Exhibit 10.1


    
      

    

     

    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

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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

     
      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

            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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 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

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    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

     

    
      

    

     

    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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

         
       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