Applied Digital Solutions, Inc. - Letter of Agreement - McLaughlin



Exhibit 10.13





December 30, 2001


Mr. Garrett Sullivan

c/o Applied Digital Solutions, Inc.

400 Royal Palm Way, Ste. 410

Palm Beach, FL 33480


Dear Garrett:


        Reference
is made to your Employment Agreement, dated March 23, 1999, between you and
Applied Digital Solutions, Inc. (f/k/a Applied Cellular Technology, Inc.)
(“ADS”), as modified from time to time, including by the letter
agreement, dated December 31, 2001 (the “Employment Agreement”). 


		1.	
Your retirement as an officer and director of ADS and all of its subsidiaries is accepted,
effective December 31, 2001.
		2.	
All of your outstanding options to acquire common stock of ADS or any of its
subsidiaries shall vest on the date hereof and shall remain outstanding for the
term of the respective options. All of such options and the shares underlying
them, shall be included in registration statements at the same time and to the
same extent as then current officers of ADS.
		3.	
ADS shall have no further payment obligations under the Employment Agreement
except as set forth herein. Without limiting the generality of the foregoing,
after December 21, 2001 (the final payday of the year), ADS shall not be
required to make the remainder of the four years’ of payments as provided
in the Employment Agreement. Notwithstanding the foregoing, you shall be issued
the stock certificate representing the shares of stock earned during the fourth
quarter of 2001 and the first payroll of 2002 in accordance with the letter
agreement between ADS and you dated July 5, 2001.
		4.	
Until December 31, 2005, Paragraph 24 of Employment Agreement (regarding Change of Control)
shall remain in effect.
		5.	
Until December 31, 2005, ADS shall provide to you family medical and dental
coverage comparable to the coverage that is provided to senior executives of
ADS.
		6.	
Within 3 weeks of the date hereof, ADS will issue to you 2,500,000 shares of
ADS’s common stock (the “Shares”), which Shares are unvested and,
until vested, subject to forfeiture as set forth herein. The shares shall become
vested on the Effective Date (as defined below). Once vested, the Shares are not
subject to forfeiture. You agree to deposit the Shares in a new brokerage
account formed by you and agree to cause the broker to provide ADS with copies
of the monthly statements for such account.





		7.	
It is the intention of the parties that you assist in the transition of your
work duties by being available to answer questions regarding your ADS work
duties. The questions regarding your work duties shall include, but not he
limited to, questions that will assist ADS in preparing and filing its
securities filings. If, until the Effective Date, you do not make yourself
available, at no cost to ADS (other than out-of-pocket expense reimbursement),
at least 20 hours per week, to answer questions related to the transition of
your ADS work duties, then ADS may demand (by written notice to you) a cure. You
shall have 21 days to cure and make yourself available for at least 20 hours per
week to answer questions related to your ADS work duties. If you fail to cure as
provided, your Shares will be forfeited and you agree to return any certificates
representing the Shares to ADS. Upon your return of the Shares, this Agreement
shall be voided as if it were never entered into and the prior agreement between
you and ADS shall revert as of such date (without any back payments).
		8.	
The provisions of Paragraph 13 (nondisclosure; return of records) of your Employment Agreement
shall remain in full force and effect.
		9.	
As used herein the “Effective Date” shall mean the later of: February
28, 2002 or the date on which the registration statement on Form S-1 (filed by
ADS in December, 2001) is declared effective by the Securities and Exchange
Commission.
		10.	
Within 60 days of December 31, 2002, you may send ADS a notice (the “Price
Protection Notice”) setting forth the number of shares sold and the gross
sales proceeds for such shares (the “Sold Share Proceeds”). If the
Sold Share Proceeds for such shares is less than the Target Amount (as defined
below) then ADS shall issue you shares having a value (based on the average
closing price for the last 10 trading days of 2002) equal to the shortfall
between the Sold Share Proceeds and the Target Amount. Such issuance will be
promptly following receipt of the Price Protection Notice, and such shares will
be included in an appropriate registration statement, filed with the SEC within
90 days of the Price Protection Notice. ADS will use its best efforts to have
such registration statement declared effective and remain effective for at least
one year. The “Target Amount” shall equal $1,250,192 multiplied by the
percentage of Shares sold. By way of example only, if you were to sell 75% of
the Shares, and the gross proceeds for such sold shares was $900,000, then your
notice would request, and ADS would be obliged to issue to you, shares having a
value of $37,644.
		11.	YOU ACKNOWLEDGE THAT BY AGREEING TO THIS YOU ARE EXCHANGING APPROXIMATELY FOUR YEARS' OF CASH
SALARY AND OTHER PAYMENTS IN EXCHANGE FOR THE CONSIDERATION SET FORTH HEREIN.  YOU HAVE BEEN
GIVEN THE OPPORTUNITY TO SEEK LEGAL AND OTHER COUNSEL.




		12.	
ADS agrees to register the Shares with the Securities and Exchange Commission in
the next appropriate registration statement filed by it, which filing will in no
event be more than 90 days following the date hereof. ADS will use its best
efforts to have the registration statement declared effective and remain
effective for at least one year.
		13.	You represent:


	 	 	(1)	
The Shares to be received by you hereunder will be acquired for your own
account, not as nominee or agent, for investment purposes and not with a view
to, or for offer or sale in connection with directly or indirectly, any
distribution in violation of the Securities Act of 1933, as amended, or any
other applicable securities law (“Securities Act”).
	 	 	(2)	
You are not a registered broker dealer or engaged in the business of being a broker
dealer.
	 	 	(3)	
You acknowledge (i) that you can bear the economic risk and complete loss of
your investment in the Shares and have such knowledge and experience in
financial or business matters that you are capable of evaluating the merits and
risks of the investment contemplated hereby, and (ii) that there may be material
adverse nonpublic information regarding the ADS that could affect the value of
the Shares.
	 	 	(4)	
You are an accredited investor as defined in Rule 501(a) of Regulation D, as amended,
under the Securities Act.



If the foregoing accurately
reflects your understanding of the agreement between ADS and you, please sign
this letter and return it to the undersigned, whereupon it will become a binding
agreement between ADS and you. 


	 	Very truly yours,


APPLIED DIGITAL SOLUTIONS, INC.



	 	By:	/s/ Richard J. Sullivan

	 	 	Richard J. Sullivan

Chairman and CEO
	Agreed to and accepted:


	 	 
	/s/ Garrett A. Sullivan
	 	 
	Garrett A. Sullivan