Settlement
of Litigation
On
May 2,
2007, we, APDN (B.V.I.) Inc., our wholly-owned subsidiary, Applied DNA
Operations Management, Inc., our wholly-owned subsidiary, James A. Hayward,
our
Chief Executive Officer and one of our directors, and Jun-Jei Sheu, one
of our
directors (the “Applied DNA parties”), entered into agreements with each of
Angela Wiggins, John D. Barnett, Chanty Cheang and Adrian Butash, Jaime
Cardona,
all of whom are either a former employee or consultant of ours (collectively,
the “former employees and consultants”) to settle certain pending litigation and
all other claims arising out of the former employees’ and consultants’
employment or consulting relationships with us.
Pursuant
to the terms of these settlement agreements, the Applied DNA parties on
the one
hand, and the former employees and consultants on the other, agreed to
release
each other from any and all liabilities in connection with or arising from
the
former employees’ and consultants’ prior employment or consulting relationships,
and to dismiss certain lawsuits previously disclosed by us (Barnett, et
al. v.
Applied DNA Sciences, et al., Los Angeles County Superior Court case number
BC
350904, and Applied DNA Sciences, Inc. v. Paul Reep, Adrian Butash, John
Barnett, Chanty Cheang, Jaime Cardona, and Angela Wiggins, U.S. District
Court
for the Central District of California case number CV06-2027 RGK) as well
as
Angela Wiggins v. us, APDN Operations Management, Inc., APDN (B.V.I.) Inc.,
Peter Brocklesby and James A. Hayward (Los Angeles Superior Court case
number
BC369331), which was filed by Angela Wiggins on April 10, 2007. In exchange
for
the consideration referenced in the Settlement Agreement, the Company agreed
to
pay the Plaintiffs an aggregate amount of $605,000 in cash in five equal
installments due on the first day of each month over the five month period
beginning on June 1, 2007.
The
settlement agreements provide that each of the former employees and consultants
can cause a judgment to be entered against us, APDN (B.V.I.) Inc. and APDN
Operations Management, Inc. (and not the individual Applied DNA Parties)
in an
amount equal to three times the remaining balance due to such former employee
or
consultant under the applicable settlement agreement, plus interest, if
we
default on our payment obligation to such person and we do not satisfy
it within
the ten day period after receiving notice of such default.
A
copy of
the settlement agreements are attached hereto as Exhibits 10.1 through
10.5 and
are incorporated herein by reference.
Item
1.02 Termination of a Material Definitive Agreement
Conversion
of Secured Convertible Promissory Notes
As
we
previously disclosed, on May 2, 2006, we issued and sold $1,000,000 in
aggregate
principal amount of 10% Secured Convertible Promissory Notes with warrants
to
purchase an aggregate of 2,000,000 shares of our common stock at a price
of
$0.50 per share. On May 2, 2007, the outstanding principal amount of these
notes
and accrued but unpaid interest thereon converted automatically pursuant
to the
terms of the notes into 9,645,752 shares of our common stock at a conversion
price of $0.114039841 per share, which is equal to 80% of the average of
the
closing bid prices of our common stock on trading days during the 12 months
prior to the conversion date. Upon such conversion, all of our obligations
under
these notes were discharged.
Exhibit
10.1 Settlement
Agreement and General Release of All Claims by and between the Applied
DNA
parties and Chanty Cheang
Exhibit
10.2 Settlement
Agreement and General Release of All Claims by and between the Applied
DNA
parties and Angela Wiggins
Exhibit
10.3 Settlement
Agreement and General Release of All Claims by and between the Applied
DNA
parties and Adrian Butash
Exhibit
10.4 Settlement
Agreement and General Release of All Claims by and between the Applied
DNA
parties and John D. Barnett
Exhibit
10.5 Settlement
Agreement and General Release of All Claims by and between the Applied DNA
parties and Jaime Cardona