Exhibit 10.11
EMPLOYMENT AND NON-COMPETE AGREEMENT
AGREEMENT made as of the 1st day of January 2001, by and between
Applied Digital Solutions, Inc. a Missouri corporation (the "Company"), and
Mercedes Walton (the "Executive").
Recitals
WHEREAS, the Company wishes to employ the Executive as President and
Chief Operating Officer of the Company;
WHEREAS, the Executive wishes to accept such employment and to render
services to the Company and its subsidiaries and affiliates; and
WHEREAS, the Company desires to enter into this Employment and
Non-Compete Agreement (this "Agreement") to secure the services and employment
of the Executive on behalf of the Company and to protect the Company's right,
title and interest in its business and other affairs, policies, procedures,
methods and personnel (including, without limitation, the Confidential
Information (as defined below)) and the Executive is willing to render such
services on the terms and conditions set forth herein, and in accordance with,
the provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
Terms and Conditions
1. Term.
The Executive's employment hereunder shall be for a term (the
"Employment Term"), which shall commence on January 1st, 2001 (the "Employment
Date") and, subject to the provisions for earlier termination hereinafter
provided, shall terminate on the third anniversary of the Employment Date,
provided that the Employment Term shall be automatically extended for successive
additional one (1) year periods ("Additional Employment Terms") unless, at least
ninety (90) days prior to the end of the Original Employment Term or the
Additional Employment Terms, the Company or the Executive has notified the other
in writing that the Employment Term shall terminate at the end of the then
current term. Notice of nonextension by the Company shall be treated as a
Termination without Cause by the Company as of the end of the then current
Employment Term. Notice of nonextension by the Executive shall be treated as a
termination voluntarily other than for Good Reason at any time elected in
writing by the Executive after the giving of such notice or by the Company after
the giving of such notice by the Executive.
2. Position and Duties.
During the Employment Term, the Executive shall serve as President and
Chief Operating Officer of the Company and such other position(s) as may from
time to time be agreed upon by the Company and the Executive. The Executive will
report to the Chairman and Chief Executive Officer of the Company (the
"Chairman") and shall have the duties, responsibilities and authority consistent
with such position and such other duties, responsibilities and authority
commensurate with such position as specified from time to time by the Chairman
after consultation with the Executive. The Executive shall devote substantially
her full business time, energy and efforts to the performance of services for
the Company. The Executive shall not, without the prior written approval of the
Chairman, engage in any other business activity that would interfere with the
performance of her duties, services and responsibilities hereunder or which is
otherwise in violation of policies established from time to time by the Company.
Notwithstanding the foregoing, the Executive shall be entitled to manage her
personal investments. The Executive may, with the prior written approval of the
Chairman, devote reasonable periods of time to service as a director or advisory
board member of other non-competitive businesses; provided, however, that such
service does not interfere with the performance of her obligations hereunder.
Furthermore, the Executive may engage in such charitable or community activities
as shall not interfere with the performance of her obligations hereunder.
During the period that shall commence on the Employment Date and
terminate September 1, 2001, the Executive's principal place of employment shall
be at the Company's offices in Fairfield, New Jersey. During that portion of the
Employment Term that shall commence September 1, 2001, or such earlier date as
the Executive may elect, the Executive's principal place of employment shall be
the Company's corporate headquarters in Palm Beach, Florida. From and after the
time that the portion of the Employment Term described in the preceding sentence
commences, the Executive shall own or lease a residence or lease an apartment in
the Palm Beach, Florida area and, if she continues to maintain a residence in
New Jersey, which she may do in her sole discretion, non-business trips made to
and from such residence shall be personal commuting expenses which shall be born
by the Executive. Notwithstanding the foregoing, the Executive may from time to
time be required to travel on Company business to an extent substantially
consistent with the Executive's duties and responsibilities hereunder.
During the Employment Term, the Company shall nominate the Executive
for election to the Board of Directors (the "Board") as a member of the
management slate at each meeting of the stockholders of the Company at which the
Executive shall come up for election. If elected, the Executive agrees to serve
on the Board without additional compensation.
3. Compensation and Other Remuneration.
(a) Base Compensation. During the Employment Term, the Company shall
pay to the Executive in consideration of the performance by the Executive of the
Executive's obligations hereunder (including any services as an officer,
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director, employee, member of any committee of the Company or otherwise) a
salary (the "Base Compensation") at an annual rate equal to Three Hundred
Thousand Dollars ($300,000) payable in U.S. Dollars in accordance with the
Company's normal payroll practices then in effect. The Base Compensation and all
other amounts payable by the Company to the Executive under this Agreement shall
be subject to all applicable taxes required to be withheld by the Company
pursuant to federal, state and/or local law. The Executive will be eligible for
annual salary increases during the Employment Term in accordance with Company
Salary increase policies. Once increased, the Executive's base salary shall not
be decreased for any reason and thereafter shall be the Base Compensation.
(b) Annual Bonuses. In further consideration of the performance by the
Executive of her obligations hereunder, during the Employment Term, the
Executive shall be eligible to receive annual bonuses, the amount and payment of
which shall be conditioned upon achievement by the Executive and the Company of
performance targets set by the Compensation Committee of the Board after
consultation with the Executive. The target amount of annual bonus the Executive
may earn in any year shall be equal to one hundred percent (100%) of the
Executive's Base Compensation. Annual bonuses, if any, shall be paid to the
Executive as soon as practicable following the close of the fiscal year in which
the annual bonus shall be earned.
(c) ADS Option. In further consideration of the performance by the
Executive of her obligations hereunder, the Executive shall be granted an option
(the "ADS Option") to purchase one million seven hundred fifty thousand
(1,750,000) shares of the Company's common stock, $.001 par value per share
("ADS Common Stock"), at an exercise price per share equal to eighty-five
percent (85%) of the fair market value of a share of ADS Common Stock as of
January 1, 2001, as determined under the provisions of the Company's 1999
Flexible Stock Plan. The ADS Option shall vest and become exercisable (a) with
respect to two hundred ninety one thousand six hundred sixty six (291,666)
shares subject thereto upon the commencement of the Employment Term; (b) with
respect to an additional two hundred ninety one thousand six hundred sixty six
(291,666) shares subject thereto on September 1, 2001; (c) with respect to an
additional five hundred eighty three thousand three hundred thirty four
(583,334) shares subject thereto on December 31, 2002 and (d) with respect to
the remaining five hundred eighty three thousand three hundred thirty four
(583,334) shares subject thereto from and after December 31, 2003, provided,
however, that, except as provided below, the Executive shall be employed by the
Company on each such date. Once vested, each portion of the ADS Option shall
remain exercisable for ten (10) years from the date of grant. The ADS Option
shall become fully vested and exercisable upon the Executive's death,
Disability, termination without Cause, the Executive's termination for Good
Reason, or upon a Change in Control (as defined in Exhibit A hereto), and shall
remain exercisable for the entire exercise period. The ADS Option shall be
subject to such further terms and conditions as shall be set forth in an
agreement between the Company and the Executive, a copy of which is attached
hereto as Exhibit B.
(d) Digital Angel Option. In further consideration of the performance
by the Executive of her obligations hereunder, the Executive shall be granted an
option (the "Digital Angel Option") to purchase two hundred thousand (200,000)
shares of the common stock, $.00005 par value per share, of Digital Angel
Corporation, at an exercise price per share equal to the fair market value on
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January 1, 2001 as determined by the committee which administers the plan
pursuant to which such option will be granted. The Digital Angel Option shall
vest and become exercisable (a) with respect to thirty three thousand three
hundred thirty three (33,333) shares subject thereto upon the commencement of
the Employment Term; (b) with respect to an additional thirty three thousand
three hundred thirty three (33,333) shares subject thereto on September 1, 2001;
(c) with respect to an additional sixty six thousand six hundred sixty seven
(66,667) shares subject thereto on December 31, 2002 and (d) with respect to the
remaining sixty six thousand six hundred sixty seven (66,667) shares subject
thereto from and after December 31, 2003, provided, however, that, except as
provided below, the Executive shall be employed by the Company on each such
date. Once vested, each portion of the Digital Angel Option shall remain
exercisable for ten (10) years from the date of grant. The Digital Angel Option
shall become fully vested and exercisable upon the Executive's death,
Disability, termination without Cause, the Executive's termination for Good
Reason, or upon a Change in Control (as defined in Exhibit A hereto) or upon
Digital Angel.net, Inc. ceasing to be a subsidiary of the Company within the
meaning of Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code"), and shall remain exercisable for the entire exercise period. The
Digital Angel Option shall be subject to such further terms and conditions as
shall be set forth in an agreement between the Company and/or Digital Angel
Corporation and the Executive, a copy of which is attached hereto as Exhibit C.
(e) Relocation Allowance. In connection with the relocation of the
Executive and all members of the Executive's immediate family that reside in the
Executive's household and who shall be relocating from New Jersey to Florida
with the Executive (collectively referred to as the "Relocating Individuals"),
the Company shall reimburse the Executive for, or otherwise pay on behalf of the
Executive, the reasonable and customary expenses (the "Relocation Expenses")
incurred by the Executive in relocating from New Jersey to Florida, in
accordance with the Company's relocation policy, but not in excess of One
Hundred and Fifty Thousand Dollars ($150,000), including but not limited to
those expenses:
(i) incurred by the Executive in moving household goods,
automobiles and the personal effects of Relocating Individuals from the
Executive's residence in New Jersey to the Executive's new residence in Florida;
(ii) incurred by the Relocating Individuals in traveling (for
purposes of final relocation) from the Executive's residence in New Jersey to
the Executive's new residence in Florida;
(iii) incurred by the Executive and the Executive's spouse in
making house-hunting trips to Florida prior to final relocation;
(iv) incurred by the Executive in securing temporary living
arrangements in Florida for the Relocating Individuals; and
(v) incurred by the Executive as closing costs (as reasonably
determined by the Company) associated with the sale of the Executive's primary
residence in New Jersey and/or the purchase of the Executive's new residence in
Florida.
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Subject to the provisions of the second paragraph of Section 2, the Company
acknowledges that the Executive may choose to retain her primary residence in
New Jersey for a period of time and that the determination as to which residence
will be her primary residence will be a decision solely made by her.
All reimbursements to the Executive shall be made as soon as
practicable following the Executive's presentation to the Company of appropriate
receipts and other relevant documentation and shall be Grossed Up. For purposes
of this Agreement, if a provision herein provides for a Gross Up, it shall mean
that the Company will pay such additional compensation as is necessary (after
taking into account all federal, state and local income and payroll taxes
payable by the Executive as a result of the receipt of the amount being Grossed
Up and such additional compensation) so as to place the Executive in the same
after-tax position as she would have been in had no such tax been paid or
incurred.
In the event that the Executive terminates her employment for other
than Good Reason or her employment is terminated by the Company for Cause within
one year of the date her principal place of employment becomes the Company's
corporate headquarters, as described in the second paragraph of Section 2, the
Executive shall promptly repay to the Company the aggregate amount of all
Relocation Expense reimbursements and payments theretofore paid to or on behalf
of the Executive.
(f) Certain Legal Fees. The Company shall pay the Executive's
reasonable legal fees and costs incurred by the Executive in connection with the
negotiation and execution of this Agreement.
(g) Other Benefits. During the Employment Term, the Executive shall
be entitled to:
(i) participate in or receive benefits on the same basis as other
senior executives of the Company under the Company's benefit plans and
arrangements as in effect from time to time for senior management generally and
for which the Executive has satisfied any applicable waiting period, including
life insurance plans, pension and profit-sharing plans, medical, health and
other welfare benefit plans, sick leave, sick pay and short-term and long-term
disability benefits and holidays; and
(ii) an automobile allowance in an amount equal to six hundred
fifty dollars ($650) per month; and
(iii) a number of paid vacation days for each year of the
Employment Term as shall be determined from time to time by the Company, but in
no event less than twenty (20) days for each year of the Employment Term, which
vacation days shall accrue and become vested on the first day of each year of
the Employment Term.
(iv) financial planning and tax preparation assistance up to
twenty thousand dollars ($20,000) per year.
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(h) Expenses. During the Employment Term, the Executive shall be
entitled to reimbursement for all reasonable business expenses incurred by her
in the course of her employment by the Company hereunder, as per Company
policies then in effect, provided that the Executive properly accounts therefor
(including, without limitation, the submission of appropriate expense reports,
receipts and other appropriate documentation of such expenses).
4. Termination.
The Employment Term shall terminate upon the Employment Termination
Date; provided, however, that the Employment Term shall be terminated prior to
the Employment Termination Date upon the occurrence of any of the following
events:
(a) the death of the Executive ("Death");
(b) the Disability (as defined below) of the Executive. For purposes of
this Agreement, the term "Disability" shall mean the Executive has been unable
due to a physical or mental incapacity or impairment to perform her material
duties and responsibilities as provided under this Agreement for a period of not
less than one hundred eighty (180) consecutive days during any three hundred
sixty-five (365) consecutive day period. In the event of the Executive's
termination by the Company under this section 4(b), the Company will provide her
with 30 days written notice thereof while she remains so incapacitated, provided
that such termination shall not be effective if she returns to full time
employment within such 30 day period;
(c) a termination by the Company by notice to the Executive for Cause
(as defined below). For purposes of this Agreement, the term "Cause" shall mean
(i) willful and material written misrepresentation by the Executive to the Board
with respect to a material matter concerning the Company, a subsidiary of the
Company, or an affiliate of the Company; (ii) fraud of a material nature or
embezzlement (other than good faith expense account disputes) on the part of the
Executive with respect to the Company; (iii) conviction of, or the entry of a
plea of, nolo contendere by the Executive to a felony (other than a traffic
infraction or as a result of vicarious liability); (iv) any act of willful
misconduct by the Executive with regard to the Company which (A) is intended to
result in material personal enrichment of the Executive at the expense of the
Company or any of its subsidiaries or affiliates and (B) has a material adverse
impact on the business or reputation of the Company or any of its subsidiaries
or affiliates; (v) the willful failure to attempt to perform a substantial
portion of the Executive's duties and responsibilities hereunder or the
abandonment by the Executive of her duties hereunder, which in either case, is
not remedied within thirty (30) days after request for substantial performance
in a writing that specifies the conduct that shall necessitate correction shall
have been delivered to the Executive; or (vi) any material violation of any of
the provisions set forth in Section 7 or 8 of this Agreement. For purposes of
this Agreement, abandonment by the Executive of her duties and responsibilities
hereunder shall be deemed to have occurred if the Executive ceases to function
and perform her duties hereunder (unless due to physical or mental illness or
disability) and no act or failure to act will be deemed to be willful unless
done or omitted to be done, not in good faith and without reasonable belief that
action or inaction was in the best interests of the Company;
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(d) a termination by the Company by notice to the Executive other than
for Cause;
(e) a termination by the Executive voluntarily for Good Reason (as
defined below). For purposes of this Agreement, the term "Good Reason" shall
mean: (i) an assignment of duties to the Executive that are materially
inconsistent with the Executive's position (including status, title and
reporting requirements); (ii) a reduction in the Executive's position (including
status, title and reporting requirements), or a material reduction in the
Executive's authority, duties or responsibilities; (iii) failure to elect or
reelect the Executive to the Board or removal of the Executive from the Board;
(iv) a material breach by the Company of the terms of this Agreement; (v)
relocation of the Executive's principal work site to a location more than 35
miles from (A) Fairfield, New Jersey with respect to the period beginning with
the first day of the Employment Term and ending on September 1, 2001, and (B)
Palm Beach, Florida with respect to the remainder of the Employment Term
hereunder and all Additional Employment Terms; (vi) the failure of an assignee
of this Agreement to assume this Agreement in writing delivered to the Executive
in a form reasonably acceptable to the Executive; (vii) election as chief
executive officer of the Company of someone other than the current Chief
Executive Officer of the Company or the Executive; or (viii) a Change in Control
as defined in Exhibit A provided that the Executive resigns on fifteen (15) days
notice within one year following the Change in Control. Notwithstanding the
foregoing, no termination by the Executive for Good Reason shall be effective
unless the Executive shall have provided written notice to the Company of her
intention to so terminate the Employment Term, which notice sets forth in
reasonable detail the conduct that the Executive believes to be the basis for
the Good Reason termination, and the Company shall thereafter have failed to
correct such conduct (or otherwise commence action to correct such conduct and
diligently pursue such correction to completion) within ten (10) days following
the Company's receipt of such notice;
(f) a termination by the Executive voluntarily other than for Good
Reason pursuant to a written notice provided to the Company not less than thirty
(30) days prior to the effective date of the termination as set forth in such
notice. Notwithstanding the foregoing, the Company shall have the right to
accelerate the effective date of such termination to such earlier date as it
shall determine by notice to the Executive.
5. Effect of Termination.
(a) In the event that the Employment Term shall be terminated for any
reason, the Executive shall be entitled to: (i) all Base Compensation
theretofore accrued on or prior to the date of termination but not theretofore
paid to the Executive and (ii) all rights theretofore accrued to the benefit of
the Executive pursuant to, and in accordance with the terms and conditions set
forth in, any and all Company employee benefit plans, programs and policies,
including any accrued but unpaid bonus for the prior year, accrued but unused
vacation, reimbursement for accrued substantiated business expenses, and any
unreimbursed Relocation Expenses.
(b) In addition to the entitlements that the Executive shall have
pursuant to the provisions of Section 5(a) of this Agreement, in the event that
the Employment Term shall be terminated (i) by the Company other than for Cause,
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(ii) by Death or Disability or (iii) by the Executive for Good Reason, the
Executive shall be entitled to receive her Base Compensation for a period equal
to the period (the "Severance Period") that shall commence on the date of
termination and shall terminate on the later of (x) the end of the then current
Employment Term and (y) one year following the date of termination plus one
times her target annual bonus for the year of termination. Further, the
Executive shall be entitled to receive a pro rata portion of the annual bonus
for the year of termination based on the portion of the year during which the
Executive was employed and the actual results for such year. Such amounts shall
be payable at the times they would have been payable had the Executive's
employment not terminated. In addition, the unvested portion of ADS Option and
the Digital Angel Option shall vest and become immediately exercisable and shall
remain exercisable for the entire remainder of the exercise period.
(c) The payments and other benefits upon termination set forth in this
Section 5 shall constitute the exclusive payments due to or in respect of the
Executive upon the termination of her employment pursuant to this Agreement, but
shall have no effect on any benefits which may be due the Executive under any
plan of the Company that provides benefits after termination of employment,
other than severance pay or salary continuation.
(d) Upon any termination of the Executive's employment with the
Company, unless otherwise agreed to by the Company and the Executive, the
Executive shall immediately resign from any and all positions (whether elected
or appointed) then held by the Executive within the Company or any subsidiary or
affiliate of the Company.
(e) In the event of any termination of employment hereunder, the
Executive shall be under no obligation to seek other employment and there shall
be no offset against any amounts due the Executive under this Agreement on
account of any remuneration attributable to any subsequent employment that the
Executive may obtain. The amounts payable hereunder shall not be subject to
setoff, counterclaim, recoupment, defense or other right which the Company may
have against the executive or others, except as specifically set forth herein or
upon the Company's obtaining a final unappealable judgment against the
executive.
(f) Following termination of the Executive's employment with the
Company for any reason, the Executive agrees to cooperate with the Company upon
the Company's legal and reasonable request and to reasonably be available to the
Company (subject to her other commitments) with respect to matters arising out
of the Executive's employment with the Company; provided, however, that the
Company shall compensate the Executive for her time and effort on a per diem or
such other basis and in such amount as may reasonably be agreed upon by the
Executive and the Company.
(g) In the event that the Executive becomes entitled to payments and or
benefits which would constitute "parachute payments" within the meaning of
Section 280G of the Code, the provisions of Exhibit D, attached hereto, shall
apply.
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6. Change in Control.
Notwithstanding anything to the contrary herein, in the event of a
Change in Control (as defined in Exhibit A hereto): all options granted pursuant
to this Agreement or otherwise shall immediately vest and become exercisable in
accordance with the terms of the plan under which they are granted; and, if the
Executive terminates her employment as provided in Section 4(e)(viii) or if her
employment is terminated by the Company other than for Cause, within the time
period set forth in Section 4 (e)(viii), or if, in anticipation of a Change of
Control, she terminates her employment with Good Reason or her employment is
terminated by the Company without Cause, the amounts due under the first
sentence of Section 5(b) above shall increase to three (3) times the sum of the
Executive's Base Compensation and target annual bonus and shall be payable in a
lump sum within thirty (30) days of the date of termination of employment.
7. Confidential Information.
(a) The Executive acknowledges and agrees that by reason of her
employment with the Company, the Executive will acquire Confidential Information
(as hereinafter defined) concerning the operation of the Company and the
Company's subsidiaries and affiliates the use or disclosure of which would cause
the Company and its subsidiaries and affiliates substantial loss and damage
which could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, the Executive agrees that she will not (directly or
indirectly) at any time, whether during the Employment Term or thereafter:
(i) knowingly use for a personal benefit or for the benefit of any
third party any Confidential Information that she may have obtained by reason of
her employment with the Company, or
(ii) disclose any Confidential Information to any individual or
entity, except (A) as she deems advisable in the good faith performance of her
obligations to the Company hereunder, (B) as required by a court of competent
jurisdiction or in compliance with legal process or (C) with the prior written
consent of the Board.
For purposes of this Agreement, the term "Confidential Information"
includes information relating to the confidential affairs of the Company and/or
any subsidiary or affiliate of the Company, including but not limited to
technical information, information with respect to trade secrets and other
intellectual property, systems, patents and patent applications, procedures,
manuals, confidential reports, financial information, business and marketing
plans, prospects or opportunities, personnel information, customer and/or
supplier information, financing plans, expansion plans and other forms of
information considered by the Company and/or any subsidiary or affiliate of the
Company to be confidential and/or in the nature of trade secrets; provided,
however, that (i) such term shall not include any information that is or becomes
generally known or available publicly other than as a result of disclosure by
the Executive which is in violation of the provisions of this Section and (ii)
the Executive may, after giving prior notice to the Company and/or the Company's
subsidiary or affiliate, as the case may be, to the extent practicable under the
circumstances, disclose such information to the extent required by applicable
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laws or governmental regulations or judicial or regulatory process. This
confidentiality covenant has no temporal, geographical or territorial
restriction.
(b) Executive acknowledges and agrees that all Confidential Information
is the exclusive property of the Company and/or any subsidiary and/or affiliate
of the Company, as the case may be. Upon termination of the Employment Term, the
Executive shall promptly supply to the Company all business records, papers,
documents, electronic materials, property, keys, notes, memoranda, writings,
files, lists, reports, customer lists, correspondence, tapes, disks, cards,
surveys, maps, logs, machines, technical data, and any other tangible product or
document (whether or not such product or document constitutes Confidential
Information) that has been produced by, received by or otherwise submitted to
the Executive in the course or otherwise as a result of the Executive's
employment by the Company. The Executive acknowledges and agrees that following
termination of her employment with the Company, she shall not retain in any form
whatsoever any copies of any Confidential Information. Notwithstanding the
foregoing, the Executive may retain her rolodex and similar phone directories.
8. Non-Interference and Non-Solicitation.
(a) By and in consideration of the Company's entering into this
Agreement and the Base Compensation and other benefits provided to the Executive
hereunder, and in further consideration of the Executive's exposure to the
proprietary and other confidential information of the Company, the Executive
agrees that during the Employment Term and for a period of twelve (12) months
following the termination of the Employment Term (the "Restricted Period"), the
Executive shall not directly or indirectly, for her own account or for the
account of any other individual or entity (excluding the Company and any
subsidiary or affiliate of the Company):
(i) solicit or contact in an effort to conduct business with any
individual or entity (or any subsidiary or affiliate of such individual or
entity) who is at the time of the Executive's termination of employment a
customer of the Company or any subsidiary or affiliate of the Company
("Customers"), if the purpose or one of the purposes of such solicitation or
contact is interfering with or otherwise diminishing the Company's relationship
or business dealings with such individual or entity, directly or indirectly;
provided the foregoing shall not apply to general solicitations not primarily
aimed at known Customers or solicitations or contacts by the Executive's
employer in which the Executive is not directly involved and has not
specifically directed other employees with regard to the specific solicitations
or contacts; or
(ii) solicit or induce any employee of the Company or any of its
subsidiaries or affiliates to terminate their employment with the Company or any
subsidiary or affiliate of the Company or to accept employment with anyone
except the Company or any subsidiary or affiliate of the Company (except that it
shall not be a breach of this Agreement for the Executive to provide an
employment reference).
(b) Notwithstanding anything to the contrary contained in this Section
7, it shall not be a violation of the provisions of this Section 8 if the
Executive shall, at the request of the Company, perform services for or on
behalf of any subsidiary or affiliate of the Company.
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9. Specific Performance.
(a) The Executive acknowledges that a breach of any of the covenants
contained in Sections 7 and 8 hereof may result in material, irreparable injury
to the Company and its subsidiaries and affiliates for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of any such breach or threat of
breach, the Company and its subsidiaries and affiliates shall be entitled to an
immediate injunction and restraining order to prevent such breach and/or
threatened breach and/or continued breach by the Executive and/or any and all
entities acting for and/or with the Executive, without having to prove damages,
in addition to any other remedies to which the Company and its subsidiaries and
affiliates may be entitled at law or in equity. The terms of this Section shall
not prevent the Company and/or any of its subsidiaries or affiliates from
pursuing any other available remedies for any breach or threatened breach
hereof, including, but not limited to, the recovery of damages from the
Executive. The Executive acknowledges and agrees that the Company would not have
entered into this Agreement had the Executive not agreed to the provisions of
Section 7 and 8 hereof.
(b) The Executive acknowledges that she has carefully read and
considered the provisions of Sections 7 and 8 hereof and, having done so, agrees
that the restrictions set forth herein (including the Restricted Period, scope
of activity to be restricted and the geographical, temporal and territorial
scope of the applicable restrictions) are fair and reasonable and are reasonably
required for the protection of the interests of the Company and its subsidiaries
and affiliates, and their respective officers, directors, executives, creditors
and shareholders. The Executive and the Company agree that in the event that a
court or arbitrator should determine that any of provisions of Section 7 or 8
hereof are unreasonable or unenforceable, either in period of time, geographical
or territorial scope or otherwise, the parties hereto agree that the applicable
covenant should be interpreted and enforced to the maximum extent possible in
accordance with law. The Executive acknowledges and understands that the
restrictions contained in Sections 7 and 8 hereof may limit her ability to
engage in a business similar to the Company's business, but further acknowledges
that she will receive sufficiently high remuneration and other benefits from the
Company hereunder to justify such restrictions. The provisions contained in
Sections 7, 8 and 9 hereof shall survive any termination of the Employment Term,
and the existence of any claim or cause of action by the Executive against the
Company or any subsidiary of or affiliate of the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company or any subsidiary or affiliate of the Company of the covenants
and agreements set forth in Sections 7, 8 and 9 hereof.
10. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of the Company to expressly assume this Agreement in
writing in a form reasonably acceptable to the Executive and to agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place and to provide a
copy of such writing to the Executive. Failure of the Company to obtain such
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assumption and agreement prior to the effectiveness of any such succession shall
be a material breach of this Agreement. As used in this Agreement, the term
"Company" shall mean the Company as defined in this Agreement and any successor
to its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. Furthermore, the only entity to
which this Agreement may be assigned by the Company is to a successor as
contemplated in this Section 10(a).
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal and/or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount is theretofore accrued on or prior to the
date of her death but not theretofore paid to the Executive, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's spouse or, if there is no such spouse, to the
Executive's estate. This Agreement is personal to the Executive and may not be
assigned by her.
11. Notice.
For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or mailed by United States
overnight express mail, or nationally recognized private delivery service on an
overnight basis, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Mercedes Walton
[The last address and facsimile number
provided by the Executive to the
Company.]
If to the Company: Applied Digital Solutions, Inc.
400 Royal Palm Way, Suite 410
Palm Beach, Florida 33480
Attn: Steven M. Berkeley
Telephone: (561) 366-4800
Facsimile: (561) 366-8591
with a copy to:
Bryan Cave LLP
One Metropolitan Square, Suite 3600
St. Louis, MO 63102
Attn: Llewellyn Sale III, Esq.
Telephone: (314) 259-2649
Facsimile: (314) 259-2020
12
Notices may also be sent to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
12. Disputes and Attorneys' Fees.
Any dispute under this Agreement shall be resolved by arbitration in
accordance with the rules of the American Arbitration Association ("AAA") in
Palm Beach, Florida. The decision of the arbitrator shall be final and binding
upon the parties and may be enforced in any court having jurisdiction.
The costs of the AAA and the arbitrator shall be divided equally by the
parties and each party shall pay its or her own legal fees, provided that, if
the arbitrator determines that the Executive has prevailed, he or she shall
award the Executive the costs of the AAA and the arbitrator as well as her legal
fees and disbursements.
13. Representations and Warranties.
The Executive hereby represents and warrants that she is free to enter
this Agreement and to render services pursuant hereto and that neither the
execution and delivery of this Agreement nor the performance of her duties
hereunder, violates the provisions of any other agreement to which she is a
party or by which she is bound, based on the current activities of the Company.
The Company acknowledges that the Executive has made it aware that she is
subject to certain nonsolicitation, nondisparagement and noncompetition
arrangements with AT&T and the Company will not cause her to violate such
limitations.
14. Expenses.
Each of the parties hereto shall pay its own expenses incident to the
performance or enforcement of this Agreement, including all fees and expenses of
its counsel for all activities of such counsel undertaken pursuant to this
Agreement, except as otherwise expressly provided herein.
15. Indemnification.
The Company will indemnify and hold the Executive harmless both during
and after the Employment Term to the fullest extent permitted by law with regard
to actions or inactions with respect to performance of her responsibilities
hereunder as a director of the Company and as a director or officer of any other
entity or a fiduciary of any benefit plan which she is serving at the request of
the Company and will maintain directors and officers insurance to the same
extent as the Company maintains for any other senior executive or director of
the Company.
16. Waivers and Further Agreements.
(a) Any waiver of any of the terms or conditions of this Agreement
shall not operate as a waiver of any other breach of such terms or conditions or
13
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof;
provided, however, that no such written waiver, unless it, by its own terms,
explicitly provides to the contrary, shall be construed to effect a continuing
waiver of the provision being waived and no such waiver in any instance shall
constitute a waiver in any other instance or for any other purpose or impair the
right of the party against whom such waiver is claimed in all other instances or
for all other purposes to require full compliance with such provision.
(b) Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action as the other party
may reasonably require in order to effectuate the terms and purposes of this
Agreement.
17. Amendments.
This Agreement may not be amended, nor shall any waiver, change,
modification, consent or discharge be effected, except by an instrument in
writing executed by or on behalf of the party against whom enforcement of any
waiver, change, modification, consent or discharge is sought.
18. Severability.
If any provision of this Agreement shall be held or deemed to be, or
shall in fact be, invalid, inoperative or unenforceable as applied to any
particular case in any jurisdiction or jurisdictions, or in all jurisdictions or
in all cases, because of the conflict of any provision with any constitution or
statute or rule of public policy or for any other reason, such circumstance
shall not have the effect of rendering the provision or provisions in question
invalid, inoperative or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to the extent that such other
provisions are not themselves actually in conflict with such constitution,
statute or rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative or
unenforceable provision had never been contained herein and such provision
reformed so that it would be valid, operative and enforceable to the maximum
extent permitted in such jurisdiction, or in such case.
19. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument, and in pleading or proving any provision of this
Agreement, it shall not be necessary to produce more than one of such
counterparts.
20. Section Headings.
The headings contained in this Agreement are for reference purposes
only, are not part of this Agreement and shall not in any way affect the meaning
or interpretation of this Agreement.
14
21. Gender.
Whenever used herein, the singular number shall include the plural, the
plural shall include the singular, and the use of any gender shall include all
genders.
22. Entire Agreement.
Except as otherwise expressly provided herein, this Agreement together
with any attachments or exhibits hereto contains the entire agreement of the
parties hereto with respect to the subject matter hereof and there are no other
promises or conditions in any other agreement, whether oral or written relating
to the subject matter hereof. This Agreement supersedes any prior written or
oral agreements between the parties hereto as to the subject matter hereof,
including without limitation any prior written or oral employment agreements,
which, if any, shall be null and void as of the date hereof.
23. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Florida, without reference to the
principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
APPLIED DIGITAL SOLUTIONS, INC.
By:
----------------------------
Title:
EXECUTIVE
-------------------------------
Mercedes Walton
15
Exhibit A
Change in Control
For purposes of this Agreement, a Change in Control shall be
deemed to occur (a) if any person, as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 ("Exchange Act"), is or becomes
the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power (i) of the Company's then outstanding
securities or (ii) on a fully diluted basis, (b) upon the first purchase of the
common stock of the Company pursuant to a tender or exchange offer (other than a
tender or exchange offer made by the Company), (c) upon the approval by the
Company's stockholders of a merger or consolidation, a sale or disposition of
all or substantially all of the Company's assets or a plan of liquidation or
dissolution of the Company, or (d) if, during any period of 2 consecutive years,
individuals who at the beginning of such period constitute the board of
directors of the Company cease for any reason to constitute at least a majority
thereof, unless the election or nomination for the election by the Company's
stockholders of each new director was approved by a vote of at least 2/3 of the
directors then still in office who were directors at the beginning of the
period. Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur if the Company either merges or consolidates with or into another
company or sells or disposes of all or substantially all of its assets in
another company, if such merger, consolidation, sale or disposition is in
connection with a corporate restructuring wherein the stockholders of the
Company immediately before such merger, consolidation, sale or disposition own,
directly or indirectly, immediately following such merger, consolidation, sale
or disposition at least 80% of the combined voting power of all outstanding
classes of securities of the company resulting from such merger or
consolidation, or to which the Company sells or disposes of its assets, in
substantially the same proportion as their ownership in Company immediately
before such merger, consolidation, sale or disposition.
EXHIBIT B
NON-QUALIFIED STOCK OPTION AWARD GRANTED UNDER THE
APPLIED DIGITAL SOLUTIONS, INC.
1999 FLEXIBLE STOCK PLAN
Name of Option Recipient: Mercedes Walton
------------------------------------------------------
On January 1, 2001, the Company awarded you a stock option. You were
granted an option to buy 1,750,000 Shares of Common Stock at a per Share price
of 85% of Fair Market Value on January 1, 2001 on or after the earlier of the
date set forth in the Terms and Conditions (as defined below) or the dates set
forth in the following schedule:
Number of Shares for which
Date Option is First Exercisable
January 1, 2001 291,666
September 1, 2001 291,666
December 31, 2002 583,334
December 31, 2003 583,334
and on or before December 31, 2010.
IMPORTANT: By signing below, you agree to be bound by, and acknowledge
receipt of, the attached Terms and Conditions of this Non-Qualified Stock Option
Award ("Terms and Conditions") and the Applied Digital Solutions, Inc., 1999
Flexible Stock Plan ("Stock Option Plan"). Capitalized terms are defined in the
Terms and Conditions and/or Stock Option Plan .
APPLIED DIGITAL SOLUTIONS, INC.
By:
----------------------------
President
Read and agreed to this
___ day of January, 2001.
- --------------------------
Mercedes Walton
1
TERMS AND CONDITIONS
NON-QUALIFIED STOCK OPTION AWARD GRANTED UNDER THE
APPLIED DIGITAL SOLUTIONS, INC. 1999 FLEXIBLE STOCK PLAN
TO
MERCEDES WALTON
1. Definitions
(a) Committee The Committee (or, in certain cases,
its designees) who administers the
Stock Option Plan.
(b) Company Applied Digital Solutions Inc., a
Missouri corporation.
(c) Option The option granted by the Option
Award.
(d) Option Award The Non-Qualified Stock Option Award
to which the Terms and Conditions are
attached together with, except where
the context requires otherwise, these
Terms and Conditions.
(e) Employment Agreement That certain employment and
non-compete agreement dated as of
January 1, 2001, by and between the
Company and the Participant, as
amended.
(f) Participant Mercedes Walton, the recipient of the
Option Award.
(g) Stock Option Plan Applied Digital Solutions, Inc. 1999
Flexible Stock Plan, as amended.
All capitalized terms not otherwise defined herein (whether above or otherwise)
shall have the meanings given to such terms by the Stock Option Plan.
2. Evidence of Option Grant and Option not an Incentive Stock Option
The Option Award evidences a grant to the Participant of an Option to
purchase that number of Shares ("Optioned Shares") of the par value $.001 per
share Common Stock of the Company ("Stock") set forth on the Option Award. The
Participant may exercise the Option as shown on the Option Award and in Section
3 below. Once all or any part of the Option becomes exercisable, it shall remain
exercisable until the Option Expiration Date. In no event shall the Option or
any part of the Option be exercisable after December 31, 2010 (the "Option
Expiration Date"). The Option shall not be treated as an "Incentive Stock
Option", as defined in Section 422 of the Internal Code of 1986, as amended.
2
3. Acceleration of Exercise Date.
If and to the extent the Option is not already exercisable, it shall
become exercisable upon the occurrence of any of the following events:
(a) The Participant's death while employed by the Employer;
(b) the Participant's Disability (as defined in the Employment
Agreement);
(c) the Participant's termination of her employment for Good
Reason (as defined in the Employment Agreement);
(d) termination of the Participant's employment other than for
Cause by the Employer (as defined in the Employment Agreement); or
(e) a Change of Control (as defined in the Employment
Agreement).
4. Exercise of Option
The Option shall be exercised by the Participant delivering a written
notice of exercise to the Company's corporate headquarters at 400 Royal, Suite
410, Palm Beach, Florida 33480. This notice shall specify the number of Optioned
Shares the Participant then desires to purchase.
5. Payment of Option Price
Payment for the Shares purchased under the Option shall be made to the
Company either in cash (including cashier's check, bank draft or money order or
a cashless exercise arrangement). In addition, payment of the Option price may,
at the discretion of the Committee, be made in whole or in part by the tender of
Shares or in other property, rights and credits, including the Participant's
promissory note.
6. Form of Notice of Exercise
The Participant's notice as required by Section 3 shall be signed by
the Participant and shall be in substantially the following form with
appropriate adjustments depending on how the Option price is paid:
"I hereby exercise my Option to purchase ____ Shares in
accordance with my Option Award dated _____, 200__, granted under the
Company's 1999 Flexible Stock Plan, as amended.
The aggregate Option price of the Shares I am purchasing
is $________. I hereby tender payment of such price (complete applicable
item(s)):
(a) by delivery of a cashier's check, bank draft or money order made
payable to the Company in the amount of $__________; and/or
3
(b) through a cashless exercise as follows
-----------------------------------------------------------------------
----------------------------------------------------------------------.
7. Stock Certificate
Upon the exercise of the Option, the Participant shall be entitled to
one Stock certificate evidencing the Shares acquired upon exercise.
8. Legends on Certificate
The certificate to be issued under Section 6 shall be issued as soon as
practicable. Such certificate shall contain thereon a legend in substantially
the following form if the Shares evidenced by such certificate have not been
registered under the Securities Act of 1933, as amended:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or any applicable state
law. They may not be offered for sale, sold, transferred or pledged
without (1) registration under the Securities Act of 1933 and any
applicable state law, or (2) at holder's expense, an opinion
(satisfactory to the Company) that registration is not required."
The certificate shall also contain such other legends as may be appropriate or
required by law, such as a legend relating to any shareholders agreement that
may apply to the Shares.
9. Termination of Employment; Nonassignability
9.1 Termination. If the Participant's employment shall terminate or be
terminated, the Participant or her personal representative and/or beneficiary,
as the case may be, shall have the right (but not later than the Option
Expiration Date) to exercise such Option to the extent that such Option was
exercisable at the date of termination of employment or become exercisable upon
such date but was not exercised, and the Participant's interest in such portion
of the Option which was not then exercisable or which did not then become
exercisable shall terminate and all rights thereunder shall cease. If the
Participant is both a Director and an Employee, her employment shall not be
deemed to have been terminated as long as she remains a Director or an Employee,
as the case may be.
9.2 Non-Transferability of Rights; Designation of Beneficiaries. Except
as herein after provided in this Section 9.2, the Option shall not be
transferable by the Participant otherwise than by will or the laws of descent
and distribution, and, during the lifetime of the Participant, the Option shall
be exercisable only by the Participant. Notwithstanding the foregoing, the
Participant, during her lifetime, may transfer for no consideration the Option
to members of her immediate family or a trust for the benefit of her and/or
4
members of her immediate family subject to all of the provisions applicable to
the Option prior to its transfer. In addition, the Participant may file with the
Company a written designation of a beneficiary or beneficiaries to exercise, in
the event of death of the Participant, the Option granted hereunder, subject to
all of the provisions of this Section 9. The Participant may from time to time
revoke or change any such designation of beneficiary and any designation of
beneficiary under the Plan shall be controlling over any other disposition,
testamentary or otherwise; provided, however, that if the Committee shall be in
doubt as to the right of any such beneficiary to exercise the Option, the
Committee may determine to recognize only an exercise by the personal
representative of the estate of the Participant, in which case the Company, the
Committee and the members thereof shall not be under any further liability to
anyone.
9.3 Deemed Termination of Employment and Transfer. If the Employer that
employs the Participant (or of which the Participant is a Director) ceases to be
an Employer, the Participant's employment shall be deemed to have been
terminated by such Employer without Cause as of the date that it ceases to be an
Employer. The transfer of a Participant's employment (or a Director's service as
a Director) from one Employer to another Employer shall not be deemed a
termination of employment.
10. Withholding
The Company or any Affiliate that employs the Participant shall have
the right to deduct any sums that federal, state or local tax law requires to be
withheld with respect to the exercise of the Option or as otherwise may be
required by such laws. The Company or any such Affiliate may require as a
condition to issuing Stock upon the exercise of the Option that the Participant
or other person exercising the Option pay any sum that federal, state or local
tax law requires to be withheld with respect to such exercise. In the
alternative, the Participant or other person exercising the Option, may elect to
pay such sums to the Company or the Affiliate by delivering written notice of
that election to the Company's corporate headquarters at 400 Royal Palm Way,
Suite 410, Palm Beach, Florida 33480, prior to or concurrently with exercise.
There is no obligation that the Participant be advised of the existence of the
tax or the amount which the Employer corporation will be so required to
withhold.
5
11. Controlling Document
In the event of any conflict between the provisions of the Stock Option
Plan and the provisions of the Employment Agreement relating to this Option
and/or the Option Award and these Terms and Conditions, the provisions of the
Employment Agreement and/or the Option Award and these Terms and Conditions
shall control.
12. Early Exercise; Restricted Stock
Notwithstanding any other provision of the Option Award or these Terms
and Conditions, the Participant may exercise all or any part of the Option which
is not yet exercisable in accordance with the provisions of this Section 12. In
such event, all Shares purchased upon such exercise shall be subject to a
repurchase right in favor of the Company at a price, payable in cash in one lump
sum, equal to the original purchase price under the Option until the Option
which was exercised to purchase the Shares becomes exercisable under the Option
Award and these Terms and Conditions without regard to this Section 12. The
Company's repurchase right shall arise, if, at any time during the time period
described in the preceding sentence, an event which would cause the Option
pursuant to which such Shares were acquired to be forfeited occurs and shall be
exercised by notice to the Participant for a period of 30 days after such event.
While any Shares issued pursuant to the early exercise of the Option provided by
this Section 12 are subject to the Company's repurchase right, they may be
transferred only as described in the second sentence of Section 9.2, and, in the
event of such transfer, shall still remain subject to the Company's repurchase
right. While the Shares are subject to the Company's right of repurchase, a
legend to that effect shall be placed on such Shares, and the Company shall also
have the right to have custody of such certificates.
6
EXHIBIT C
NON-QUALIFIED STOCK OPTION AWARD GRANTED UNDER THE
DIGITAL ANGEL.NET INC.
FLEXIBLE STOCK PLAN
Name of Option Recipient: Mercedes Walton
------------------------------------------------------
On January 1, 2001, the Company awarded you a stock option. You were
granted an option to buy 200,000 Shares of Common Stock at the per Share price
equal to Fair Market Value as of January 1, 2001 as determined by the Committee
based on an appraisal by a qualified independent appraiser on or after the
earlier of the date set forth in the Terms and Conditions (as defined below) or
the dates set forth in the following schedule:
Number of Shares for which
Date Option is First Exercisable
January 1, 2001 33,333
September 1, 2001 33,333
December 31, 2002 66,667
December 31, 2003 66,667
and on or before December 31, 2010.
IMPORTANT: By signing below, you agree to be bound by, and acknowledge
receipt of, the attached Terms and Conditions of this Non-Qualified Stock Option
Award ("Terms and Conditions") and the Digital Angel.net, Inc. Flexible Stock
Plan ("Stock Option Plan"). Capitalized terms are defined in the Terms and
Conditions and/or Stock Option Plan .
DIGITAL ANGEL.NET, INC.
By:
------------------------
President
Read and agreed to this ___ day of January, 2001.
- ------------------------------------------
Mercedes Walton
1
TERMS AND CONDITIONS
NON-QUALIFIED STOCK OPTION AWARD GRANTED UNDER THE
DIGITAL ANGEL.NET INC. FLEXIBLE STOCK PLAN
TO
MERCEDES WALTON
1. Definitions
(a) Committee The Committee (or, in certain cases,
its designees) who administers the
Stock Option Plan.
(b) Company Digital Angel.net, Inc., a Delaware
corporation.
(c) Option The option granted by the Option
Award.
(d) Option Award The Non-Qualified Stock Option Award
to which the Terms and Conditions are
attached together with, except where
the context requires otherwise, these
Terms and Conditions.
(e) Employment Agreement That certain employment and
non-compete agreement dated as of
January 1, 2001, by and between
Applied Digital Solutions, Inc.
("ADSX") and the Participant, as
amended.
(f) Participant Mercedes Walton, the recipient of the
Option Award.
(g) Stock Option Plan Digital Angel.net, Inc. Flexible Stock
Plan, as amended.
All capitalized terms not otherwise defined herein (whether above or otherwise)
shall have the meanings given to such terms by the Stock Option Plan.
2. Evidence of Option Grant and Option not an Incentive Stock Option
The Option Award evidences a grant to the Participant of an Option to
purchase that number of Shares ("Optioned Shares") of the par value $.00005 per
share Common Stock of the Company ("Stock") set forth on the Option Award. The
Participant may exercise the Option as shown on the Option Award and in Section
3 below. Once all or any part of the Option becomes exercisable, it shall remain
exercisable until the Option Expiration Date. In no event shall the Option or
any part of the Option be exercisable after December 31, 2010 (the "Option
Expiration Date"). The Option shall not be treated as an "Incentive Stock
Option", as defined in Section 422 of the Internal Code of 1986, as amended.
2
3. Acceleration of Exercise Date.
If and to the extent the Option is not already exercisable, it shall
become exercisable upon the occurrence of any of the following events:
(a) The Participant's death while employed by the Employer;
(b) the Participant's Disability (as defined in the Employment
Agreement);
(c) the Participant's termination of her employment for Good
Reason (as defined in the Employment Agreement);
(d) termination of the Participant's employment other than for
Cause by the Employer (as defined in the Employment Agreement);
(e) a Change of Control (as defined in the Employment
Agreement) with respect to the Company or ADSX; or
(f) the Company ceases to be a Subsidiary of ADSX.
4. Exercise of Option
The Option shall be exercised by the Participant delivering a written
notice of exercise to the Company's corporate headquarters at 400 Royal, Suite
410, Palm Beach, Florida 33480. This notice shall specify the number of Optioned
Shares the Participant then desires to purchase.
5. Payment of Option Price
Payment for the Shares purchased under the Option shall be made to the
Company either in cash (including cashier's check, bank draft or money order or
a cashless exercise arrangement). In addition, payment of the Option price may,
at the discretion of the Committee, be made in whole or in part by the tender of
Shares or in other property, rights and credits, including the Participant's
promissory note.
6. Form of Notice of Exercise
The Participant's notice as required by Section 3 shall be signed by
the Participant and shall be in substantially the following form with
appropriate adjustments depending on how the Option price is paid:
"I hereby exercise my Option to purchase ____ Shares in
accordance with my Option Award dated _____, 200__, granted under the
Company's 1999 Flexible Stock Plan, as amended.
The aggregate Option price of the Shares I am purchasing
is $______________. I hereby tender payment of such price (complete applicable
item(s)):
3
(a) by delivery of a cashier's check, bank draft or money
order made payable to the Company in the amount of
$__________; and/or
(b) through a cashless exercise as follows
--------------------------------------------------------------
-------------------------------------------------------------.
7. Stock Certificate
Upon the exercise of the Option, the Participant shall be entitled to
one Stock certificate evidencing the Shares acquired upon exercise.
8. Legends on Certificate
The certificate to be issued under Section 6 shall be issued as soon as
practicable. Such certificate shall contain thereon a legend in substantially
the following form if the Shares evidenced by such certificate have not been
registered under the Securities Act of 1933, as amended:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or any applicable state
law. They may not be offered for sale, sold, transferred or pledged
without (1) registration under the Securities Act of 1933 and any
applicable state law, or (2) at holder's expense, an opinion
(satisfactory to the Company) that registration is not required."
The certificate shall also contain such other legends as may be appropriate or
required by law, such as a legend relating to any shareholders agreement that
may apply to the Shares.
9. Termination of Employment; Nonassignability
9.1 Termination. If the Participant's employment shall terminate or be
terminated, the Participant or her personal representative and/or beneficiary,
as the case may be, shall have the right (but not later than the Option
Expiration Date) to exercise such Option to the extent that such Option was
exercisable at the date of termination of employment or become exercisable upon
such date but was not exercised, and the Participant's interest in such portion
of the Option which was not then exercisable or which did not then become
exercisable shall terminate and all rights thereunder shall cease. If the
Participant is both a Director and an Employee, her employment shall not be
deemed to have been terminated as long as she remains a Director or an Employee,
as the case may be.
9.2 Non-Transferability of Rights; Designation of Beneficiaries. Except
as herein after provided in this Section 9.2, the Option shall not be
transferable by the Participant otherwise than by will or the laws of descent
and distribution, and, during the lifetime of the Participant, the Option shall
be exercisable only by the Participant. Notwithstanding the foregoing, the
4
Participant, during her lifetime, may transfer for no consideration the Option
to members of her immediate family or a trust for the benefit of her and/or
members of her immediate family subject to all of the provisions applicable to
the Option prior to its transfer. In addition, the Participant may file with the
Company a written designation of a beneficiary or beneficiaries to exercise, in
the event of death of the Participant, the Option granted hereunder, subject to
all of the provisions of this Section 9. The Participant may from time to time
revoke or change any such designation of beneficiary and any designation of
beneficiary under the Plan shall be controlling over any other disposition,
testamentary or otherwise; provided, however, that if the Committee shall be in
doubt as to the right of any such beneficiary to exercise the Option, the
Committee may determine to recognize only an exercise by the personal
representative of the estate of the Participant, in which case the Company, the
Committee and the members thereof shall not be under any further liability to
anyone.
9.3 Deemed Termination of Employment and Transfer. If the Employer that
employs the Participant (or of which the Participant is a Director) ceases to be
an Employer, the Participant's employment shall be deemed to have been
terminated by such Employer without Cause as of the date that it ceases to be an
Employer. The transfer of a Participant's employment (or a Director's service as
a Director) from one Employer to another Employer shall not be deemed a
termination of employment.
10. Withholding
The Company or any Affiliate that employs the Participant shall have
the right to deduct any sums that federal, state or local tax law requires to be
withheld with respect to the exercise of the Option or as otherwise may be
required by such laws. The Company or any such Affiliate may require as a
condition to issuing Stock upon the exercise of the Option that the Participant
or other person exercising the Option pay any sum that federal, state or local
tax law requires to be withheld with respect to such exercise. In the
alternative, the Participant or other person exercising the Option, may elect to
pay such sums to the Company or the Affiliate by delivering written notice of
that election to the Company's corporate headquarters at 400 Royal Palm Way,
Suite 410, Palm Beach, Florida 33480, prior to or concurrently with exercise.
There is no obligation that the Participant be advised of the existence of the
tax or the amount which the Employer corporation will be so required to
withhold.
11. Controlling Document
In the event of any conflict between the provisions of the Stock Option
Plan and the provisions of the Employment Agreement relating to this Option
and/or the Option Award and these Terms and Conditions, the provisions of the
Employment Agreement and/or the Option Award and these Terms and Conditions
shall control.
12. Early Exercise; Restricted Stock
Notwithstanding any other provision of the Option Award or these Terms
and Conditions, the Participant may exercise all or any part of the Option which
5
is not yet exercisable in accordance with the provisions of this Section 12. In
such event, all Shares purchased upon such exercise shall be subject to a
repurchase right in favor of the Company at a price, payable in cash in one lump
sum, equal to the original purchase price under the Option until the Option
which was exercised to purchase the Shares becomes exercisable under the Option
Award and these Terms and Conditions without regard to this Section 12. The
Company's repurchase right shall arise, if, at any time during the time period
described in the preceding sentence, an event which would cause the Option
pursuant to which such Shares were acquired to be forfeited occurs and shall be
exercised by notice to the Participant for a period of 30 days after such event.
While any Shares issued pursuant to the early exercise of the Option provided by
this Section 12 are subject to the Company's repurchase right, they may be
transferred only as described in the second sentence of Section 9.2, and, in the
event of such transfer, shall still remain subject to the Company's repurchase
right. While the Shares are subject to the Company's right of repurchase, a
legend to that effect shall be placed on such Shares, and the Company shall also
have the right to have custody of such certificates.
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Exhibit D
Parachute Gross Up
(a) In the event that the Executive shall become entitled to
payments and/or benefits provided by this Agreement or any other amounts in the
"nature of compensation" (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a change of ownership or effective control covered by Section
280G(b)(2) of the Code or any person affiliated with the Company or such person)
as a result of such change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (and any similar tax that may
hereafter be imposed by any taxing authority) the Company shall pay to the
Executive at the time specified in subsection (d) below an additional amount
(the "Gross-up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Company Payments and any U.S. federal,
state, and for local income or payroll tax upon the Gross-up Payment provided
for by this paragraph (a), but before deduction for any U.S. federal, state, and
local income or payroll tax on the Company Payments, shall be equal to the
Company Payments.
(b) For purposes of determining whether any of the Company
Payments and Gross-up Payments (collectively the "Total Payments") will be
subject to the Excise Tax and the amount of such Excise Tax, (x) the Total
Payments shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless and except to the extent that, in the opinion
of the Company's independent certified public accountants appointed prior to any
change in ownership (as defined under Section 280G(b)(2)of the Code) or tax
counsel selected by such accountants (the "Accountants") such Total Payments (in
whole or in part) either do not constitute "parachute payments," represent
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the "base amount" or are otherwise
not subject to the Excise Tax, and (y) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Accountants in accordance
with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Gross-up
Payment, the Executive shall be deemed to pay U.S. federal income taxes at the
highest marginal rate of U.S. federal income taxation in the calendar year in
which the Gross-up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence for the calendar year in which the Company Payment is to be made, net
of the maximum reduction in U.S. federal income taxes which could be obtained
from deduction of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants to be less
than the amount taken into account hereunder at the time the Gross-up Payment is
made, the Executive shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the prior
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Gross-up Payment attributable to such reduction (plus the portion of the
Gross-up Payment attributable to the Excise Tax and U.S. federal, state and
local income tax imposed on the portion of the Gross-up Payment being repaid by
the Executive if such repayment results in a reduction in Excise Tax or a U.S.
federal, state and local income tax deduction), plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the Gross-up Payment
to be refunded to the Company has been paid to any U.S. federal, state and local
tax authority, repayment thereof (and related amounts) shall not be required
until actual refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest received or
credited to the Executive by such tax authority for the period it held such
portion. The Executive and the Company shall mutually agree upon the course of
action to be pursued (and the method of allocating the expense thereof) if the
Executive's claim for refund or credit is denied.
In the event that the Excise Tax is later determined by the Accountant
or the Internal Revenue Service to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest or penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided for in
subsection (c) above shall be paid not later than the thirtieth (30th) day
following an event occurring which subjects the Executive to the Excise Tax;
provided, however, that if the amount of such Gross-up Payment or portion
thereof cannot be finally determined on or before such day, the Company shall
pay to the Executive on such day an estimate, as determined in good faith by the
Accountant, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code), subject to further payments pursuant to subsection
(c) hereof, as soon as the amount thereof can reasonably be determined, but in
no event later than the ninetieth day after the occurrence of the event
subjecting the Executive to the Excise Tax. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(e) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise Tax, the Executive
shall permit the Company to control issues related to the Excise Tax (at its
expense), provided that such issues do not potentially materially adversely
affect the Executive, but the Executive shall control any other issues. In the
event the issues are interrelated, the Executive and the Company shall in good
faith cooperate so as not to jeopardize resolution of either issue, but if the
parties cannot agree the Executive shall make the final determination with
regard to the issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive shall permit the
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representative of the Company to accompany the Executive, and the Executive and
the Executive's representative shall cooperate with the Company and its
representative.
(f) The Company shall be responsible for all charges of the
Accountant.
(g) The Company and the Executive shall promptly deliver to
each other copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this Exhibit D.
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