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Exhibit 10.1
 
Sales Plan
 
        Sales Plan, dated as of the date set forth on the signature page (the
“Sales Plan”), between Scott Silverman (“Seller”) and Goldman, Sachs & Co.
(“Broker”).
 
        WHEREAS, Seller desires to establish the Sales Plan to sell shares of
common stock, par value $0.01 per share (the “Stock”), of Applied Digital
Solutions, Inc. (the “Issuer”) in accordance with the requirements of Rule
10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) as further set forth herein;
 
        NOW, THEREFORE, Seller and Broker hereby agree as follows:
 
1.    Broker shall effect one or more sales (each a “Sale”) of shares of Stock
(the “Shares”), including Shares that Seller has the right to acquire under
stock options issued by the Issuer (the “Options”), as further set forth in the
attached Annex A to this Sales Plan. All orders will be deemed day orders only
and not held unless otherwise specified in Annex A.
 
2.    This Sales Plan shall become effective as of the date hereof and shall
terminate on the earliest of (a) July 15, 2007, (b) the date on which Broker has
sold all Shares specified in Annex A, (c) the date that this Sales Plan is
terminated in accordance with paragraph 11 below, or (d) the date Broker
receives notice of the death of Seller.
 
3.    Seller understands that Broker may effect Sales hereunder jointly with
orders for other sellers of Stock of the Issuer and that the average price for
executions resulting from bunched orders will be assigned to Seller's account.
 
4.    Seller represents and warrants that Seller is not aware of material,
nonpublic information with respect to the Issuer or any securities of the Issuer
(including the Stock) and is entering into this Sales Plan in good faith and not
as part of a plan or scheme to evade the prohibitions of Rule 10b5-1.
 
5.    It is the intent of the parties that this Sales Plan comply with the
requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act and this Sales
Plan shall be interpreted to comply with the requirements of Rule 10b5-1(c).
Seller has consulted with Seller’s own advisors as to the legal and tax aspects
of Seller’s adoption and implementation of this Sales Plan.
 
6.    Seller represents that the Shares are “restricted securities” and/or that
Seller may be deemed an “affiliate” of the Issuer as those terms are defined
under Rule 144 of the Securities Act of 1933. Seller shall not take, and shall
not cause any person or entity with which he or she would be required to
aggregate sales of Stock pursuant to paragraph (a)(2) or (e) of Rule 144 to
take, any action that would cause the Sales not to comply with Rule 144. Seller
has provided Broker with ten (10) executed Forms 144, which Broker will complete
and file on behalf of the Seller. Seller understands and agrees that unless
otherwise agreed or instructed, Broker will generally make one Form 144 filing
as necessary at the beginning of each three-month period commencing prior to the
first Sale to be effected pursuant to this Plan; provided that Broker may file
Forms 144 more or less
 
 

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frequently as may be appropriate under the circumstances. Such Form 144 shall
specify that the Sales are being effected in accordance with a Sales Plan
intended to comply with Rule 10b5-1. Seller agrees to provide Broker with such
information as is reasonably necessary for Broker accurately and timely to
complete the Forms 144.
 
7.    (a) Seller represents and warrants that Seller is currently permitted to
sell Stock in accordance with the Issuer’s insider trading policies and has
obtained the approval of the Issuer’s insider trading policies and has obtained
the approval of the Issuer’s counsel to enter into this Sales Plan and that,
other than any Rule 144 requirements set forth herein, there are no contractual,
regulatory, or other restrictions applicable to the Sales contemplated under
this Sales Plan that would interfere with Broker’s ability to execute Sales and
effect delivery and settlement of such Sales on behalf of Seller, other than
restrictions with respect to which the Seller has obtained all required
consents, approvals and waivers. Seller shall notify Broker immediately in the
event that any of the above statements become inaccurate prior to the
termination of this Sales Plan.
 
        (b)    With respect to Shares underlying options held by Seller that are
to be exercised and sold pursuant to this Plan (“Options”), Seller has delivered
to Broker executed option exercise notices in the form attached hereto as Annex
B covering up to the maximum number of Shares that may be sold pursuant to
option exercise hereunder, and hereby authorizes Broker to deliver such notices
to the Issuer’s stock administrator on Seller’s behalf as necessary to
effectuate such exercises and settle such Sales. Seller agrees to make
appropriate arrangements with the Issuer and its transfer agent and stock plan
administrator to assure that Stock received upon exercise of Options shall be
delivered to an account at Broker in the name of and for the benefit of Seller.
 
        (c)    On each day that sales are to be made pursuant to option exercise
under this Sales Plan, Broker shall exercise a sufficient number of Options to
effect such sales provided, that in the event sales of any Shares to be executed
are subject to a limit order, Seller shall have been deemed to have exercised
the Options with respect to such notice from Broker with respect to such Shares
at the beginning of the trading day on which such sales took place.
 
8.    Seller will not directly or indirectly communicate any information
relating to Issuer or Issuer securities to any employee of Broker or its
affiliates who is directly or indirectly involved in executing this Sales Plan
at any time while this Sales Plan is in effect.
 
9.    Seller shall make all filings, if any, required under Sections 13(d) and
16 of the Exchange Act.
 
10.         Seller understands that Broker may not effect a Sale due to a market
disruption or a legal, regulatory or contractual restriction applicable to the
Broker or any other event or circumstance (a “Blackout”). Seller also
understands that even in the absence of a Blackout, Broker may be unable to
effect Sales consistent with ordinary principles of best execution due to
insufficient volume of trading, failure of the Stock to reach and sustain a
 
2
 

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limit order price, or other market factors in effect on the date of a Sale set
forth in Annex A (“Unfilled Sales”).
 
Broker agrees that if Issuer enters into a transaction that imposes trading
restrictions on the Seller, such as a stock offering requiring an affiliate
lock-up (an “Issuer Restriction”), and if Issuer and Seller shall provide Broker
at least three (3) days’ prior notice of such trading restrictions, then Broker
will cease effecting Sales under this Sales Plan until notified by Issuer and
Seller that such restrictions have terminated. All required notifications to
Broker under this paragraph 10 shall be made in writing (signed by Seller and
Issuer) and confirmed by telephone as follows: (Attn: Structured Equity
Solutions, c/o Control Room; Fax No. (212) 902-0943; Tel: (212) 902-1511).
Broker shall resume effecting Sales in accordance with this Sales Plan as soon
as practicable after the cessation or termination of a Blackout or Issuer
Restriction. Any Unfilled Sales, and any Sales that would have been executed in
accordance with the terms of Annex A but are not executed due to the existence
of a Blackout or Issuer Restriction, shall be deemed to be cancelled, and shall
not be effected pursuant to this Sales Plan.
 
11.    This Sales Plan and its enforcement, and each transaction entered into
hereunder and all matters arising in connection with this Sales Plan and
transactions hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to its choice of law
doctrine. The Sales Plan may be modified, terminated or amended only by a
writing signed by the parties hereto, which the Issuer has reviewed and not
objected to, and provided that any such modification, termination or amendment
shall only be permitted at a time when the Seller is otherwise permitted to
effect sales under the Issuer's trading policies and at a time when the Seller
is not aware of material nonpublic information concerning the Issuer or its
securities. In the event of a modification or amendment to this Sales Plan, or
in the event Seller establishes a new plan after termination of the Sales Plan,
no sales shall be effected during the thirty days immediately following such
modification, amendment or termination (other than Sales already provided for in
the Sales Plan prior to modification, amendment or termination).
 
12.    Seller agrees that Broker and its affiliates and their directors,
officers, employees, and agents (collectively, “Broker Persons”) shall not have
any liability whatsoever to Seller for any action taken or omitted to be taken
in connection with the Sales Plan, the making of any Sale, or any amendment,
modification or termination of this Sales Plan, unless such liability is
determined in a non-appealable order of a court of competent jurisdiction to
have resulted solely from the gross negligence, willful misconduct or bad faith
of the Broker Person. Seller further agrees to hold each Broker Person free and
harmless from any and all losses, damages, liabilities or expenses (including
reasonable attorneys’ fees and costs) incurred or sustained by such Broker
Person in connection with or arising out of any suit, action or proceeding
relating to this Sales Plan, any Sale, or any amendment, modification or
termination of this Sales Plan (each an “Action”) and to reimburse each Broker
Person for its expenses, as they are incurred, in connection with any Action,
unless such loss, damage, liability or expense is determined in a non-appealable
order of a court of competent jurisdiction to be solely the result of such
Broker Person’s gross negligence, willful misconduct or bad faith. This
paragraph 12 shall survive termination of this Sales Plan.
 
3
 

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        IN WITNESS WHEREOF, the undersigned have signed this Sales Plan as of
the date below.
 
 
 

       /s/ Scott Silverman                                             Scott
Silverman Goldman, Sachs & Co.   By:    /s/ Michael Dweck            Date:  
7-14-06                                                       Name: Michael
Dweck   Title: Managing Director

 
 
 
 
 
Acknowledged:
Applied Digital Solutions, Inc.
 
By:    /s/ Evan McKeown                                      
Name: Evan McKeown
Title: CFO
 
 
 
 
 
 
 
4
 

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Annex A
 
Scott Silverman
 
Applied Digital Solutions, Inc.
 
Broker will sell up to 1,289,302 Shares by entering orders on the first Trading
Day* of each of the Sales Periods set forth below provided that no more than
100,000 Shares shall be sold on any Trading Day. Each limit order shall be good
until the end of such Sales Period. Any Shares that remain unsold at the close
of business on the last trading day of the last Sales Period shall be cancelled
and shall not be sold pursuant to this Plan.
 
 
 Trade Window
 
 Shares to be sold**
 
 $ Limit
 
 
During the period commencing 8/1/06
 through and including 7/15/07 or the
 date of termination of the Sales Plan, if
 earlier
 392,500
 $5.95
 
During the period commencing 8/1/06
 through and including 7/15/07 or the
 date of termination of the Sales Plan, if
 earlier
 461,802
$7.95
 
During the period commencing 8/1/06
 through and including 7/15/07 or the
 date of termination of the Sales Plan, if
 earlier
 435,000
 $9.95

 
 
 Sales of shares effected at a price for which more than one limit price is
applicable shall be allocated to the highest of such limit prices.
 
*“Trading Day” means each day on which the Shares trade regular way on NASDAQ.
 
**Share amounts and limit prices listed shall be increased or decreased to
reflect stock splits should they occur
 
Options shall be exercised in the following order:
 
 

 Date of Grant  Grant Number  Number of Shares
 Exercise Price
 8/14/2001  [          ]  10,000
 $1.50
 9/17/2001  [          ]  10,000
$1.50
 9/24/2001  [          ]  12,500
 $1.50
 4/8/2004  [          ]  36,005
 $2.57

 
 
A-1
 

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 Date of Grant  Grant Number  Number of Shares
 Exercise Price
 5/12/2004  [          ]  2,000
  $2.57
 4/8/2004  [          ]  234,012
 $2.57
 4/8/2004  [          ]  186,285
 $2.57
 5/12/2004  [          ]  3,500
 $2.57
 4/8/2004  [          ]  16,816
 $2.57
 7/25/2002  [          ]  60,000
 $2.80
 2/4/2002  [          ]  100,000
 $3.20
 7/6/2005  [          ]  326,135
 $3.23
 11/3/2003  [          ]  200,000
 $3.90
 12/13/2004  [          ]  92,049
 $5.85

 
 
 
 

       /s/ Scott Silverman                                             Scott
Silverman Goldman, Sachs & Co.   By:       /s/ Michael Dweck             Date:  
7-14-06                                                       Name: Michael
Dweck   Title: Managing Director

 
 
 
 
 
Acknowledged:
Applied Digital Solutions, Inc.
 
By:    /s/ Evan McKeown                                      
Name: Evan McKeown
Title: CFO
 
 
 
A-2

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Annex B
 
Applied Digital Solutions, Inc.
Stock Options Exercise Form
 
 
Instructions:
1.  Complete form and sign.
2.  Direct any questions and send back to Marc Shachtman 305-755-1032
 

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Name of Employee:  Scott Silverman
 
Phone Number:  561-805-8056
 
I elect to exercise options for 1,289,302 shares of Common Stock of Applied
Digital Solutions, Inc. (the “Shares”) pursuant to the:
 
                        Incentive Stock Option Plan (ISO), or
 
           X          Nonqualified Stock Option Plan (NQSO)
 
 
This exercise represents a partial/total (circle one) exercise of an option
granted pursuant to an option agreement dated         with an exercise price of
$        per share, for an aggregate exercise price of $               
           .
 
The exercising procedure I wish to use is as follows (check one):
 
 
                 Option A: Outright Purchase of Shares with Cash
 
I elect to exercise my option and pay for shares in full. Enclosed is my check
to Applied Digital Solutions, Inc. for $                      representing an
aggregate exercise option price of $                          plus required
withholding taxes (i.e. federal, state and FICA) of $                        
(this number will be provided to you by Applied Digital Solutions, Inc.).
Note: Withholding taxes are only required if you are exercising an option under
the Stock Option Plan (NQSO).
 
Please instruct the transfer agent to issue my stock in street name and transfer
it directly to Goldman, Sachs & Co. Via DWAC as follows:
 
Goldman, Sachs & Co.
DTC #0005
For the benefit of:
A/C #                             
 
 
 
 
B-1
 

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       X         Option B: Cashless Option Exercise
 
Please instruct the transfer agent to issue my stock in street name and transfer
ALL shares of Applied Digital Solutions, Inc. that are represented by this
notification directly to Goldman, Sachs & Co. via DWAC as follows:
 
Goldman, Sachs & Co.
DTC #0005
For the benefit of:
A/C #                             
 
I authorize Goldman, Sachs & Co. (“GS & Co.”) to sell the above exercised shares
for my account and to pay the aggregate option exercise price for all shares
indicated above and any required withholding taxes for the exercise to Applied
Digital Solutions, Inc.. Required withholding taxes (i.e. federal, state and
FICA) are $                            (this number will be provided by Applied
Digital Solutions, Inc.). Note: Withholding taxes are only required if you are
exercising an option under the Stock Option Plan (NQSO).
 
You may contact Marc Shachtman at GS & Co. at 305-755-1032.
 
Fax number is 305-755-1110
 
General Authorization
1.
GS & Co. is authorized to pay the aggregate option price and applicable
withholding taxes to Applied Digital Solutions, Inc..

2.
Upon sale of my stock option shares through GS & Co., my authorization and
direction to deliver such shares to my GS & Co. account shall be irrevocable.

3.
I understand I am responsible for providing GS & Co. with properly completed
Individual or Multi-Party Account Agreements, W-9 and Stock Power forms, so that
the above-referenced sale may be finalized.

 
Employee Signature:             /s/ Scott
Silverman                                Date:          7-14-06                 
 
Employee Name (please print):
 
Legal Address:
 
 
 
 
 
 
Approved by Applied Digital Solutions, Inc.:               /s/ Evan
McKeown                     
 
Date:         7-14-06            
 
Name (please print):     Evan McKeown                  
 
 
 
 
B-2