APPLIED DIGITAL SOLUTIONS, INC. EMPLOYMENT AND NON-COMPETE AGREEMENT
Exhibit
10.1
APPLIED
DIGITAL SOLUTIONS, INC.
AGREEMENT
made
this 6th day of December 2006 (the “Effective Date”), by and between the parties
to this Agreement (hereinafter individually referred to as “Party” and
collectively referred to as “Parties”), APPLIED
DIGITAL SOLUTIONS, INC.,
a Missouri
Business Corporation (hereinafter referred to as “ADS”), and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ (hereinafter
referred to as “Executive”).
WHEREAS,
ADS is
an advanced digital technology development company (the “Business”);
and
WHEREAS,
Executive has contributed meaningfully in his capacity as Executive Vice
President and General Counsel of ADS; and
WHEREAS,
ADS
finds it is in its best interest to enhance Executive’s contribution to the
Business, to protect its technologies and business relationships, and to engage
Executive’s services as Chief Executive Officer of ADS; and
WHEREAS,
Executive is willing to assume the fulltime role as ADS’s Chief Executive
Officer;
NOW
THEREFORE,
in
consideration of the promises and the mutual obligations set forth
in
this Agreement, the Parties agree as follows:
1. EMPLOYMENT.
ADS
agrees to continue to employ Executive, and Executive agrees to accept such
continued employment by ADS, pursuant to the terms and conditions set forth
in
this Agreement. Executive agrees that the provisions and benefits under the
2003
Severance Policy, and the 2004 Executive Management Change in
Control
Plan shall terminate with respect to Executive and Executive specifically waives
any rights he may have thereunder.
2. POSITION
AND RESPONSIBILITIES.
During
the term of this Agreement, as defined below, Executive shall serve as Chief
Executive Officer of ADS and will perform such duties and exercise such
supervision with regard to the business of ADS as are associated with such
positions, as well as such additional duties as may be prescribed from time
to
time by ADS’s Board of Directors (the “Board”). Executive agrees to render
services to the best of Executive’s ability for and on behalf of ADS. Executive
agrees to devote his full business time to rendering such services on behalf
of
ADS, other than reasonable time for charitable works, managing personal
investments and, with the consent of the Board, service on boards of other
companies.
3. TERM.
Except
as terminated in this Section 3 or Section 8(c) of this Agreement, the term
of
this Agreement (the “Term”) shall commence on the Effective Date and shall
continue in force thereafter. Notwithstanding the foregoing, upon the happening
of any of the following events, this Agreement shall terminate (unless otherwise
provided herein for a termination after a period of time) and Executive shall
cease to be an employee of ADS:
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(a)
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Executive’s
resignation upon sixty (60) days advance written
notice;
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(b)
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Executive’s
Total Disability upon ADS’s election. For purposes of this Agreement,
“Total Disability” shall be defined as Executive’s inability, due to
illness, accident or any other physical or mental incapacity, to
perform
Executive’s usual responsibilities performed by Executive for ADS prior to
the onset of such disability, for one hundred eighty (180) consecutive
days during the Term. ADS may elect, by written notice
to
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Executive,
within thirty (30) days of the end of such period of Total Disability defined
above, to terminate Executive’s employment herein;
(c)
the
death
of Executive;
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(d)
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Executive’s
Constructive Termination. For purposes of this Agreement, “Constructive
Termination” shall be defined as a material breach by ADS of its
obligations under this Agreement, including but not limited to (i)
any
reduction of Executive’s Base Salary or incentive compensation as provided
herein, (ii) a diminution in duties or position, (iii) moving Executive’s
workplace away from headquarters or moving headquarters outside of
Palm
Beach, Broward or Dade Counties. If Executive chooses to treat such
material breach as a Constructive Termination, Executive shall provide
ADS
with written notice describing the circumstances being relied upon
by
Executive for such termination with respect to this Agreement within
thirty (30) days after the event giving rise to the Constructive
Termination. ADS shall have thirty (30) days after receipt of such
notice
to remedy the situation prior to the Constructive Termination being
deemed
final;
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(e)
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ADS
terminates this Agreement without cause upon sixty (60) days advance
written notice; or
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(f)
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ADS
terminates this Agreement for cause, with said cause being defined
as a
conviction of a felony or Executive’s being prevented from providing
services hereunder as a result of Executive’s violation of any law,
regulation and/or rule.
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(g)
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Executive’s
resignation by written notice within one hundred twenty (120) days
following a Change in Control, such term being defined as a transaction
or
series of transactions in which any person or entity (or persons
or
entities acting as a group) acquires stock of ADS that, together
with
stock then held by such person, entity or group, results in such
person,
entity or group holding more than fifty (50%) percent of the fair
market
value or total voting power of ADS, as well as the Board members
prior to
the transaction no longer constituting a majority of the Board members
following such transaction.
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4. ANNUAL
COMPENSATION.
(a) During
the Term, Executive shall be entitled to compensation for all services performed
by Executive pursuant to this Agreement (“Compensation”) as
follows:
(i) Executive
shall, during the Term, be entitled to a base salary (the “Base Salary”) of
THREE HUNDRED FIFTY THOUSAND ($350,000.00) DOLLARS per annum. The Base Salary
may be increased (but not decreased) in the reasonable discretion of ADS. The
“Base Salary” shall, for all purposes of this Agreement, mean the Base Salary
then being paid by ADS to Executive.
(ii) During
the Term, Executive shall be eligible for incentive bonus compensation for
each
calendar year, to be reasonably determined by the Board, which shall consider
bonuses paid by similarly situated employers to similarly situated
employees.
(b) ADS
shall
deduct from the Compensation all taxes and other deductions which are required
to be deducted or withheld under any provision of any federal, state, or local
law now in effect or which may become effective at any time during the term
of
this Agreement (collectively, the “Withholdings”).
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5. FRINGE
BENEFITS.
During
the
Term, Executive shall be entitled to all fringe benefits (the “Fringe Benefits”)
provided to senior executive employees of ADS, as reasonably determined by
the
Board. The Fringe Benefits shall specifically include executive health benefits
which shall entitle Executive to full reimbursement for all physical
examinations and other related services, use of an automobile leased by ADS
for
use by Executive, premium payments of life and disability insurance comparable
to that currently provided, as well as the payment by ADS of all reasonable
expenses relating to a foreign language course in which Executive may be
enrolled.
6. BUSINESS
AND OTHER EXPENSES.
ADS
will reimburse Executive for all reasonable travel, entertainment and other
expenses incurred by Executive in connection with the performance of his duties
and obligations under this Agreement. Executive will comply with all reasonable
reporting requirements with respect to business expenses as may be established
by ADS from time to time. In addition, ADS shall pay to Executive TWENTY
THOUSAND ($20,000.00) DOLLARS per year during the Term, payable in ten thousand
dollar installments on or before January 15 and July 15, representing
non-allocable expenses that shall be deemed additional compensation to
Executive.
7. ADDITIONAL
BENEFITS.
(a) Executive
will be entitled to participate in all other compensation or employee benefit
plans or programs and receive all benefits for which salaried employees of
ADS
generally are eligible under any plan or program now or later established by
ADS
on the same basis as similarly situated senior executives of ADS. Executive
will
participate to the extent permissible under the terms and provisions of such
plans or programs, in accordance with program provisions.
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(b) Upon
the
execution of this Agreement, ADS shall issue 100,000 shares (the “Shares”) of
common stock of ADS to Executive under an applicable stock incentive plan
previously approved by shareholders. It is agreed that 50,000 of the Shares
will
vest immediately, while the remaining 50,000 Shares (the “Unvested Shares”)
shall be restricted and subject to a substantial risk of forfeiture in the
event
that this Agreement is terminated on or before December 31, 2008 pursuant to
subparagraphs (a) or (f) of Section 3 of this Agreement, in which event the
Unvested Shares shall immediately be forfeited.
8. PAYMENT
UPON TERMINATION OF AGREEMENT.
(a) Upon
the
termination of this Agreement, ADS will pay to Executive any and all earned
but
unpaid Base Salary and earned but unpaid incentive bonus compensation as of
the
date of termination. ADS shall pay such amounts due Executive within thirty
(30)
days of Executive’s last day of service. Any outstanding stock options held by
Executive on Executive’s last day of service shall remain exercisable for the
life of the option. In addition, ADS shall remain responsible for all rental
payments relating to the leased vehicle then used by Executive until the
expiration of the lease. Further, Executive shall be permitted to maintain
possession of all computer equipment owned by ADS which is then being used
by
Executive. Executive shall remain reasonably available by electronic mail or
telephone to assist with any post-separation transition relating to
pre-separation issues.
(b) To
the
extent that this Agreement is terminated other than pursuant to subparagraphs
(a) or (f) of Section 3, Executive shall be entitled to receive: ONE MILLION
FOUR HUNDRED EIGHTY THOUSAND ($1,480,000.00) DOLLARS (the “Severance Amount”) as
severance. The Severance Amount shall be payable in common stock of ADS (“ADS
Stock”), except for the Withholdings, which shall be payable in cash. In the
event that (i) ADS is unable to pay part of the Severance Amount in the form
of
common ADS Stock, or (ii) at
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the
time
of issuance or delivery the shares of ADS Stock are not both traded and expected
for the foreseeable to be traded in the public markets on a national exchange
(for example, without limitation, because a Change in Control results in ADS
being a private company), then and in that event, ADS shall pay the Severance
Amount in cash. Within twenty (20) business days of the termination of this
Agreement, ADS will contribute to a Rabbi Trust (as defined in Section 8(c))
the
Severance Amount (whether cash or, if applicable, the number of shares of ADS
Stock determined pursuant to section 8(d)).
(c) Payments
pursuant to Section 8(b) and 10(c) shall be deposited in the Rabbi Trust. As
used herein, the “Rabbi Trust” shall mean a “rabbi trust” to be on terms
reasonably acceptable to the Executive and ADS, but in no event less favorable
to the Executive than the terms of the rabbi trust set forth in Rev. Proc.
92-64. The amount contributed to the rabbi trust will be released from the
trust
(together with any earnings thereon) and paid or delivered to the Executive
as
follows: (i) as to the Severance Amount, the cash or the shares of ADS Stock
(as
applicable) shall be released from escrow and paid or delivered to Executive
six
(6) months and one (1) day following termination of this Agreement, and (ii)
as
to the Covenant Consideration pursuant to Section 10(c), the cash or the shares
of ADS Stock (as applicable) shall be released from escrow and paid or delivered
to Executive one year following termination of this Agreement, assuming for
this
clause (ii) only that Executive does not materially breach the provisions of
Section 10, in which case such cash or ADS Stock shall be returned to ADS.
(d) To
the
extent that ADS Stock shall be issued pursuant to subparagraph (b) or (c) of
this Section 8, the ADS Stock shall be included on an applicable registration
statement filed by ADS as soon as practicable, which is anticipated to be within
six (6) months from the date of issuance of any such stock. ADS shall utilize
good faith efforts to include ADS Stock in any other registration statement
filed by ADS, but shall not be obligated to file a separate
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registration
statement for the ADS Stock. In all events, ADS shall bear all costs of
registration of the ADS Stock. In the event that the ADS Stock is not registered
within one (1) year from the date of issuance, ADS shall fully cooperate at
all
times thereafter in allowing Executive to benefit from any and all registration
requirement exemptions that shall then exist. In all events, the number of
shares of ADS Stock due will be calculated based upon the average closing price
of one (1) share of common stock of ADS for the ten (10) trading days preceding
the day in which the ADS Stock is issued. Any ADS Stock issued hereunder shall
be price protected through the later of: (i) the date on which the applicable
registration statement becomes effective, or the date in which such ADS Stock
should otherwise become eligible for trading without restriction pursuant to
an
exemption from registration, or (ii) the date such ADS Stock is delivered to
Executive from the Rabbi Trust (such later date, the “Price Protection Date”),
such that if the value of the ADS Stock on such Price Protection Date is less
than the intended applicable amount as set forth in Section 8(b) or Section
10(c), cash or freely tradable shares of ADS Stock (at ADS’s option) will be
issued to Executive to subsidize any shortfall, which cash or additional shares
shall be due fourteen (14) months following termination of this Agreement.
ADS
agrees that it shall not announce or effect any stock split, reverse split
or
similar transaction for a period of three (3) months following any Price
Protection Date. The
Parties agree that the various provisions regarding payment of ADS Stock
pursuant to the Agreement is intended to benefit both ADS and the Executive
as a
substitute for cash value, so that notwithstanding any provision herein, any
payment hereunder shall be made in cash and not ADS Stock if (i) it is
reasonably likely that Executive will not be able, within a reasonable period
of
time (complying with applicable securities laws), to sell such ADS Stock for
cash for any reason including, without limitation, if shares of ADS Stock are
not publicly traded following a transaction or (ii)
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any
such
issuance would not be in full compliance with applicable securities laws and
stock exchange or stock market rules.
9. CONFIDENTIAL
INFORMATION.
(a) Executive
recognizes and acknowledges that all information pertaining to this Agreement
or
to the affairs; business; results of operations; accounting methods, practices
and procedures; shareholders; acquisition candidates; financial condition;
clients; customers or other relationships of ADS or any of its affiliates
(“Information”) is confidential and is a unique and valuable asset of ADS or any
of its affiliates. Access to and knowledge of the Information is essential
to
the performance of Executive’s duties under this Agreement. Executive will not,
during the Term or thereafter, except to the extent reasonably necessary in
performance of his duties under this Agreement, give to any person, firm,
association, corporation, or governmental agency any Information, except as
may
be required by law. Executive will not make use of the Information for his
own
purposes or for the benefit of any person or organization other than ADS or
any
of its affiliates. Executive will also use his best efforts to prevent the
disclosure of this Information by others. All records, memoranda, etc. relating
to the business of ADS or its affiliates, whether made by Executive or otherwise
coming into his possession, are confidential and will remain the property of
ADS
or its affiliates.
(b) Executive
will, with reasonable notice during or after the Term, furnish information
as
may be in his possession and reasonably cooperate (taking into account
Executive’s then current employment situation) with ADS and its affiliates as
may be required in connection with any claims or legal action in which ADS
or
any of its affiliates is or may become a party to the extent that such claim
or
legal action reasonably relates to Executive’s pre-termination duties with
ADS.
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10. RESTRICTIONS.
(a) During
the Term and thereafter for a one (1) year period (the “Restriction Period”),
Executive agrees that, without the prior express written approval from the
Board, he shall not compete with ADS and its affiliates by directly or
indirectly engaging in the Business or by engaging in any business comparable
to
that of ADS or its affiliates, either directly or indirectly, as an individual,
partner, member, corporation, limited liability company, limited liability
partnership, officer of a corporation or in any
other capacity whatsoever
at any
location at which ADS or its affiliates conducts business and/or provides
any
services.
(b) Executive
acknowledges that the restrictions contained in this Section 10 of this
Agreement, in view of the nature of the activities in which ADS and its
affiliates are engaged, are reasonable and necessary in order to protect the
legitimate interests of ADS and its affiliates, and that any violation thereof
would result in irreparable injuries to ADS and/or its affiliate(s), as the
case
may be. Executive, therefore, acknowledges that, in the event of the violation
of any of these restrictions, ADS shall be entitled to seek from any Court
of
competent jurisdiction preliminary and permanent injunctive relief, as well
as
attorneys fees and costs, damages and an equitable accounting of all earnings,
profits and other benefits arising from such violation, which rights shall
be
cumulative, and in addition to any other rights or remedies to which ADS may
be
entitled.
(c) In
consideration for the restrictions contained in this Section 10, as well as
in consideration for the services to be provided by Executive pursuant to the
terms of Section 9(a), ADS shall pay to Executive the amount of TWO HUNDRED
FIFTY THOUSAND ($250,000.00) DOLLARS (the “Covenant Consideration”) payable in
ADS Stock, except for the Withholdings, which shall be payable in cash. In
the
event that ADS is unable to pay part of the Covenant Consideration in the form
of ADS Stock, then and in that event, ADS shall pay the Covenant Consideration
in cash. Whether in cash or ADS Stock, the cash or ADS Stock shall
be
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deposited
in the Rabbi Trust within twenty (20) business days of the termination of this
Agreement, and shall be released as provided in Section 8(c). To the extent
that
ADS is able to pay part of the Covenant Consideration in the form of ADS Stock,
then and in that event, all of the terms and conditions set forth in Section
8(d) applicable to the ADS Stock shall similarly be applicable to the common
stock issued by ADS incident to the Covenant Consideration, including the issue
of those circumstances upon which the Covenant Consideration may be paid in
ADS
Stock.
(d) If
any of
the restrictions set forth in this Section 10 should, for any reason, be
adjudged invalid or unreasonable in any proceeding, then the validity or
enforceability of the remainder of such restrictions or provisions shall not
be
adversely affected. If the Restriction Period or the area specified in this
Section 10 of this Agreement shall be adjudged unreasonable in any proceeding,
then the Restriction Period shall be reduced by such number of months, or the
area shall be reduced by the elimination of such portion thereof or both, so
that such restrictions may be enforced in such area and for such period of
time
as is adjudged to be reasonable. If Executive violates any of the restrictions
contained in this Section 10, the Restriction Period shall not run in favor
of
Executive from the time of commencement of any such violation until such time
as
such violation shall be cured by Executive to the satisfaction of
ADS.
(e) The
terms
of this Section 10 shall survive the termination of this Agreement. Executive
acknowledges that he can be gainfully employed and still comply with the terms
of this Section 10 and that it is not unduly inconvenient to him.
11. INDEMNIFICATION;
LITIGATION.
(a) ADS
will
indemnify Executive to the fullest extent permitted by the laws of the State
of
Florida in effect at that time, or the certificate of incorporation and by-laws
of ADS, whichever affords the greater protection to Executive. Executive will
be
entitled to any
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insurance
policies ADS may elect to maintain generally for the benefit of its officers
and
directors against all costs, charges and expenses incurred in connection with
any action, suit or proceeding to which he may be made a party by reason of
being an officer of ADS.
(b) In
the
event of any litigation or other proceeding between ADS and Executive with
respect to the subject matter of this Agreement, ADS will reimburse Executive
for all costs and expenses related to the litigation or proceedings, including
attorney’s fees and expenses, providing that the litigation or proceedings
results in either a settlement requiring ADS to make a payment to Executive
or
judgment in favor of Executive.
12. MITIGATION.
Executive will not be required to mitigate the amount of any payment provided
for hereunder by seeking other employment or otherwise, nor will the amount
of
any such payment be reduced by any compensation earned by Executive as the
result of employment by another employer after the date Executive’s employment
hereunder terminates.
13. REMEDIES.
(a) In
the
event of a breach of this Agreement, the nonbreaching Party may maintain an
action for specific performance against the Party who is alleged to have
breached any of the terms of this Agreement. This subparagraph (a) of this
Section 13 of this Agreement will not be construed to limit in any manner any
other rights or remedies an aggrieved Party may have by virtue of any breach
of
this Agreement.
(b) Each
of
the Parties has the right to waive compliance with any obligation of this
Agreement, but a waiver by any Party of any obligation will not be deemed a
waiver of compliance with any other obligation or of its right to seek redress
for any breach of any obligation on any subsequent occasion, nor will any waiver
be deemed effective unless in writing and signed by the Party so
waiving.
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14. CONSOLIDATION,
MERGER OR SALE OF ASSETS.
Subject
to the terms of Section 8, this Agreement shall not preclude ADS from
consolidating or merging into or with, or transferring all or substantially
all
of its assets to, another corporation which, subject to the express written
consent of Executive, which consent may be withheld for any reason or for no
reason, may then assume this Agreement and all obligations and undertakings
of
ADS hereunder. In that event, “ADS” will mean the other corporation and this
Agreement will continue in full force and effect.
15. ATTORNEY’S
REPRESENTATIONS.
Executive acknowledges that ADS’ counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, P.A., prepared this Agreement on behalf of and in the course of
its
representation of ADS, and that:
1. Executive
has been advised to seek the advice of independent counsel; and
2. Executive
has had the opportunity to seek and has, in fact, received the advice of
independent counsel of his choosing.
16. NOTICES.
Any
notices required or permitted by this Agreement or by law to be served on,
or
delivered to, any Party to this Agreement, shall be in writing and shall be
signed by the Party giving or delivering it and sent by courier that guarantees
overnight delivery, or by registered or certified mail, return receipt
requested, addressed to the Party to whom any communication under this Agreement
is to be made. Notice given as provided herein shall be deemed to have been
given on the mailing date and, unless otherwise provided herein, shall be
effective from that date. Notice shall be sent to the respective Party at the
address set forth below. Any Party may change its address for purposes of
receiving notices by furnishing notice of such change in the manner set forth
above.
If
to
ADS:
APPLIED
DIGITAL SOLUTIONS, INC.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇- ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
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If
to
Executive
▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇▇
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17. INVALID
PROVISIONS.
The
invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as though such invalid or unenforceable provisions
were omitted.
18. ASSIGNMENT.
This
Agreement shall inure to the benefit of and be binding upon ADS, its successors
and assigns, and Executive. This Agreement, being for the personal services
of
Executive, shall not be assignable or subject to anticipation by Executive.
19. AMENDMENTS.
The
terms and provisions of this Agreement may not be modified except by written
instrument duly executed by the Parties.
20. ENTIRE
AGREEMENT.
This
Agreement supersedes all other oral and written agreements between the Parties
with respect to the matters contained in this Agreement and, except as otherwise
provided herein, this Agreement contains all of the covenants and agreements
between the Parties with respect to those matters.
21. LAW
GOVERNING AGREEMENT.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Florida. Any terms and conditions of this Agreement which apply to
Executive and/or govern Executive’s behavior after Executive’s termination of
employment and/or after the termination of this Agreement shall automatically
survive the termination of this Agreement.
22. CONSENT
TO JURISDICTION AND VENUE.
The
Parties hereby consent and submit to the jurisdiction and venue of any state
or
federal court within the State of Florida, Palm Beach County in any litigation
arising out of this Agreement.
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23. CAPTIONS
AND GENDER.
The
headings contained in this Agreement are inserted for convenience and reference
purposes only and are not intended to describe, interpret, define or limit
the
scope, extent or intent of this Agreement or any provisions hereof, and shall
not affect in any way the meaning or interpretation of this Agreement or any
provisions hereof. All personal pronouns used in this Agreement shall include
the other genders whether used in the masculine or feminine or neuter gender,
and the singular shall include the plural and vice versa, whenever and as often
as may be appropriate.
24. COUNTERPART
EXECUTION.
This
Agreement may be executed in two or more counterparts either by facsimile or
otherwise, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN
WITNESS WHEREOF,
the
Parties hereto have set their hands and seals as of the date set forth on the
first page of this Agreement.
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ATTEST:
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APPLIED
DIGITAL SOLUTIONS, INC.
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/s/ ▇▇▇▇
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12/5/06
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By: ▇▇▇▇
▇. ▇▇▇▇▇▇▇ CFO and Senior Vice President
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WITNESS:
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EXECUTIVE:
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