Exhibit 10.1

 

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EMPLOYMENT AGREEMENT

 

AGREEMENT made as of the 1st day of July, 2016, by and between APPLIED DNA
SCIENCES, INC., a Delaware corporation (the “Company”), and JAMES A. HAYWARD
(“Executive”).

 

1.                  Employment. Executive shall continue to be employed as the
Chief Executive Officer of the Company, which employment will be subject to and
governed by this Agreement.

 

1.1           Duties and Responsibilities. Executive will have the authority,
duties and responsibilities customarily associated with the position of Chief
Executive Officer, consistent with the Company’s by-laws and applicable law.
Executive will have such additional duties and responsibilities commensurate
with his position as the Company’s Board of Directors (the “Board”) may assign
to him from time to time. Executive will report directly to and be subject to
the control and direction of the Board. The Company will use its reasonable
efforts to ensure that Executive will continue to be a member of the Board
during the period of his employment under this Agreement. At the request of the
Board, Executive shall serve as an officer and director of the Company’s
subsidiaries and other affiliates without additional compensation. Executive
will observe and adhere to all applicable written Company policies and
procedures in effect from time to time, including, and without limitation,
policies on business ethics and conduct, and policies on the use of inside
information and insider trading.

 

1.2           Term. Unless sooner terminated pursuant to Section 3, the term of
this Agreement (the “Term”) will begin July 1, 2016 and end June 30, 2017.
Thereafter, the Term will automatically be renewed for successive one-year
periods unless either party provides written notice of non-renewal to the other
at least 90 days before the end of the then-current Term.

 

1.3           Full Time. Executive shall devote all of his business time and
attention to the performance of his duties and responsibilities under this
Agreement. Executive will not render services to others for compensation or,
without the written consent of the Board (which should not be unreasonably
withheld), serve on the board of directors or other governing body of another
for profit entity, provided, however, that the Company hereby consents to
Executive’s continuing to engage in the other business activities listed on
Exhibit A hereto, so long as such activities do not conflict or interfere with
Executive’s obligations and covenants under this Agreement or Executive’s
ability to fully and properly perform the duties and responsibilities of his
employment under this Agreement. Executive may engage in personal, charitable
and passive investment activities, so long as such activities do not conflict or
interfere with his ability to perform the duties and responsibilities of his
employment under this Agreement.

 

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1.4           Location of Employment. Executive’s principal place of employment
will be at the Company’s principal offices, currently located in Stony Brook,
New York. The Company will not relocate the Executive’s office beyond a 75 mile
radius of the then current location without Executive’s consent. Notwithstanding
the foregoing, Executive acknowledges that he will have to engage in business
travel in connection with the performance of his duties and in accordance with
the needs of the Company.

  

2.                  Compensation.

 

2.1           Base Salary. The Company will pay base salary (“Base Salary”) to
Executive, in accordance with its regular payroll practices, at an initial
annual rate, as earned, of $400,000. The Board and/or the Compensation Committee
of the Board (the “Compensation Committee”) will review Executive’s Base Salary
annually. The Board or the Compensation Committee, acting in its discretion, may
increase (but may not decrease unless elected by Executive) the annual rate of
Executive’s Base Salary.

 

2.2           Annual Bonus Opportunity. The Board or Compensation Committee may
award an annual bonus to the Executive in such amount and upon such terms and
conditions as the Board or the Compensation Committee, acting in its discretion,
determines (provided that the Executive will not be treated less favorably with
respect to annual bonuses than other executives of the Company). The bonus for
any fiscal year will be recognized by the Company when achieved and/or granted
and will be payable to Executive as a lump sum, or installments, as practicable
and feasible (with consideration for cash flow and cash collections from bonus
eligible revenues).

 

2.3           Cash Incentive Award. The Company will pay a cash bonus to
Executive of up to $800,000, to be earned as follows: $300,000 for the first
fiscal year-ending after the date hereof in which the Company’s revenue equals
at least $8 million, plus $100,000 for each $2 million of revenue in excess of
$8 million. For example, if the Company’s has $10 million of revenue in the
first fiscal year in which its revenues equal or exceed $8 million, the
Executive will be entitled to $400,000 ($300,000 + $100,000); and if the Company
has revenue of $12 million in the next succeeding fiscal year, then Executive
will earn an additional $200,000; and, if the Company has $14 million of revenue
in the third succeeding fiscal year, the Executive will earn an additional
$200,000 at of the end of that year, at which point, Executive will have earned
the $800,000 aggregate maximum incentive amount under this subsection 2.3.

 

2.4           Annual Equity Awards. Executive will be eligible for annual equity
awards under the Company’s equity incentive plan on a basis that is not less
favorable than the annual equity awards being made generally to other senior
executives of the Company.

 

2.5           Employee Benefits. Executive will be eligible to participate in
such retirement, welfare and other employee benefit and fringe benefit plans,
arrangements, programs and perquisites as are provided by the Company from time
to time to or for the benefit of the Company’s other executives, on comparable
terms and conditions. Executive shall be entitled to five weeks of vacation time
during each calendar year of his employment, subject to the Company’s current
personal time off (PTO) policies and procedures.

 

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2.6           Reimbursement of Business Expenses. Executive is authorized to
incur reasonable expenses in carrying out his duties and responsibilities of his
employment under this Agreement, and the Company will promptly reimburse him for
all expenses that are so incurred upon presentation of appropriate vouchers or
receipts, subject to the Company’s expense reimbursement policies applicable to
senior executives generally as in effect from time to time. Executive will be
entitled to first class travel on flights that are scheduled to exceed three
hours. The Company will pay or reimburse Executive for the cost of computer,
phone and other equipment and services reasonably required in order to enable
Executive to conduct business from his home outside of regular business hours.

 

2.7           Other Items. The Company will pay or reimburse Executive for the
payment of up to $1,500 per month for the costs associated with an automobile
used by Executive and, in addition, will provide Executive with a gas credit
card (the charges on which will not be taken into account in applying the $1,500
monthly automobile allowance). The Company will pay or reimburse Executive for
the payment of an annual or monthly gym membership and for at least one airline
club membership. The Company will also pay for the use of an outside driver for
Executive for up to 20 hours per week.

 

3.                  Termination of Employment Before End of Term.

 

3.1           Termination by Company for Cause. The Company may terminate
Executive’s employment before the end of the Term for Cause if Executive: (a) is
convicted of or pleads nolo contendre to a felony, (b) commits fraud or a
material act or omission involving dishonesty affecting the assets, business or
reputation of the Company or any of its subsidiaries or affiliates, (c)
willfully fails or refuses to carry out the material responsibilities of his
employment, as reasonably determined by the Board, (d) engages in gross
negligence, willful misconduct or a pattern of behavior that has had or is
reasonably likely to have a significant adverse effect on the Company or the
ability of Executive to perform the duties and responsibilities of his
employment, or (e) willfully engages in any act or omission that is in material
violation of Company policy, including, without limitation, Company policy on
business ethics and conduct, and Company policy on the use of inside information
and insider trading; provided, however, that, if the conduct giving rise to
termination for Cause is curable without material harm to the business or assets
of the Company, the Executive will be afforded an opportunity to effect such a
cure within 30 days after notice of termination and thereby avoid a termination
for Cause based upon such conduct.

 

3.2           Resignation by Executive. Executive may terminate his employment
before the end of the Term, subject to at least 60 days’ prior written notice to
the Company. Upon receipt of such notice, the Company may relieve Executive of
some or all of his duties and/or set an earlier termination date.

 

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3.3           Termination by Company without Cause. Company may terminate
Executive’s employment without Cause before the end of the Term, subject to 60
days prior written notice to Executive. Following such notice, the Company may
relieve Executive of some or all of his duties, provided that Company continues
to pay Executive through the end of the notice period. For the purposes hereof,
the termination of this Agreement at the expiration of the initial Term or the
expiration of either of the first two renewal Terms (if any) due to non-renewal
by Company pursuant to Section 1.2 will be deemed to be a termination of
Executive’s employment by Company without Cause.

 

3.4           Termination Due to Disability or Death. Company may terminate
Executive’s employment before the end of the Term due to “Disability” if
Executive is unable to substantially perform the customary duties and
responsibilities of his employment for at least 120 consecutive calendar days or
150 or more calendar days during any 365 calendar day period by reason of
physical or mental illness,  injury, impairment or incapacity. No minimum notice
is required for a termination due to Executive’s Disability. If Executive dies
before the end of the Term, his employment will terminate on the date of his
death.

 

3.5           Termination by Executive for Good Reason. Executive may terminate
his employment for Good Reason at any time, subject to applicable notice and
cure conditions described below. For this purpose, the term “Good Reason” means
any of the following: (a) a material adverse change by Company of Executive’s
status or position as the Chief Executive Officer, including, without
limitation, a material diminution of his position, duties, responsibilities or
authority or the assignment to him of duties or responsibilities that are
materially inconsistent with his status or position; (b) a non-voluntary
reduction by the Company of Executive’s annual Base Salary or failure to pay
same ; (c) a breach by the Company of any of its material obligations under this
Agreement; (d) relocation of Executive without Executive’s consent beyond a 75
mile radius of Executive’s then principal place of employment in violation of
this Agreement; or (e) in connection with a Change in Control, the failure or
refusal by the successor or acquiring company to expressly assume the
obligations of Company under this Agreement. As a condition to terminating his
employment for Good Reason, Executive must, within 60 days after the occurrence
of the event or condition giving rise to such termination, provide written
notice to the Company (or the successor or acquiring company) of his desire to
terminate for Good Reason, specifying the nature of the act or omission that
Executive deems to constitute Good Reason. The Company shall have 30 days after
receipt of such notice to review and, if required, correct the situation (and
thus prevent Executive’s termination for Good Reason).

 

3.6           Definition of Change in Control.  For the purposes hereof, a
“Change in Control” will be deemed to have occurred if and when, after the date
of this Agreement,

 

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(a)           any person, as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”), other than (1) the
Company, (2) any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (3) the Executive, or (4) any entity owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly from the
Company or its affiliates) representing 30 percent or more of the combined
voting power of the Company’s then outstanding voting securities;

 

(b)          during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (a), (c) or (d) of this
subsection) whose election by the Board or nomination for election by the
company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof;

 

(c)           there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other entity, other
than (1) a merger or consolidation which results in the directors of the Company
immediately prior to such merger or consolidation continuing to constitute at
least a majority of the board of directors of the Company, the surviving entity
or any parent thereof or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
(other than persons described in any of parts (1) – (4) of subsection (a) above)
is or becomes the beneficial owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such person any
securities acquired directly from the Company or its affiliates) representing
30% or more of the combined voting power of the Company’s then outstanding
securities; or

 

(d)           the complete liquidation or dissolution of the Company or the sale
or other disposition by the Company of all or substantially all of the Company’s
assets, other than a sale or disposition by the Company of all or a majority of
the Company’s assets, income or revenue to an entity, at least 70% of the
combined voting power of the voting securities of which are owned by
shareholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.

 

4.                  Payments and Benefits Upon Termination of Employment.

 

4.1           Termination of Employment by Company without Cause or by Executive
for Good Reason. Except as provided in Section 4.4 (relating to the effect of a
Change in Control), if Executive’s employment is terminated by Company without
Cause pursuant to Section 3.3 or by Executive for Good Reason pursuant to
Section 3.5, then, subject to Section 5, Executive shall receive the following
payments and benefits:

 

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(a)           a single cash payment equal to the sum of (1) the unpaid amount,
if any, of Base Salary previously earned by Executive through the date of his
termination, and (2) the unpaid amount, if any, of the annual bonus earned by
Executive for the preceding year;

 

(b)           payment of any business and other expenses described in Sections
2.7 and 2.8 that were previously incurred but not reimbursed and are otherwise
eligible for reimbursement;

 

(c)           any payments or benefits payable to Executive or his covered
spouse, or a dependent or beneficiary of Executive, under and in accordance with
the provisions of any employee benefit plan of the Company;

 

(d)           a cash payment equal to the product of (1) the greater of (A) the
annual bonus award (if any) that would have been earned by Executive for the
fiscal year in which his employment terminates if his employment had continued
through the end of such year, and (B) the annual bonus earned by Executive for
the preceding year, multiplied by (2) a fraction, the numerator of which is the
number of days elapsed from the beginning of that fiscal year until the date his
employment terminates, and the denominator of which is 365 (“Pro Rata Bonus”),
which payment will be made when the bonus for such year would otherwise have
been paid;

  

(e)           an amount of severance equal to the greater of (1) 2.99- times
Executive’s annual rate of Base Salary in effect at the time his employment
terminates, or (2) 2-times the sum of (A) such annual rate of Base Salary, plus
(B) the annual bonus, if any, earned by Executive for the year preceding the
year of termination, or, if greater, the target bonus, if any, for the year of
termination, which amount (the greater of (1) and (2)) shall be payable ratably
for a period of 24 months following such termination of employment as if it were
salary payable in accordance with the Company’s normal payroll practices, 
provided, however, that the initial installment will begin on the 60th day
following the date on which Executive’s employment terminates and will include
the payments that would otherwise have been made during such 60-day period;

 

(f)            any vested stock options and stock appreciation rights held by
Executive at the time of his termination of employment will remain exercisable
by the Executive or his beneficiary, as the case may be, for a period of at
least three years following the termination of his employment (but in no event
later than the stated expiration date of such option or stock appreciation
right;

 

(g)           if the Executive and/or his covered spouse or dependents elect
COBRA continuation coverage as a result of the termination of Executive’s
employment, then the Company will pay the full amount of the COBRA premium for
such coverage for a period of up to 18 months following the termination of
Executive’s employment, it being understood that Executive may be taxable on the
value of such coverage in order to enable the Company to avoid any penalty or
additional tax that may otherwise be incurred by reason of the provision of such
subsidized COBRA coverage; and

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(h)           if the Executive is covered by Company-provided life insurance,
continuing life insurance benefits for 24 months following the termination of
his employment as if Executive’s employment had continued.

 

4.2           Termination Due to Disability or Death. If Executive’s employment
is terminated pursuant to Section 3.4 by reason of his death or Disability,
then, subject to Section 5, Executive (or, as applicable, his spouse, covered
dependents and/or beneficiaries) shall receive the payments and benefits
described in Sections 4.1(a) – (d) and 4.1(g), and any vested stock options held
by Executive at the time of his termination of employment will remain
exercisable by the Executive or his beneficiary, as the case may be, for a
period of at least three  years following the termination of his employment (but
in no event later than the stated expiration date of the option, as such date
may be extended without causing the option to become subject to Section 409A of
the Code).

 

4.3           Termination by Company for Cause or Resignation by Executive. If
Company terminates Executive’s employment for Cause pursuant to Section 3.1 or
if Executive resigns his employment pursuant to Section 3.2 (other than a
resignation for Good Reason pursuant to Section 3.5), Executive shall not be
entitled to any payments or benefits except for those described in section 4.1
(a)-(c).

 

4.4           Effect of Change in Control.

 

(a)           Vesting of Certain Equity Awards. If a Change in Control occurs,
then immediately prior to such Change in Control, Executive will become fully
vested in any then outstanding unvested stock options, restricted stock or other
equity incentive awards for shares of Company stock, unless and except to the
extent that they are assumed by or otherwise converted into economically
equivalent stock options, restricted stock or other equity incentive awards with
respect to shares of stock of the acquiring company, the surviving company or
any of its or their affiliates.

  

(b)           Termination of Employment in Connection with Change in Control. If
Executive’s employment is terminated by Company without Cause or by Executive
for Good Reason within two years after a Change in Control or within 6 months
prior to a Change in Control, then (1) the amount of severance payable to
Executive pursuant to Section 4.1(e) (or, as the case may be, the amount
remaining to be paid to Executive at the time of a Change in Control occurring
within 6 months after the termination of Executive’s employment) will be payable
to Executive in a single sum cash payment on the 60th day following his
termination of employment (or, if Executive’s employment terminated before the
Change in Control, on the later of the date of the Change in Control or the date
which is 60 days after the date Executive’s employment terminated); and (2) any
stock options and stock appreciation rights that are outstanding at the time of
such termination of employment will remain exercisable for at least three years
following the date on which the Change in Control occurs or, if later, the date
Executive’s employment terminates (but in no event later than the stated
expiration date of such option or stock appreciation right).

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5.                  Release of Claims; Restoration of Payments; Section 280G.

 

5.1           Release.  Notwithstanding anything to the contrary contained
herein, as conditions to the Company’s being obligated to make the separation
payments and provide the benefits described in Sections 4.1(d) – 4.1(h) (and, by
extension, Section 4.2)), (a) within 60 days after the date of Executive’s
termination, the Company must have received from Executive an executed valid
general release of claims substantially in the form attached hereto as Exhibit
A, that is no longer subject to revocation, and (b) on or before Executive’s
termination date, the Executive shall have (1) turned over all Company property
in his possession or control to the Company, and (2) resigned from the Board of
the Company and the board of directors or comparable body of every subsidiary or
other Affiliate of the Company, and every committee thereof. Executive shall not
be entitled to receive such severance payment and benefits if the conditions
described in the preceding sentence are not timely satisfied.

 

5.2           Restoration of Payments. Executive’s right to receive any
separation payments and benefits pursuant to this Agreement shall be subject to
his compliance with the restrictive covenants referenced or set forth in Section
6 and repayment pursuant to this Section. If Executive violates or is in breach
of any said restrictive covenants, then (a) Executive shall not be entitled to
any further separation payments and benefits under this Agreement, (b) Executive
shall be obligated to immediately return to the Company any separation payments
and the value of any separation benefits previously received hereunder, and (c)
Executive shall have no further rights or entitlements under this Agreement.
This Section shall not in any manner supersede or limit any other right the
Company may have to enforce or seek legal or equitable relief with respect to a
violation or breach by Executive of any of said restrictive covenants.

  

5.3           Section 280G.

 

(a)           General. If any payment or benefit received or to be received by
Executive in connection with or contingent on a change in ownership or control
of the Company, within the meaning of Section 280G of the Code, whether or not
in connection with Executive’s termination of employment, and whether or not
pursuant to this Agreement (such payments or benefits being referred to as the
“Total Payments”) will be subject to an excise tax as provided for in Section
4999 of the Code (the “Excise Tax”), then Executive will be entitled to receive
either (a) the full amount of the Total Payments, or (b) a portion of the Total
Payments having a value equal to 2.99-times Executive’s “base amount” (as such
term is defined in Section 280G(b)(3)(A) of the Code), whichever of clauses (a)
and (b), after taking into account applicable federal, state, and local income
taxes and the Excise Tax, results in the receipt by Executive on an after-tax
basis, of the greatest portion of the Total Payments. For purposes of
determining the after-tax amounts in (a) and (b) above, Executive will be deemed
to pay federal, state and local income tax at the highest marginal rates, net of
the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. If there is a reduction of the Total
Payments pursuant to the foregoing, then, unless the parties agree otherwise,
such reduction will occur in the following order: (A) any cash severance payable
under this Agreement; (B) any other cash amount payable to Executive; (C) any
benefit valued as a “parachute payment;” and (D) acceleration of vesting of any
equity awards.

 

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(b)           Determinations. All determinations under this subsection must be
made by a nationally recognized accounting firm, which must not be the auditor
of the acquirer in the transaction constituting a change in ownership or control
of the Company, selected by the Company (the “Auditor”), and the Company will
pay all costs and expenses of the Auditor. The Company will cooperate in good
faith in making such determinations and in providing the necessary information
for this purpose.

 

6.                  Restrictive Covenants.

 

6.1           Nondisclosure of Confidential Information; Inventions.

 

(a)                The Company possesses valuable business and technical
information, know-how and trade secrets (whether written or oral) related to its
and its subsidiaries’ current, future and proposed products, including, but not
limited to, research, developments, improvements, methods, procedures,
discoveries, patents, patent applications, inventions, processes, formulas,
technology, designs, models, drawings, product plans, products, services,
customers, customer lists, strategies, studies, business plans, forecasts,
markets, techniques, engineering, testing systems, hardware configuration
information, computer software and programs (including source code and related
documentation), test and/or experimental data and results, laboratory notebooks,
marketing, finances or other business information (herein collectively referred
to as “Confidential Information”).  Confidential Information shall include any
and all information relating to the Company, and its subsidiaries, affiliates,
clients, customers, investors, and joint venture and strategic partners.

 

(b)                The Executive is an employee of the Company and as such the
Company has and will disclose Confidential Information to the Executive.  The
Executive shall not communicate the Company’s Confidential Information to any
third party without the prior written consent of the Company, and the Executive
shall use his best efforts to prevent inadvertent disclosure of the Company’s
Confidential Information to any third party.  The Executive hereby acknowledges
that he is aware that United States securities laws prohibits any person who has
received from an issuer material, non-public information from purchasing or
selling securities of such issuer or from communicating such information to any
other person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities. The obligation of this
Section 6.1(b) shall terminate with respect to any particular portion of the
Company’s Confidential Information when the Executive can document that the
information is part of the public domain other than as a result of the
Executive’s or another person’s breach of duty to maintain confidentiality.

 

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(c)                In the event that the Executive is requested or required (by
oral question or request for information or documents and legal proceedings,
interrogatories, subpoena, civil investigative demand or similar process) to
disclose Confidential Information of the Company, or if the Executive is advised
by his legal counsel that it is legally required to disclose the Confidential
Information, it is agreed that the Executive (i) will provide the Company prompt
notice of any request or requirement, (ii) will provide the Company full and
complete cooperation to seek an appropriate order or remedy, (iii) will
cooperate with the Company in obtaining reliable assurances that confidential
treatment will be accorded to the disclosure of Confidential Information, and
(iv) will, if disclosure of said Confidential Information is required, disclose
only that portion of the Confidential Information which is legally required to
be disclosed.

 

(d)               The Executive will make full and prompt disclosure to the
Company of all inventions, creations, improvements, discoveries, trade secrets,
secret processes, technology, know-how, methods, developments, software, and
works of authorship or other creative works, whether patentable or not, which
are created, made, conceived or reduced to practice by him or under his
direction or jointly with others during his employment by the Company, whether
or not during normal working hours or on the premises of the Company (herein
collectively referred to as “Developments”).

 

(e)               The Executive agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications.  However, this Section
6.1(f) shall not apply to Developments that do not relate to the present or
planned business or research and development of the Company and which are made
and conceived by the Executive not during normal working hours, not on the
Company premises and not using the Company’s tools, devices, equipment or
Confidential Information.

 

(f)               The Executive agrees to cooperate fully with the Company and
to take such further actions as may be necessary or desirable, both during and
after his employment with the Company, with respect to the procurement,
maintenance and enforcement of copyrights, patents and other intellectual
property rights (both in the United States and foreign countries) relating to
Developments.  The Executive shall sign all papers, including, without
limitation, copyright applications, patent applications, declarations, oaths,
formal assignments, assignments of priority rights, and powers of attorney,
which the Company may deem necessary or desirable in order to protect its rights
and interests in any Development.  The Executive further agrees that if the
Company is unable, after reasonable effort, to secure the signature of the
Executive on any such papers, any executive officer of the Company shall be
entitled to execute any such papers as the agent and the attorney-in-fact of the
Executive, and the Executive hereby irrevocably designates and appoints each
executive officer of the Company as his/her agent and attorney-in-fact to
execute any such papers on his/her behalf, and to take any and all actions as
the Company may deem necessary or desirable in order to protect its rights and
interests in any Development, under the conditions described in this sentence.

 

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(g)               Nothing herein shall be construed as giving the Executive any
right in or to the Confidential Information or Developments or granting the
Executive any license under any intellectual property rights.

 

6.2           Duty to Return Company Documents and Property.  Upon the
termination of Executive’s employment with the Company for any reason, Executive
shall immediately return and deliver to the Company any and all papers, books,
records, documents, memoranda and manuals, e-mail, electronic or magnetic
recordings or data, including all copies thereof, belonging to the Company or
any of its subsidiaries or relating to the business of the Company or any of its
subsidiaries, in Executive’s possession, whether prepared by Executive or
others. If at any time after the termination of employment, Executive determines
that he has any trade secrets or other confidential information belonging to the
Company or any of its subsidiaries in his possession or control, Executive shall
immediately return to the Company all such trade secrets and other confidential
information, including all copies and portions thereof.

 

6.3           Non-Solicitation. During the period of Executive’s employment or
other service with the Company and for 24 months thereafter, Executive shall
not, without the prior written consent of the Company, directly or indirectly:
(a) solicit, request, advise, entice, persuade, induce, offer to employ, or hire
any employee, consultant, or independent contractor employed by or working on
behalf of the Company or any of its subsidiaries at any time during the one-year
period prior to the Executive’s termination of employment with the Company to
leave the Company or any of its subsidiaries or to engage in any activity which,
were it done by the Executive, would violate the terms of this Agreement; (b) or
solicit, request, advise, entice, persuade or induce any individual or entity,
including but not limited to any customer, supplier, vendor, investor, equity or
financing source, or other contracting party of the Company or any of its
subsidiaries, to terminate, reduce or refrain from continuing or renewing their
present or prospective contractual or business relationship with the Company or
any of its subsidiaries. Upon request, Executive will execute a standard form of
Company non-solicitation agreement, as in effect from time to time for
executives generally, which shall apply in addition to and not in lieu of the
covenants contained in this Agreement (it being understood that, in the event of
any inconsistency, the provisions of this Agreement shall govern).

 

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6.4           Non-Competition Restrictions. During the period of Executive’s
employment or other service with the Company and for 24 months thereafter,
Executive shall not, directly or indirectly, without the prior written consent
of the Company, engage in, become financially interested in, be employed by,
render any consultation or business advice with respect to, or have any
connection with, any business engaged in the research, development, testing,
design, manufacture, sale, lease, marketing, utilization or exploitation of any
products or services which are designed for the same purpose as, are similar to,
or are otherwise competitive with, products or services of the Company or any of
its subsidiaries, in any geographic area where, during the period of his
employment with the Company or any subsidiary or at the time of the termination
of his employment or other service with the Company and its subsidiaries, as the
case may be, the business of the Company or any of its subsidiaries was being
conducted or was proposed to be conducted in any manner whatsoever; provided,
however, that Executive’s mere purchase or holding, for investment purposes, of
securities representing less than 5% of the outstanding value or voting interest
of a publicly traded company shall not be deemed to be a violation of the
provisions of this paragraph.

 

6.5           Reformation. Executive acknowledges that the Company and its
subsidiaries conduct their business on a world-wide basis, that their sales and
marketing prospects are for continued expansion into world markets and that;
therefore, the territorial and time limitations set forth in Section 6.4 are
reasonable and properly required for the adequate protection of the business of
the Company and its subsidiaries. If a court concludes that any time period
and/or the geographic area specified in Section 6.4 is unenforceable, then the
time period will be reduced by the number of months, or the geographic area will
be reduced by the elimination of the overbroad portion, or both, as the case may
be, so that the restrictions may be enforced in the geographic area and for the
time to the fullest extent permitted by law.

 

6.6           Remedies. It is intended that, in view of the nature of the
Company’s business, the restrictions contained in Sections 6.1 through 6.4
(including, without limitation, the restrictions that are specifically
incorporated herein by reference), are considered reasonable and necessary to
protect the Company’s legitimate business interests and that any violation of
these restrictions would result in irreparable injury to the Company.  In the
event of a breach or a threatened breach by Executive of any restrictive
covenant contained herein, the Company shall be entitled to a temporary
restraining order and injunctive relief restraining Executive from the
commission of any breach, and to recover the Company’s attorneys’ fees, costs
and expenses related to the breach or threatened breach. Nothing contained
herein shall be construed as prohibiting the Company from pursuing any other
remedies available to it for any breach or threatened breach, including, without
limitation, the restoration and other remedies specified in this Agreement
and/or the recovery of money damages, attorneys’ fees, and costs.  These
covenants and restrictions shall each be construed as independent of any other
provisions in the Agreement, and the existence of any claim or cause of action
by Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
such covenants and restrictions.

 

6.7           Severability.  Should a court determine that any paragraph or
sentence, or any portion of a paragraph or sentence of this Section 6 is
invalid, unenforceable, or void, this determination shall not have the effect of
invalidating or validating the remainder of the paragraph, sentence or any other
provision of this Section 6.  Further, it is intended that the court should
construe this Section 6 by limiting and reducing it only to the extent necessary
to be enforceable under then applicable law.

 

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7.                  Recoupment Upon Certain Restatement of Financial Statements.
If the Company is required to restate all or a portion of its financial
statement(s) for any period following the date of this agreement, and if the
Board or the Compensation Committee determines that such restatement is
attributable in whole or in significant part to fraud, negligence, or
intentional misconduct on the part of Executive or known to Executive, then,
subject to applicable law, the Board or the Compensation Committee, acting in
its discretion, may require Executive to reimburse the Company for the amount of
any incentive compensation paid to him, cause the cancellation of outstanding
equity compensation awards, and seek reimbursement of any gains otherwise
realized by him in respect of the exercise or settlement of any such awards if
and to the extent that (a) the amount of such incentive compensation was or will
be based upon the achievement of certain financial results that were
subsequently reduced due to such restatement, and (b) the amount of the
incentive compensation that was, would have been or would be paid or provided to
Executive if the financial results had been properly reported would have been
lower than the amount actually paid or provided.

 

8.                  Assignment. The services and duties to be performed by
Executive hereunder are personal and may not be assigned.  This Agreement shall
be binding upon and inure to the benefit of the Company, its successors and
assigns and Executive and his heirs and representatives. Company may assign this
Agreement to a successor in interest, provided that any such assignee
affirmatively adopts and agrees to fulfill all obligations to Executive
hereunder.

 

9.                  Legal Fees to Enforce Rights after a Change in Control.  If,
following a Change in Control, the Company fails to comply with any of its
obligations under this Agreement or the Company takes any action to declare this
Agreement void or unenforceable or institutes any litigation or other legal
action designed to deny, diminish or to recover from Executive (or Executive’s
beneficiary) the payments and benefits intended to be provided, then Executive
(or Executive’s beneficiary, as the case may be) shall be entitled to select and
retain counsel at the expense of the Company to represent Executive (or
Executive’s beneficiary) in connection with the good faith initiation or defense
of any litigation or other legal action, whether by or against the Company or
any director, officer, stockholder or other person affiliated with the Company
or any successor thereto in any jurisdiction.

 

10.                No Impediment to Agreement.  Executive covenants that, except
as otherwise specifically disclosed herein, he is not, as of the date hereof,
aware of any circumstance or condition (legal, health or otherwise), which, in
any such case, would constitute an impediment to, or restriction upon, his
ability to enter into this Agreement and to perform the duties and
responsibilities of his employment hereunder.

 

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11.                Arbitration. Except as otherwise specifically provided herein
(relating to the Company’s right to obtain injunctive or other equitable relief
from a court) or enforcement rights by Executive after a Change of Control, any
claim or controversy arising out of or relating to this Agreement or the breach
hereof shall be resolved exclusively by arbitration. Any such arbitration will
be administered in accordance with the Employment Dispute Resolution Rules of
the American Arbitration Association (“AAA”), in the metropolitan area of New
York before an experienced employment law arbitrator licensed to practice law in
that jurisdiction who has been selected in accordance with such Rules. Each
party may be represented by counsel of its or his own choosing and at its or his
own expense; provided, however, that attorneys’ fees and costs may be awarded to
a prevailing party in the discretion of the arbitrator. The arbitrator’s award
will be enforceable, and a judgment may be entered thereon, in a federal or
state court of competent jurisdiction in the state where the arbitration was
held.  The decision of the arbitrator will be final and binding.

 

12.                Governing Law. This Agreement shall be governed by the laws
of the State of New York, excluding its conflict of law rules.

 

13.                Indemnification; D&O Insurance. To the extent permitted by
its Certificate of Incorporation and By-laws and subject to applicable law, the
Company will indemnify, defend and hold Executive harmless from and against any
claim, liability or expense (including reasonable attorneys’ fees) made against
or incurred by him as a result of his employment with the Company or any
subsidiary or other affiliate of the Company, including service as an officer or
director of the Company or any subsidiary or other affiliate of the Company. The
Company shall cover Executive under directors and officers liability insurance
both during and, while potential liability exists, after the Term, in the same
amount and to the same extent as the Company covers its other officers and
directors.

 

14.                Withholding. All payments made by Company to or for the
benefit of Executive in connection with his employment shall be subject to
applicable tax withholding.

 

15.                Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.

 

16.                Section 409A.

 

16.1         Parties’ Intent. The intent of the parties is that payments and
benefits under this Agreement comply with Internal Revenue Code Section 409A and
the regulations and guidance promulgated thereunder (collectively “Code Section
409A”) and, accordingly, to the maximum extent permitted, this Agreement will be
interpreted to be in compliance therewith. To the extent any of the payments or
benefits required under this Agreement are, or in the opinion of counsel to the
Company or Executive, could be interpreted in the future to create, a
nonqualified deferred compensation plan that does not meet the requirements of
Code Section 409A(a)(2), (3) and (4), the Company and Executive hereby agree to
execute any and all amendments to this Agreement or otherwise reform this
Agreement as deemed necessary by either of such counsel and reasonably
acceptable to the other, and prepared by counsel to the Company, to either cause
such payments or benefits not to be a nonqualified deferred compensation plan or
to meet the requirement of Code Section 409A. In amending or reforming this
Agreement for Code Section 409A purposes, the parties maintain, to the maximum
extent practicable, the original intent and economic benefit of this Agreement
without subjecting Executive to additional tax or interest; provided further,
however, the Company will not be obligated to pay any additional material amount
to Executive as a result of such amendment.

 

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16.2         Delayed Distribution to Key Employees. If the Company determines in
accordance with Code Sections 409A and 416(i), that Executive is a “Specified
Employee” (within the meaning of Code Section 409A) of the Company on the date
his employment with the Company terminates and, the parties agree that a delay
in severance pay and benefits provided under this Agreement is necessary for
compliance with Code Section 409A(a)(2)(B)(i), then any severance payments and
any continuation of benefits or reimbursement of benefit costs provided under
this Agreement, and not otherwise exempt from Code Section 409A (for example,
pursuant to the “short-term deferral” or “separation pay” exemptions”), will be
delayed until the earlier of (i) the first day of the seventh (7th) calendar
month commencing after Executive’s termination of employment, or (ii)
Executive’s death, consistent with and to the extent necessary to meet the
requirements of Code Section 409A (the “409A Delay Period”). In such event, any
such severance payments and the cost of any such continuation of benefits
provided under this Agreement that would otherwise be due and payable to
Executive during the 409A Delay Period will be paid to Executive in a lump sum
cash amount at the end of the 409A Delay Period.

 

16.3         Separation from Service. A termination of employment will not be
deemed to have occurred for purposes of any provision of this Agreement
providing for the payment of any amounts or benefits following or upon a
termination of employment (to the extent such payments or benefits are subject
to Code Section 409A) unless such termination also constitutes a “Separation
from Service” within the meaning of Code Section 409A and, for purposes of any
such provision of this Agreement, references to a “termination,” “termination of
employment,” “separation from service” or like terms mean Separation from
Service.

 

16.4         Separate Payments. Each payment required under this Agreement will
be considered a separate payment for purposes of determining the applicability
of or exemption from Section 409A. Whenever a payment under this Agreement
specifies a payment period with reference to a number of days, the actual date
of payment within the specified period will be within the sole discretion of the
Company.

  

16.5         Reimbursements. To the extent that reimbursements or other in-kind
benefits under this Agreement constitute “nonqualified deferred compensation”
for purposes of Code Section 409A, (i) all expenses or other reimbursements
hereunder will be made no later than the time frame set forth in this Agreement,
but in any event, on or prior to the last day of the taxable year following the
taxable year in which such expenses were incurred by Executive, (ii) any right
to reimbursement or in-kind benefits will not be subject to liquidation or
exchange for another benefit, and (iii) no such reimbursement, expenses eligible
for reimbursement, or in-kind benefits provided in any taxable year will in any
way affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year.

 

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17.                Counterparts.  This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken together
shall constitute one and the same agreement, and any party hereto may execute
this Agreement by signing any such counterpart.

 

18.                Amendment or Waiver.  No provision of this Agreement may be
modified, amended, waived or terminated except by an instrument in writing
signed by the parties to this Agreement.  No course of dealing between the
parties will modify, amend, waive or terminate any provision of this Agreement
or any rights or obligations of any party under or by reason of this
Agreement.  No delay on the part of the Company in exercising any right
hereunder shall operate as a waiver of such right.  No waiver, express or
implied, by a party of any right or any breach by the other party shall
constitute a waiver of any other right of such party or breach by such other
party.

 

19.                Notices.  Any notice given to a party shall be in writing and
shall be deemed to have been given when delivered personally or sent by
certified or registered mail, postage prepaid, return receipt requested, or
express mail to the recipient at his or its last known address.

 

20.                Entire Agreement.  This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any prior and/or contemporaneous understandings,
agreements or representations, written or oral, relating to the subject matter
hereof and Executive’s compensation for employment with the Company.

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.

 

  APPLIED DNA SCIENCES, INC.         By: /s/ Beth Jantzen, CFO
7/28/16

 

  /s/ James A. Hayward, CEO       James A. Hayward 7/28/16

 

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EXHIBIT A

SECTION 1.3

PERMITTED ACTIVITIES

 

This Exhibit A is attached to the Employment Agreement (the “Agreement”) made as
of July 01, 2016, by and between Applied DNA Sciences, Inc. (“Company”) and
James A. Hayward (“Executive”). Subject to Section 1.3 of the Agreement,
Executive is permitted to continue to engage in any one or more of the outside
business activities listed below.

 

Boards:

 

Not for profit

 

1) Stony Brook Foundation

 

2) Regents Council

 

3) Ward Melville Heritage Organization

 

Corporate

 

1) Softheon, Inc.

  

2) NeoMatrix Formulations Inc.

 

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EXHIBIT B

FORM OF RELEASE

 

In consideration of the premises and the payments and benefits to be made or
provided by Applied DNA Sciences, Inc. (the Company”) to James A. Hayward (the
“Executive”) under this Release and the provisions of Section 4 of the
Employment Agreement between the parties to which this Exhibit is attached (the
“Employment Agreement”) relating to the termination of Executive’s employment
with the Company, the Executive, for the Executive and for the executors and
administrators of the Executive’s estate, and the Executive’s heirs, successors
and assigns, hereby releases and forever discharges the Company and its
officers, directors, employees, agents and stockholders from any and all claims,
actions, causes of action, suits, sums of money, debts, dues, accounts,
reckonings, bonds, bills, covenants, contracts, controversies, agreements,
promises, demands or damages of any nature whatsoever or by reason of any
matter, cause or thing regardless of whether known or unknown at present, which
against the Company or any of its officers, directors, employees, agents or
stockholders Executive ever had, now has or may have arising out of or relating
to any transaction, dealing, relationship, conduct, act or omission, or any
other matters or things occurring or existing at any time prior to and including
the date of this Release (collectively defined herein as “Claims”). This Release
includes, but is not limited to, all Claims the Executive might have under Title
VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§2000e, et. seq.; 42
U.S.C. §§1981, et. seq.; the Americans with Disabilities Act, 29 U.S.C.
§§2000e, et. seq.; the Age Discrimination in Employment Act; the Older Workers
Benefits Protection Act; the federal Family and Medical Leave Act; Section
451 et. seq.; similar Connecticut laws, the New York State Executive Law, and
any and all statutory and common law causes of action for defamation;
slander; slander per se; defamation per se; false light; tortious interference
with prospective business relationships; assault; sexual assault; battery;
sexual harassment; sexual discrimination; hostile work environment;
discrimination; retaliation; workers’ compensation retaliation; wrongful
termination; intentional infliction of emotional distress; breach of a duty or
obligation of any kind or description, including any implied covenant of good
faith and fair dealing; and for breach of contract or any tort whatsoever, as
well as any expenses or attorney’s fees associated with such Claims. The parties
acknowledge that this Release does not either affect the rights and
responsibilities of the Equal Employment Opportunity Commission to enforce the
Age Discrimination in Employment Act, or justify interfering with the protected
right of an employee to file a charge or participate in an investigation or
proceeding conducted by the Equal Employment Opportunity Commission under the
Age Discrimination in Employment Act. In the event the Equal Employment
Opportunity Commission commences a proceeding against the Company in which
Executive is a named party, the Executive agrees to waive and forego any
monetary claims which may be alleged by the Equal Employment Opportunity
Commission to be owed to Executive. Notwithstanding the foregoing, nothing in
the provisions of this Release shall act as a release by the Executive of any
Claims against the Company with respect to (i) any amounts or benefits to which
the Executive may become entitled to receive under the Employment Agreement
after the date hereof, including the right to indemnity referenced therein, (ii)
the Executive’s rights under and in accordance with the terms of any employee
benefit plan in which Executive participates, and (iii) any Claims arising with
respect to acts, events or occurrences taking place after the date of this
Release.

 

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The Company has advised the Executive in writing to consult with an attorney
prior to executing this Release. By executing this Release, the Executive
acknowledges that (a) the Executive has been provided an opportunity to consult
with an attorney or other advisor of the Executive’s choice regarding the terms
of this Release, (b) Executive has been given twenty-one (21) days (or, if
required by applicable law, 45 days) in which to consider whether the Executive
wishes to enter into this Release, (c) Executive has elected to enter into this
Agreement knowingly and voluntarily, (d) Executive’s waiver of rights or claims
is in exchange for the good and valuable consideration herein; and (e) if
Executive does so within fewer than twenty-one (21) days (or, if required by
applicable law, 45 days) from receipt of this Release, Executive has knowingly
and voluntarily waived the remaining time. This Release will become effective,
enforceable and irrevocable on the eighth day after the date on which it is
executed by the Executive (the “Effective Date”). During the seven-day period
prior to the Effective Date, the Executive may revoke this Release by delivering
a written notice of revocation to the Company.

 

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