed of unless they are
subsequently registered under the Securities Act and under the applicable
securities laws of such states, or an exemption from such registration is
available. In particular, the Subscriber is aware that the
Notes are “restricted securities,” as such term is defined in Rule 144
promulgated under the Securities Act (“Rule
144”), and they may not be sold pursuant to Rule 144 unless all of
the conditions of Rule 144 are met.
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k.
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The
Company, by and through itself and/or legal counsel, has made no
representations or warranties as to the suitability of the Subscriber’s
investment in the Company, the length of time the undersigned will be
required to own the Note(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 the
Subscriber, nor has the Company, by and through itself and counsel, acted
in any advisory capacity to the Subscriber.
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l.
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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
Note(s).
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m.
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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 be made
available for inspection by investors upon reasonable notice during normal
business hours at the principal place of business of the
Company.
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n.
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The
Note(s) was not offered to the Subscriber by means of publicly
disseminated advertisement or sales literature, nor is the Subscriber
aware of any offers made to other persons by such
means.
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o.
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All
information which the 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.
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7.
Agreements of
Subscriber. The Subscriber agrees as
follows:
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c.
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The
sale of the Note(s) by the Company has not been recommended by any United
States federal or other 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 Placement Term Sheet dated February 20, 2009.
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d.
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The
Note(s) and the underlying common stock will not be offered for sale,
sold, or transferred other than pursuant to: (i) an effective registration
under the Act or in a transaction otherwise in compliance with the Act;
and (ii) 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.
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e.
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The
Company is under no obligation to register the Note(s) or to comply with
any exemption available for sale of the Note(s) without registration, and
the information necessary to permit routine sales of securities of the
Company under Rule 144 of the Act may not be available when you desire to
resell them pursuant to Rule 144 of the Act. The Company is under no
obligation to act in any manner so as to make Rule 144 available with
respect to the Note(s).
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f.
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There
is no established market for the Notes and it is not anticipated that any
public market for the Notes will develop in the future.
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g.
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The
Company may, if it so desires, refuse to permit the transfer of the
Note(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 Act or the
applicable securities laws of any other jurisdiction.
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h.
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A
legend indicating that the Note(s) and the underlying common stock have
not been registered under such securities laws and referring to the
restrictions and transferability of Note(s) and the underlying common
stock may be placed on the certificates or instruments delivered to the
Subscriber or any substitutes thereof and any transfer agent of the
Company may be instructed to require compliance
therewith.
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8.
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 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.
9.
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 Note(s) hereby
subscribed.
10.
Special Power of
Attorney.
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a.
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The
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:
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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 Delaware 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.
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b.
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Such
a power of attorney:
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1. is
a special power of attorney coupled with an interest and is irrevocable;
and;
2. shall
survive the death or disability of the Subscriber.
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c.
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The
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.
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11.
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.
12.
Restrictions on
Transferability. The undersigned understands and agrees that the Note(s)
shall not be sold, pledged, hypothecated or otherwise transferred unless the
Note(s) is registered under the Act and applicable state securities laws or an
exemption from such registration is available.
13.
Governing Law. This
Subscription Agreement is being delivered and is intended to be performed in the
State of New York, and shall be construed and enforced in accordance with, and
the law of such state shall govern the rights of parties.
14.
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.
THIS
SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS
APPLIED
DNA SCIENCES , INC.
SIGNATURE
PAGE TO
SUBSCRIPTION
AGREEMENT
Subscriber
hereby elects to subscribe under the Subscription Agreement for a total of
$______________ of $100,000 principal amount 10% secured convertible promissory
notes (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: ______________, 2009
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IF
INDIVIDUAL INVESTOR:
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(Signature)
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(Printed
Name)
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IF CORPORATION,
TRUST, |
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ESTATE OR
REPRESENTATIVE: |
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Name
of Investor
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(Investors do not write below this
line)
APPROVED
THIS ____ DAY OF ______________, 2009
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APPLIED
DNA SCIENCES, INC.
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By:
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Name:
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Title:
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Exhibit
10.2
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) PROMULGATED UNDER THE SECURITIES ACT, IS PROHIBITED
EXCEPT (1) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO
AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
APPLIED
DNA SCIENCES, INC.
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________________,
2009
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$________________
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10%
SECURED CONVERTIBLE PROMISSORY NOTE
Applied
DNA Sciences, Inc., a Delaware corporation (the “Company”), for value received,
hereby promises to pay to ______________________________ (the “Holder,” which
term shall in every instance refer to any owner or holder of this Note) at
________________________________ or at any other place that the Holder may
designate in writing to the Company, on ________________, 2009 (the “Maturity
Date”), subject to Section 4 hereof, the principal sum of _____________________
THOUSAND AND NO/100 DOLLARS ($______) and to pay interest on the outstanding
principal sum hereof at the rate of ten percent (10%) per
annum. Subject to the conversion of the principal and accrued and
unpaid interest into shares of common stock of the Company, par value $0.001 per
share (“Common Stock”), pursuant to Section 4 hereof, payment on account of
principal and interest shall be due and payable on the Maturity Date 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.
This Note
is secured by a security interest in all the assets of the Company as set forth
in Section 4 hereof (the “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 as enacted in the State of Delaware 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 Delaware is made for a complete description of the rights, powers
and obligations of the Holder.
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1.
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Transfers of Note to Comply with the Securities
Act
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THE
HOLDER AGREES THAT THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THE NOTE MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT (1) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR (2)
PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM.
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2.
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Prepayment; Repayment Upon Consolidation or
Merger
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(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.”
(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.
(a) This
Note and any accrued and unpaid interest hereon shall automatically convert on
the first anniversary of the date hereof into fully paid and non-assessable
shares of Common Stock of the Company, at a price equal to 80% of the average
volume weighted average price of the Common Stock for the ten trading days prior
to the Closing Date (the “Automatic Conversion
Price”).
(b) The
Holder shall have the right 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 principal and
accrued but unpaid interest then outstanding under this Note into that number of
fully paid and non-assessable shares of Common Stock at a price equal to the
greater of (i) 50% of the average volume weighted average price of the Common
Stock for the ten trading days prior to the date the Company receives the
written notice of conversion, rounded up to the nearest whole share, and (ii)
the Automatic Conversion Price.
4.
Security
Agreement. In order to secure the obligations of the Company
under this Note and the Bridge Notes, the Company hereby grants a security
interest in all of the assets of the Company. This security interest
is pari passu with the
security interest granted to the holders of an aggregate principal amount of
$250,000 of secured convertible promissory notes of the Company bearing interest
at 10% per annum issued on March 4, 2008 (the “March Notes”), with the security
interest granted to the holder of a $100,000 principal amount secured
convertible promissory note of the Company bearing interest at 10% per annum
issued on May 7, 2008 (the “May Note”), with the security interest granted to
the holders of an aggregate principal amount of $250,000 of secured convertible
promissory notes of the Company bearing interest at 10% per annum issued on July
31, 2008 (the “July Notes”), and with the security interest granted to James A.
Hayward, the Chairman of the Board of Directors and the Company’s President and
Chief Executive Officer, for an aggregate principal amount of $650,000 of
secured convertible promissory notes of the Company bearing interest at 10% per
annum issued on October 21, 2008 and January 29, 2009 (the “Hayward
Notes”). Upon the automatic conversion (or earlier payment) of the
March Notes, the May Note, the July Notes and the Hayward Notes, all of the
Company’s obligations will be discharged, including the termination of the
noteholders’ security interest in the Company’s assets. The Company
may issue debt in addition to the amounts sold in the Offering that may be
secured by a security interest in all of the Company’s assets, which would be
pari passu to the
security interest granted to the holders of the Notes, the March Notes, the May
Note, the July Notes and the Hayward Notes.
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5.
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Events of Default and
Remedies
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(a) Any
one or more of the following events (each an “Event of Default”) which shall
have occurred and be continuing shall constitute an event of
default:
(i) A
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 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)(iii); or
(iv) 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
(v) One
or more final judgments, arbitration awards or orders for the payment of money
in excess of $1,000,000 in the aggregate shall be rendered against the Company,
which judgment remains unsatisfied for thirty (30) days after the date of such
entry.
(vi) Delisting
of the Common Stock from the principal market or exchange on which the Common
Stock is listed for trading; the 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.
(vii) 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.
(viii) 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;
(ix) 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 ten percent (10%) per
annum. 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.
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6.
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Unconditional Obligation; Fees, Waivers,
Other
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(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.
(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., Stony Brook,
New York 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.
(g) Except
as otherwise provided herein, 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, in any suit, action or proceeding. FURTHER, THE HOLDER AND THE
COMPANY HEREBY WAIVE TRIAL BY JURY IN ANY ACTION TO ENFORCE THIS NOTE AND IN
CONNECTION WITH ANY DEFENSE, COUNTERCLAIM OR CROSS CLAIM 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; SIGNATURE PAGE FOLLOWS
IN
WITNESS WHEREOF, the undersigned has duly executed and delivered this 10%
Secured Convertible Promissory Note as of the day and year first above
written.
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APPLIED
DNA SCIENCES, INC.
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By:
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Name:
James A. Hayward
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Title:
Chief Executive Officer
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8