Exhibit 99.1
November 10, 2003
PURCHASER
NAME & ADDRESS
Re: 8.5% Convertible Exchangeable Debentures Due November 1, 2005
("Debentures")
DEAR GENTLEMEN:
Applied Digital Solutions, Inc. would hereby like to make the holders
of the Debentures the following offer:
Each holder of Debentures shall convert into common stock of Applied
Digital Solutions, Inc. (the "Company") at least 50% outstanding principal
amount of Debentures (and associated accrued but unpaid interest) owned by
such holder, effective at the close of business November 12, 2003 (the
"First Conversion"), at a conversion price per share of $0.35. The parties
acknowledge that this First Conversion price was calculated at such price in
view of the future interest on the Debentures being converted which shall
not be payable.
Each holder of Debentures will notify the Company by 4:00 p.m. on
Tuesday, November 11, 2003 the principal amount of outstanding Debentures
(at least 50% of such amount owned by such holder) that such holder is
converting during the First Conversion. The following additional provisions
shall apply:
1. On Wednesday, November 19, 2003 (the "Second Conversion"), each
holder of Debentures will convert the balance of the outstanding
balance of principal amount of Debenture owned by it at a
conversion price which effects a 16% discount to the average
volume weighted average price of one share of the Company's common
stock for the 5 trading days preceding but not including November
17 (the "Discounted VWAP"); provided, that if such Discounted VWAP
is less than $0.35 (the "Minimum Price"), then (i) the conversion
price per share shall be $0.35 and not the Discounted VWAP, and
(ii) the holder of Debentures need not convert the remaining
principal amount of such holders' Debentures, which shall continue
outstanding in accordance with the terms of the Debentures (with
no price change or adjustment caused by any of the transactions
contemplated by this letter agreement).
2. At the time of the First Conversion, any holder of Debentures may
elect, in writing to the Company, to have any conversion of
Debentures reduce the next succeeding amortization of principal
payments or whether conversion will reduce the ending amortization
of principal payments. If no election is made, it shall be assumed
to reduce the ending amortization payments.
3. In the Purchase Agreement between the Company and the holders of
the Debentures, the definition of "(OMITTED FOR CONFIDENTIALITY)"
shall, on November 26, 2003, automatically be expanded to include
an additional 8,000,000 shares of Common Stock of the Company,
provided that if the Company proposes to engage in a (OMITTED FOR
CONFIDENTIALITY) with respect to such additional 8,000,000 shares,
each holder of Debentures shall have the right (but not the
obligation) to participate in such transaction on the same terms
as such (OMITTED FOR CONFIDENTIALITY) in an amount equal to its
Participation Amount. For any holder of Debentures, the
"Participation Amount" shall mean (A) the percentage of total
Debentures originally purchased by such holder, multiplied by (B)
half of the number of shares proposed in such (OMITTED FOR
CONFIDENTIALITY). If the Company desires to enter into a (OMITTED
FOR CONFIDENTIALITY), it shall notify each holder of Debentures in
writing of the terms of such transaction and if such holder
desires to participate on such terms, then it must notify the
Company in writing by 5 p.m. on the next succeeding business day
by facsimile to (OMITTED FOR CONFIDENTIALITY) attention: debenture
department and confirm to Michael Krawitz by telephone (OMITTED
FOR CONFIDENTIALITY) that such facsimile was received. Failure to
so notify shall be deemed to be a rejection of the offer and
permission for the Company to proceed with selling such holder's
Participation Amount.
The preceding paragraph is conditioned on all holders of Debentures
accepting this offer. However, should a holder elect not to participate in
this offer, then it would not deem the participation by the others to change
the price or cause other adjustment to the Debentures. If any holder of
Debenture disagrees with the above statement, it must contact Michael
Krawitz at (OMITTED FOR CONFIDENTIALITY) immediately. Each holder of
Debentures further expressly agrees that the transaction contemplated by
this letter agreement will not change the exercise price or cause any other
adjustment to the warrants issued in connection with the Debentures.
This offer is also predicated on the fact that the holders of all
outstanding principal amount of Debentures are the same holders that
purchased such Debentures on June 30, 2003. We expect the holders of
outstanding Debentures to sign additional documents providing for standard
investment experience representations and other language in accordance with
securities regulations and other laws.
2
This offer shall remain open until 9:30 a.m. on November 11, after
which time it will immediately expire.
Very truly yours,
APPLIED DIGITAL SOLUTIONS, INC.
By:
----------------------------
Name:
Title:
Agreed and accepted:
See attached pages
3
HOLDERS SIGNATURE PAGE TO LETTER AGREEMENT DATED NOVEMBER 10, 2003
PURCHASER:
By:
-------------------------------
4