THIS EMPLOYMENT AGREEMENT (this “Agreement”) is
effective as of March 24, 2008, (the “Effective
Date”), between Applied Digital Solutions, Inc. (the
“Employer”) and Mr. Parke H. Hess, Jr., an
individual (the “Employee”).
In
consideration of the mutual promises, covenants and agreements set
forth below, and intending to be legally bound hereby, it is hereby
agreed as follows:
1.
Definitions . Capitalized terms shall have the
meanings defined in this Agreement or on Exhibits A and B attached
hereto unless the context otherwise requires. Exhibits A and B are
incorporated herein by this reference.
2.
Employment Term and Duties .
2.1
Employment Term . The Employer employs the Employee,
and the Employee accepts employment by the Employer, on the terms
and conditions set forth in this Agreement and for the period of
time set forth in Exhibit B (the “Employment
Period”), which Employment Period shall be the term of this
Agreement.
(a) The
Employee will serve in the position set forth on Exhibit B.
The Employee will devote his/her full business time, attention,
skill, and energy exclusively to the business of the Employer, will
use his/her best efforts to promote the success of the
Employer’s business.
(b) The
Employee may engage in the following activities during the
Employment Period so long as such activities do not interfere or
conflict with Employee’s duties to Employer as set forth in
Section 2.2(a) above: (i) serve on corporate, civic,
religious, educational, and/or charitable boards or committees;
(ii) deliver lectures, fulfill speaking engagements, or teach
at educational institutions without receiving any compensation
other than reimbursement of expenses, nominal stipends, or similar
forms of compensation; and (iii) manage his/her personal
investments, provided that such investments do not conflict with
the Employee’s duties and responsibilities under this
Agreement. If the Employee is appointed or elected an officer or
director of the Employer or any Affiliate, the Employee will
fulfill his/her duties as such officer or director without
additional compensation. Upon termination of this Agreement for any
reason, the Employee automatically resigns as of such date as an
officer and director of the Employer and each Affiliate of which
he/she is an officer or director, if any.
(c) The
Employee will report to the function indicated in
Exhibit B.
2.3
Location . The Employee’s primary place of
employment hereunder shall be as set forth in
Exhibit B.
3.
Compensation and Benefits . The compensation and
benefits payable and provided to the Employee under this Agreement
shall constitute the full consideration to be paid to the Employee
for all services to be rendered by the Employee to the Employer and
its Affiliates in all capacities.
3.1 Base
Salary . During the first year of this Agreement, the
Employee will be paid an annual salary as set forth in
Exhibit B (“Base Salary”), payable in periodic
installments according to the Employer’s customary payroll
practices. In subsequent years, Base Salary may be increased taking
into account Employee’s performance, company operating
results, and industry practices.
3.2 Annual
Bonus . During the term of this Agreement, the Employee
shall be eligible to participate in an annual bonus plan. The bonus
plan and any amounts payable thereunder may take into consideration
personal performance and contribution, operational and financial
results, and other achievements attributable to Employee’s
accomplishments (“Bonus”). The bonus plan applicable to
Employee under this Agreement is as described in
Exhibit B.
3.3 Signing
Bonus . Employee shall be paid a one-time Signing Bonus as
set forth in Exhibit B (“Signing Bonus”) payable
as set forth in Exhibit B.
3.4 Business
Expenses . In accordance with the rules and policies that
the Employer may establish from time to time, the Employer shall
reimburse the Employee for business expenses reasonably incurred by
him/her in the performance of his/her duties hereunder in
accordance with the Employer’s documentation guidelines as
may be in effect from time to time, provided that in no event will
such reimbursement be made later than the calendar year following
the calendar year in which the expenses are incurred.
3.5
Vacation . The Employee shall be entitled to the
vacation period per calendar year as set forth on Exhibit B
(prorated for less than a full year). Unused vacation time not to
exceed an aggregate of Two (2) weeks for all prior years may
be accumulated or carried over from year to year. The Employee
shall not be entitled to any compensation for unused vacation time
except as provided in Section 4.
3.6 Office
and Support Staff . During the Employment Period, the
Employee shall be entitled to an office, furnishings, other
appointments, and secretarial or other assistants as Employer shall
determine are reasonably necessary to perform the Employee’s
duties and obligations as set forth herein and comparable to other
similarly situated employees of the Employer and its
Affiliates.
3.7
Other . Additional compensation and benefits to be
paid by Employer to the Employee are set forth on
Exhibit B.
4.1 Death;
Disability . This Agreement will terminate automatically
upon the death or Disability of the Employee.
4.2
Termination Notice . Any termination of the
Employee’s employment other than a termination pursuant to
Section 4.1 hereof shall be by written notice to the other
party, indicating the specific termination provision in this
Agreement relied upon, if any, and setting forth in reasonable
detail the facts and circumstances claimed to provide a basis for
the termination of the Employee’s employment under the
provision so indicated. The date of the Employee’s
termination of employment shall be specified in such notice;
provided, however, that such date may not be earlier than any
applicable cure periods as set forth herein and, if a termination
is being effected by the Employee for any reason, such date shall
in any event not be less than thirty (30) days from the date
the written notice is given to the Employer (the “Required
Notice”), during which period Employee shall continue to
perform in accordance with this Agreement unless such performance
or notice period is waived by the Employer by written notice to the
Employee. Failure to provide the Required Notice or to perform in
accordance with in this Agreement during this period shall be
deemed a material breach of this Agreement by the
Employee.
4.3
Termination Pay . Upon termination of the
Employee’s employment, the Employer will be obligated to pay
or provide the Employee or the Employee’s estate, as the case
may be, only such compensation and Benefits as are provided in this
Section 4.3.
(a)
Termination by the Employer for Cause; Resignation of the
Employee without Good Reason or Required Notice. If
(i) the Employer terminates the Employee’s employment
for Cause; (ii) the Employee terminates his/her employment for any
reason other than Good Reason; or (iii) the Employee
terminates his/her employment for any reason without the Required
Notice, then: the Employee shall be entitled to receive the Accrued
Obligations from the Employer, payable to Employee within thirty
(30) Business Days after the date of termination. Except as
specifically provided herein, the Employee shall not be entitled to
any other payments or Benefits pursuant to this
Agreement.
(b)
Termination due to Disability or upon Death . If the
Employee’s employment is terminated due to Disability or upon
the Employee’s death, the Employee or the Employee’s
estate, as the case may be, shall be entitled to receive from the
Employer the sum of the Accrued Obligations, payable to Employee or
Employee’s legal representative within thirty
(30) Business Days after the date of termination, as more
specifically described in Exhibit B.
(c)
Termination by the Employee due to Good Reason or after a
Change of Control or by the Employer without Cause . If
after the first annual anniversary of this Agreement, a Change of
Control occurs, and the Employee’s employment is terminated
by the Employer without Cause or by the Employee for Good Reason,
in either case within six months immediately following a Change of
Control, the Employee shall be entitled to receive from the
Employer the Termination Payment. If at any time during the term of
this Agreement the Employee’s employment is terminated by the
Employer without Cause, the Employee shall be entitled to receive
from the Employer a severance payment as set forth on
Exhibit B (“Severance”).
4.4
Payment . Any termination or severance payment to
Employee pursuant to Section 4.3 shall be payable by Employer
in accordance with its usual payroll practices, less standard
deductions and withholdings, all as if Employee remained active on
Employer’s payroll, except for any amounts representing bonus
payments (which shall be payable over the same period), which
payment shall be payable to Employee in cash or stock at
Employer’s discretion, subject to receipt of the release and
waiver required by Section 4.5 and to the provisions of
Section 4.6.
4.5 Release
and Waiver . Notwithstanding anything in Section 4.3
to the contrary, the Employee shall not be entitled to any payment
or Benefit pursuant to Section 4.3, except for Accrued
Obligations as required by law, unless the Employee has delivered
to the Employer a general release, signed and in a form reasonably
acceptable to the Employer, that releases the Employer and its
Affiliates, and all their respective officers, directors,
employees, and agents from any and all claims of any kind that the
Employee may have arising out of the Employee’s relationship
with the Employer or any of its Affiliates or the termination of
employment, but excluding any claims arising under this Agreement,
and such release has become irrevocable by no later than the date
which is 60 days following the date of termination.
4.6
Six-Month Waiting Period for Distributions Upon Separation
From Service . To the extent required by Section 409A
of the Internal Revenue Code of 1986 (as amended) (the
“Code”), amounts that would otherwise be payable under
this Section 4 during the six-month period immediately
following the Employee’s termination, shall instead be paid
on the first business day after the expiration of such six-month
period, plus interest thereon, at a rate equal to the applicable
Federal short-term rate (as defined in Section 1274(d) of the Code)
for the month in which such date of termination occurs from the
respective dates on which such amounts would otherwise have been
paid until the actual date of payment. In no event will any
severance payments be made hereunder, unless the relevant
termination of employment constitutes “separation from
service” under Section 409A.
5.
Non-Competition and Non-Interference .
5.1
Acknowledgements . The Employee acknowledges that
(a) the services to be performed by him/her under this
Agreement are of a special, unique, unusual, extraordinary, and
intellectual character and (b) the provisions of this
Section 5 are reasonable and necessary to protect the
Confidential Information, goodwill, and other business interests of
the Employer and its Affiliates.
5.2
Covenants of the Employee . The Employee covenants
that he/she will not, directly or indirectly, and except as
specifically provided on Exhibit B of this
Agreement:
(a) during
the Non-Compete Period, without the express prior written consent
of the Board of Directors, as owner, officer, director, employee,
stockholder, principal, consultant, agent, lender, guarantor,
cosigner, investor, or trustee of any corporation, partnership,
proprietorship, joint venture, association, or any other entity of
any nature, engage, directly or indirectly, in the Business in any
state in the United States or in any country in which the Employer
or any of its Affiliates is conducting Business activities or has
conducted Business activities in the twelve (12) months prior
to termination, provided however, that the Employee may purchase or
otherwise acquire for passive investment up to three percent (3%)
of any class of securities of any such enterprise under Section
12(g) of the Securities Exchange Act of 1934;
(b) whether
for the Employee’s own account or for the account of any
other person at any time during his/her employment with the
Employer or its Affiliates (except for the account of the Employer
and its Affiliates) and the Non-Compete Period, solicit from any
person or entity that is a customer of the Employer Business of the
same or similar type being carried on by the Employer or its
Affiliates, whether or not the Employee had personal contact with
such person or entity during the Employee’s employment with
the Employer;
(c) whether
for the Employee’s own account or the account of any other
person and at any time during his/her employment with the Employer
or its Affiliates and the Non-Compete Period, (i) solicit, employ,
or otherwise engage as an employee, independent contractor, or
otherwise, any person who is an employee of the Employer or an
Affiliate, or in any manner induce, or attempt to induce, any
employee of the Employer or its Affiliates to terminate his/her
employment with the Employer or its Affiliate; or
(ii) interfere with the Employer’s or its
Affiliate’s relationship with any person or entity that, at
any time during the Employment Period, was an employee, contractor,
supplier, or customer of the Employer or its Affiliate, provided
however, that nothing herein shall prevent the Employee from
offering employment to, or employing or otherwise engaging, any
person who responds to an advertisement directed to the general
public, or some segment thereof, and not specifically to such
person; or
(d) at
any time after the termination of his/her employment, disparage the
Employer or its Affiliates or any shareholders, directors,
officers, employees, or agents of the Employer or any of its
Affiliates, so long as the Employer does not disparage the
Employee; provided, however, that notwithstanding the foregoing,
paragraphs (a) and (b) of this Section 5.2 shall not
apply if the Employee’s employment is terminated pursuant to
Section 4.3(c) hereof. If any covenant in this
Section 5.2 is held to be unreasonable, arbitrary, or against
public policy, such covenant will be considered to be divisible
with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not
arbitrary, and not against public policy, will be effective,
binding, and enforceable against the Employee. The Employee hereby
agrees that this covenant is a material and substantial part of
this Agreement and that: (i) the geographic limitations are
reasonable; (ii) the term of the covenant is reasonable; and
(iii) the covenant is not made for the purpose of limiting
competition per se and is reasonably related to a protectable
business interest of the Employer. The period of time applicable to
any covenant in this Section 5.2 will be extended by the
duration of any violation by the Employee of such
covenant.
6.
Non-Disclosure Covenant
6.1
Acknowledgments by the Employee . The Employee
acknowledges that (a) the Employee will be afforded access to
Confidential Information; (b) public disclosure of such
Confidential Information would have an adverse effect on the
Employer and its Affiliates and its business; and (c) the
provisions of this Section 6 are reasonable and necessary to
prevent the improper use or disclosure of Confidential
Information.
6.2
Covenants of the Employee . The Employee covenants as
follows:
(a)
Confidentiality . During and after his/her employment
with the Employer and its Affiliates, the Employee will hold in
confidence the Confidential Information and will not disclose such
Confidential Information to any person other than in connection
with the performance of his/her duties and obligations hereunder,
except with the specific prior written consent of the Board of
Directors; provided, however, that the parties agree that this
Agreement does not prohibit the disclosure of Confidential
Information where applicable law requires in response to subpoenas
and/or orders of a governmental agency or court of competent
jurisdiction. In the event that the Employee is requested or
becomes legally compelled under the terms of a subpoena or order
issued by a court of competent jurisdiction or by a governmental
body to disclose Confidential Information, the Employee agrees that
he/she will (i) immediately provide the Employer with written
notice of the existence, terms, and circumstances, surrounding such
request(s) so that the Employer may seek an appropriate protective
order or other appropriate remedy, (ii) cooperate with the
Employer in its efforts to decline, resist, or narrow
such
requests, and
(iii) if disclosure of such Confidential Information is
required in the opinion of counsel, exercise reasonable efforts to
obtain an order or other reliable assurance that confidential
treatment will be accorded to such disclosed
information.
(b)
Trade Secrets . Any and all trade secrets of the
Employer and its Affiliates will be entitled to all the protections
and benefits under the federal and state trade secret and
intellectual property laws and any other applicable law. If any
information that the Employer or any of its Affiliates deems to be
a trade secret is found by a court of competent jurisdiction not to
be a trade secret for purposes of this Agreement, such information
will, nevertheless, be considered Confidential Information for the
purposes of this Agreement, so long as it otherwise meets the
definition of Confidential Information. The Employee hereby waives
any requirement that the Employer or any of its Affiliates submit
proof of the economic value of any trade secret or post a bond or
other security.
(c)
Removal . The Employee will not remove from the
premises of the Employer or any of its Affiliates (except to the
extent such removal is for purposes of the performance of the
Employee’s duties at home or while traveling, or except
otherwise specifically authorized by the Employer or the applicable
Affiliate) any document, record, notebook, plan, model, component,
device, or computer software or code, whether embodied in a disk or
in any other form belonging to the Employer or any of its
Affiliates or used in the business of the Employer or of any of its
Affiliates (collectively, the “Proprietary Items”). All
of the Proprietary Items, whether or not developed by the Employee,
are the exclusive property of the Employer or its applicable
Affiliate. Upon termination of his/her employment, or upon the
request of the Employer during the Employment Period, the Employee
will return to the Employer all of the Proprietary Items and
Confidential Information in the Employee’s possession or
subject to the Employee’s control, and the Employee shall not
retain any copies, abstracts, sketches, or other physical
embodiments in electronic form or otherwise, of any such
Proprietary Items or Confidential Information.
(d)
Development of Intellectual Property . Any and all
writings, inventions, improvements, plans, designs, architectural
work papers, drawings, processes, procedures, and/or techniques
(“Intellectual Property”) which the Employee
(i) made, conceived, discovered, or developed, either solely
or jointly with any other person or persons, at any time when the
Employee was an employee of the Employer or any of its Affiliates
whether pursuant to this Agreement or otherwise, whether or not
during working hours, and whether or not at the request or upon the
suggestion of the Employer or any of its Affiliates, which relate
to or were useful in connection with any business now or hereafter
carried on or contemplated by the Employer or any of its
Affiliates, including developments or expansions of its fields of
operations, or (ii) may make, conceive, discover, or develop,
either solel
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