Exhibit 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made and entered into as of this 1st day
of March, 2000, by and between APPLIED DIGITAL SOLUTIONS, INC., a Missouri
corporation ("Company") and XXXXXXX X. XXXXXXXX ("Employee").
BACKGROUND
Employee has been and presently is employed by Company as its president
and chief operating officer. The parties have entered into a formal employment
agreement dated March 23, 1999 covering the terms and conditions of such
employment. The parties desire to amend such agreement and to set forth in this
document such agreement, as hereby amended, in its entirety.
TERMS AND CONDITIONS
1. Employment. Company hereby employs Employee, and Employee hereby
accepts such employment by Company, on the terms and conditions set forth below.
2. Capacity. Employee shall serve as Company's president and chief
operating officer. Employee shall perform such services for company and its
subsidiaries and affiliates as Company's board of directors shall direct from
time to time. However, no such services shall be of a nature which are not
commensurate with, and/or are beneath the dignity of, Employee's title.
3. Term. Company's employment of Employee under this Agreement shall be
for an initial term of five years commencing on March 1, 2000 and ending on
February 28, 2005. The term of Employee's employment under this Agreement shall
automatically be renewed for successive additional one year terms on each
anniversary of the commencement of Employee's employment under this Agreement,
beginning with the March 1, 2001 anniversary date, each of which terms shall be
added at the end of the then existing term (taking into account any prior
extensions or failures to extend), unless either party notifies the other at
least 30 days prior to an anniversary date of this Agreement. For example,
unless either party notifies the other to the contrary on or before January 29,
2001, the term of this Agreement shall be extended from March 1, 2005 to
February 28, 2006. For further example, and assuming the term of this Agreement
has been extended to February 28, 2006, if one party notifies the other that it
does not desire to extend the term of this Agreement for an additional year and
such notice is given on or before January 29, 2002, the term of this Agreement
shall not be extended from March 1, 2006 to February 28, 2007. Notwithstanding
the foregoing, the term of this Agreement may end prior to the termination date
determined under this paragraph 3 as provided in paragraphs 9, 10, 11 and 12.
4. Service While Employed. Employee agrees to devote his best efforts,
his full diligence and all of his business time to his duties hereunder and
shall not engage, either directly or indirectly, in any business or other
activity which is competitive with or adverse to the interests or the business
of Company.
5. Items Furnished and Relocation. Company shall furnish Employee with
such private office, secretarial assistance, and such other facilities,
equipment and services suitable to his position and adequate to perform his
duties hereunder. Employee shall not be relocated by Company without his
consent. Company shall furnish Employee with an automobile upon the terms and
conditions that were in effect on June 1, 1998.
2
6. Compensation, Vacations and Reimbursement. As partial compensation
for his services to Company, Company agrees to pay Employee an annual salary in
regular monthly or other agreed upon installments of not less than $165,000.
Employee shall also be entitled to receive such bonuses, incentive compensation,
and other compensation, if any, as Company's board of directors, executive
committee, compensation committee, or other designated committee shall award
Employee from time to time whether in cash, Company stock, stock options, other
stock based compensation, other form of remuneration, or any combination of the
foregoing. In addition, Company shall pay Employee monthly payments of $3,000
each as a flexible perquisite allowance to be used by Employee for such purposes
as he shall determine. All such compensation shall be subject to legally
required income and employment tax withholding. Employee shall be entitled to
paid vacations and reimbursement for all reasonable business expenses in
accordance with Company's policies for operating officers.
7. Other Benefits. In addition to his compensation described in
paragraph 6 above, Employee shall be entitled to participate in such bonus,
profit sharing, deferred compensation and pension plans of Company for which he
is eligible.
8. Welfare and Fringe Benefits. In addition to his compensation
described in paragraph 6 and the benefits described in paragraph 7 above,
Employee shall be entitled to participate in such welfare and fringe benefits
plans and programs of the Company for which he is eligible.
9. Death and Disability. If Employee dies during the term of this
Agreement, his employment shall be deemed to have been terminated as of the last
day of the month in which his death occurs, and Company will pay to Employee's
3
personal representative all salary and other compensation due Employee through
the end of such month. If Employee becomes permanently disabled so that he
cannot perform his duties hereunder, as determined by a physician selected by or
acceptable to Company, his employment shall be deemed to have been terminated as
of the last day of the month in which such determination is made, and he will
receive his salary and other compensation through the end of such month. For
purposes of the foregoing computations, Employee shall be deemed to have earned
the same percentage of his minimum annual bonus for such employment year as the
number of days in the employment year through the date his employment is deemed
to terminate is of 365.
10. Retirement. From and after the time Employee attains age 65, he may
retire at any time by notifying Company at least 120 days prior to his
retirement date or be retired by Company upon at least two years notice.
11. Default. In the event that Company fails to perform a material
provision of this Agreement and such failure continues for 30 days after
notification from Employee, the Employee may terminate this Agreement by notice
to the Company. Company may terminate this Agreement upon Employee's material
default. Employee's material default shall mean (a) Employee's willful and
continued failure to perform the requirements of his duties hereunder (other
than as a result of total or partial incapacity due to physical or mental
illness) for 30 days after a written demand is delivered to Employee on behalf
of Company which specifically identifies the manner in which it is alleged that
Employee has not substantially performed his duties, (b) Employee's dishonesty
in the performance of his duties hereunder, (c) an act or acts on Employee's
part involving moral turpitude or constituting a felony under the laws of the
United States or any state thereof, (d) any other act or omission which
materially injures the financial condition or business reputation of Company or
4
any of its subsidiaries or affiliates, or (e) Employee's material breach of his
non-compete and confidentiality obligations under paragraphs 4 and/or 13 of this
Agreement, respectively. Any termination shall be without prejudice to any
rights or remedies which Employee or Company may have.
12. Change in Control. Notwithstanding any other provision of this
Agreement, should a Change of Control (as defined below) occur, Employee, at his
sole option and discretion, may terminate his employment under this Agreement at
any time within one year after such change of control upon 15 days notice. In
the event of such termination, Company shall pay to Employee a severance payment
equal to three times the base amount as defined in Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended ("Code") minus $1.00 which shall be
payable no later than one month after the effective date of the Employee's
termination of employment. In addition, in the event of a Change of Control, all
outstanding stock options held by Employee (whether issued under Company's 1996
Stock Option Plan, Company's 1999 Flexible Stock Plan, or otherwise) shall
become fully exercisable (to the extent not already exercisable). 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 Company representing 20% or more of the combined
voting power (i) of Company's then outstanding securities or (ii) on a fully
diluted basis, (b) upon the first purchase of the common stock of Company
pursuant to a tender or exchange offer (other than a tender or exchange offer
made by Company), (c) upon the approval by Company's stockholders of a merger or
5
consolidation, a sale or disposition of all or substantially all of Company's
assets or a plan of liquidation or dissolution of 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 Company cease for any reason to constitute
at least a majority thereof, unless the election or nomination for the election
by 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 Company either merges or consolidates with or
into another company or sells or disposes of all or substantially all of its
assets to another company, if such merger, consolidation, sale or disposition is
in connection with a corporate restructuring wherein the stockholders of 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 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.
13. Nondisclosure; Return of Records. Employee will not, except as
authorized by Company, publish or disclose to others, or use for his own
benefit, or authorize anyone else to publish or disclose or use, or copy or make
notes of any secret, proprietary, or confidential information or knowledge of
data or trade secrets of or relating to the business activities of Company which
may come to Employee's knowledge during his employment with the Company. Upon
6
termination of Employee's employment for any reason, Employee will deliver to
Company, without retaining any copies, notes or excerpts, all records, notes,
data, memoranda, and all other documents or materials made or compiled by
Employee, or made available to him by Company during his employment, which are
in Employee's possession and/or control and which are the property of Company
and/or which relate to Employee's employment or the business activities of
Company.
14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Company and any successors or assigns of Company, and Employee,
his heirs, personal representatives and assigns, except that Employee's
obligations to perform services and rights to receive payment therefore shall be
nonassignable and nontransferable.
15. Entire Agreement: Modification. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter and
supersedes all prior or contemporaneous agreements not set forth in this
agreement. This Agreement may not be modified other than by an agreement in
writing signed by each of the parties.
16. Waiver. Any failure by either party to enforce any provision of
this Agreement shall not operate as a waiver of such provision or any other
provision. Any waiver by either party of any breach of any provision of this
Agreement shall not operate as a waiver of any other breach of such provision or
any other provision of this agreement.
17. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not effect the other provisions of this
Agreement, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
7
18. Paragraph Headings. Paragraph headings throughout this Agreement
are solely for the convenience of the parties and shall not be construed as a
part of any section or as modifying the contents of any section.
19. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri.
20. Notices. All notices under this Agreement shall be personally
delivered, sent certified mail, postage prepaid, to Company at its corporate
office and to Employee at his principal residence, or sent by telecopy.
21. Supplemental Compensation. Upon the termination of Employee's
employment with Company for any reason other than Company's termination due to
his material default, as described in paragraph 11, Employee shall be entitled
to receive from Company 60 equal monthly payments, with the first such payment
due on the second first day of the month after termination of employment, of
8.333% of his Compensation (as defined below) from Company over the
12-consecutive month period for which his Compensation was the greatest. If
Employee should die before all or any part of the above described monthly
payments have been made, all payments or all remaining payments shall be made to
his designated beneficiary, if any, otherwise to his estate. Notwithstanding the
foregoing, the aggregate amount payable under this paragraph 21 shall be reduced
by the amount, if any, payable under paragraph 12. For purposes of this
paragraph 21, Compensation shall mean salary, bonuses, incentive compensation,
and other forms of remuneration for services rendered, whether payable in cash
or kind (including Company stock) but shall not include taxable income resulting
from the exercise of a stock option or from the disposition of stock acquired
pursuant to a stock option.
8
22. Non-Competition. During the period that Employee is entitled to
receive payments under paragraph 21, Employee shall not engage, directly or
indirectly, either on his own behalf or on behalf of any other person, firm,
corporation or other entity, in any business competitive with the business of
Company, in the geographic area in which Company is conducting business at the
time of termination of Employee's employment, or own more than 5% of any such
firm, corporation or other entity. In addition, Employee must furnish Company
with such information as Company shall from time to time request in order to
determine that Employee is in compliance with the requirements of the preceding
provisions of this paragraph 22. The payments to be made under paragraph 21 are
conditioned upon Employee's complying with the provisions of this paragraph 22,
and, in the event that such provisions are not complied with, Company may
suspend such payments for any period of time in which Employee is not in
compliance with the preceding provisions of this paragraph 22.
23. Company. For purposes of paragraphs 4, 13, and 22 of this
Agreement, the Company shall mean Applied Digital Solutions, Inc. and all
subsidiaries and affiliates of it.
24. Other Matters. For purposes of this paragraph 24, a "Triggering
Event" is a Change of Control (as defined in paragraph 12), the termination of
Xxxxxxx Xxxxxxxx'x employment for any reason other than due to his material
default, as described in the present paragraph 11 of Xxxxxxx Xxxxxxxx'x
Employment Agreement, if Xxxxxxx Xxxxxxxx ceases to be Company's chairman of the
board or chief executive officer for any reason other than due to his material
default, as described in the present paragraph 11 of Xxxxxxx Xxxxxxxx'x
Employment Agreement, or the sale by Company of the stock of Company
subsidiaries or the sale by Company subsidiaries of assets, outside the ordinary
course of business, having aggregate proceeds of at least $110 million. Within
9
10 days of the occurrence of a Triggering Event. Company shall pay to Employee
the sum of $3,525,000. Company may pay such amount in cash or in Company's
common stock or in a combination of cash and common stock. Common stock used in
payment shall be valued at the average closing price on the Nasdaq National
Market over the last 5 business days prior to the date of the Triggering Event.
The allocation of cash and stock for payments provided pursuant to this
paragraph 24 shall include at least sufficient cash to cover the tax liability
associated with such payments, and shall otherwise be structure to maximize tax
efficiency to both Company and Employee.
25. Excise Gross Up. In the event that any payment or benefit received
or to be received by Employee under this Agreement and/or under another plan of
or agreement with Company is subject to the excise tax ("Excise Tax") under
Section 4999 of the Internal Revenue Code of 1986, as amended ("Code"), Company
shall pay Employee an amount ("Excise Gross Up Payment") that covers all Excise
Taxes incurred or to be incurred by Employee because of any such payment or
benefit and all federal and state income taxes and Excise Taxes on the Excise
Gross Up Payment and which, therefore, will place Employee in the same position
that he would have been in had no such payment or benefit been subject to the
Excise Tax. The Excise Tax Gross Up Payment (or portion thereof) shall be made
upon the earlier of the imposition of any Excise Tax upon Employee or his
payment of any Excise Tax.
26. Effect of Amendment. This Agreement shall supersede all agreements
between the parties relating to Employee's employment by Company.
10
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
APPLIED DIGITAL SOLUTIONS, INC.
By:
----------------------------------------
Title:
--------------------------------------
"Company"
-------------------------------------------
Xxxxxxx X. Xxxxxxxx
"Employee"
11
