NON-COMPETITION AGREEMENT
Exhibit
10.3
EXECUTION VERSION
THIS NON-COMPETITION AGREEMENT (this “Agreement”) is made and entered into as of May
15, 2008 by and between Applied Digital Solutions, Inc., a Delaware corporation (the
“Company”) and The Xxxxxxx Works, a Connecticut corporation (“Purchaser”) and is
ancillary to the Stock Purchase Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, concurrently with the execution of this Agreement, VeriChip Corp, a subsidiary of the
Company and a Delaware corporation (“VeriChip”) and Purchaser have entered into a Stock
Purchase Agreement (the “Stock Purchase Agreement”), pursuant to which Purchaser will
purchase all of the outstanding capital stock of Xmark Corporation, a corporation governed under
the laws of Canada (“Xmark”);
WHEREAS, all capitalized terms not otherwise defined herein shall have the meanings attributed
thereto in the Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the premises, the terms and provisions set forth in this
Agreement, the mutual benefits to be gained by the performance thereof and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Non-Competition and Non-Solicitation.
(a) To induce Purchaser to enter into the Stock Purchase Agreement and consummate the
transactions contemplated thereby and more effectively to protect the value of Xmark, the Company
shall not from the Closing until the date that is three years after the Closing Date, directly or
indirectly, on its own behalf or for the benefit of any other Person, engage directly or indirectly
in Competitive Activities, it being agreed that for purposes of the Agreement, a Person shall be
deemed to be engaged in “Competitive Activities” if it engages in, or directly or indirectly,
controls or has an ownership interest in, any Person that is engaged in, the business of
manufacturing, selling, financing, supplying, marketing or distributing of Business Products,
anywhere in the world. “Business Products” means (a) human infant security systems, (b) wander
prevention systems for human beings (c) active RFID asset tracking systems marketed to the
healthcare industry and (d) vibration monitoring equipment for the mining, construction and
geotechnical markets.
(b) The Company acknowledges and agrees that the restrictions contained in this Agreement are
reasonable in scope and duration, and are necessary to protect Purchaser after the Closing Date.
If any provision of this Agreement as applied to any party or to any circumstance is adjudicated by
a court to be invalid or unenforceable, the same will in no way affect any other circumstance or
the validity or enforcement of this Agreement or this Agreement. If any such provision, or any
part thereof, is held to be unenforceable because of the duration of such
provision or the area
covered thereby, the parties agree that the court making such determination shall have the power to
reduce the duration and/or area of such provision and/or to delete specific words or phrases, to
the extent necessary to make it enforceable, and in its reduced form, such provision shall then be
enforceable and shall be enforced. The Company further acknowledges and agrees that if it breaches
or threatens to breach the provisions of this Agreement, then, in addition to monetary damages,
Purchaser shall be entitled to specific performance and injunctive and other equitable relief to
prevent or restrain a breach or threatened breach of such provision or to enforce its terms.
SECTION 2. Miscellaneous.
(a) Termination. With respect to those Competitive Activities in which a Competitive Entity
was engaged in prior to any Change in Control Effective Date, this Agreement shall terminate upon a
Change in Control Effective Date. “Change in Control Effective Date” means the first day
that any one or more of the following conditions shall have been satisfied:
(i) the consummation of any bona fide transaction (including, without limitation, any
merger or consolidation) the result of which is that any “person” as such term is used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934, (the “Exchange Act”), which is a
Competitive Entity is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of
the combined voting power of the Company’s then outstanding securities entitled generally to vote
in the election of the Board of Directors of the Company;
(ii) the stockholders of the Company approve a bona fide merger or consolidation of the
Company with any other Competitive Entity, which is consummated, other than a merger or
consolidation which would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after such merger or
consolidation; or
(iii) the consummation of a bona fide agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets to a Competitive Entity.
“Competitive Entity” means any corporation, entity or “person” which, prior to any Change in
Control Effective Date, is presently engaged in Competitive Activities.
(b) Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to the principles of conflicts of law thereof.
(c) Severability. In the event that any portion of this Agreement becomes or is held by an
arbitrator or a court of competent jurisdiction to conflict with any federal, state or local law,
or to be otherwise illegal, void or unenforceable, the remainder of this Agreement will
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continue in
full force and effect and be construed as if such portion had not been included in this Agreement.
(d) No Assignment. Because the nature of the Agreement is specific to the actions of the
Company, the Company may not assign this Agreement. This Agreement shall inure to the benefit of
Purchaser and its successors and assigns.
(e) Notices. All notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial messenger or courier service, or mailed by
registered or certified mail (return receipt requested) or sent via facsimile (with acknowledgment
of complete transmission) to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice); provided, however, that notices sent by mail will not
be deemed given until received:
If to Purchaser, to:
The Xxxxxxx Works
0000 Xxxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Corporate Secretary
Telecopy: (000) 000-0000
0000 Xxxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Corporate Secretary
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx Xxxxx & Xxxxxxxx LLP
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
if to the Company, to:
Applied Digital Solutions, Inc.
0000 Xxxxx Xxxxxxxx Xxx., #000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: 561-805-8001
0000 Xxxxx Xxxxxxxx Xxx., #000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopy: 561-805-8001
with a copy to:
Xxxxx Xxxxx L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
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Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(f) Entire Agreement. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior discussions, agreements and
understandings, written or oral, between the parties with respect to the subject matter hereof.
(g) Waiver of Breach. No delay or omission by Purchaser in exercising any right under this
Agreement shall operate as a waiver of that right or any other right under this Agreement. The
waiver of a breach of any term or provision of this Agreement, which must be in writing, shall not
operate as or be construed to be a waiver of any other previous or subsequent breach of this
Agreement.
(h) Counterparts. This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
(i) Amendments and Modification. This Agreement may not be modified, amended, altered or
supplemented except by the execution and delivery of a written agreement executed by the parties
hereto.
(j) Interpretation. The words “include,” “includes” and “including” when used herein shall be
deemed in each case to be followed by the words “without limitation.” The headings contained in
this Agreement are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
| THE XXXXXXX WORKS | ||||||
| By | /s/ Xxxx X. Xxxxxxxx | |||||
| Title: Chairman and Chief Executive Officer | ||||||
| APPLIED DIGITAL SOLUTIONS, INC. | ||||||
| By | /s/ Xxxxxx X. Xxxxxx | |||||
| Title: CEO | ||||||
