Document:

Unassociated Document

    
      

    

     

    Exhibit
      10.4

     

    

    (Angelica
      Letterhead)

    

    

    

    

    November
      22, 2006

    

    Mr.
      John
      Olbrych

    P.O.
      Box
      155

    Brownsville,
      Vermont 05037

    

    

    Dear
      Jack:

    

    On
      behalf
      of the Company, and subject to ratification of the Compensation Committee’s
      approval by Angelica’s Board of Directors, I’m pleased to confirm the offer of
      employment as Chief Administrative Officer of Angelica Corporation. You will
      also be nominated for election by Angelica’s Board of Directors to the office of
      Senior Vice President. We expect to present the offer for ratification by the
      Board at the Board’s next meeting, which is currently scheduled for December 8,
      2006. Your nomination for election as Senior Vice President will be presented
      at
      that time as well. In your position, you will report directly to the Chief
      Executive Officer. 

    

    The
      following is intended to summarize the other principal terms of this
      offer.

    

    
      	 	
              1.

            	
              Annual
                Base Salary
                -
                Your starting annual base salary will be $250,000. Following the
                conclusion of the Company’s current fiscal year, your annual base salary
                will be reviewed at least annually
                thereafter.

            

    

    

    
      	 	
              2.

            	
              Short
                Term Incentive Compensation
                -
                Beginning with FY ‘07, you will participate in the Company’s short term
                incentive compensation program. You will be eligible to earn, annually,
                short-term incentive compensation of 0% to 100% of your annual base
                salary
                (with a target bonus of 50%). The short term incentive compensation
                program is based upon performance criteria that are established at
                the
                beginning of each fiscal year. 

            

    

    

    
      	 	
              3.

            	
              Long
                Term Incentive Program (LTIP)
                -
                Beginning with the FY ‘07 program, you
                will be eligible to participate in the Company’s Long Term Incentive
                Program. Under the LTIP, the Board of Directors has discretion to
                grant
                shares of restricted stock to program participants. The number of
                shares
                granted to each participant is based upon a percentage of the
                participant’s annual base salary and the market share price as of the date
                of the grant. You will participate in the LTIP at 50% of your annual
                base
                salary.

               

            

    

    
      
        
           

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      
        	
                 

              	
                4.

              	
                Stock
                  Option Grant
                  -
                  You will receive an initial, non-qualified stock option grant for
                  a total
                  of 75,000 shares of the Company’s stock. These options, which will be
                  granted pursuant to the Company’s 1999 Performance Plan, will be granted
                  as of your Employment Start Date (the “Grant Date”), and, unless earlier
                  forfeited or exercised, will expire ten (10) years following the
                  Grant
                  Date. The options will be priced, and will vest, as
                  follows:

              

      

    

     

    Pricing:

    

    
      	 	
              o

            	
              25,000
                options will be priced at the average market share price as of the
                Grant
                Date;

            

    

    
      	 	
              o

            	
              25,000
                options will be priced at 110% of the average market share price
                as of the
                Grant Date; and

            

    

    
      	 	
              o

            	
              25,000
                options will be priced at 120% of the average market share price
                as of the
                Grant Date.

            

    

    

    Vesting:

    

    
      	 	
              o

            	
              25%
                of each set of options (i.e. 6,250 of each set for a total of 18,750)
                will
                vest six (6) months following the Grant
                Date;

            

    

    
      	 	
              o

            	
              An
                additional 25% of each set of options will vest eighteen (18) months
                following the Grant Date;

            

    

    
      	 	
              o

            	
              An
                additional 25% of each set of options will vest thirty (30) months
                following the Grant Date; and

            

    

    
      	 	
              o

            	
              The
                final 25% of each set of options will vest forty-two (42) months
                following
                the Grant Date.

            

    

    

    If
      your
      employment terminates for any reason, all options that have not yet vested,
      shall immediately be forfeited to the Company.

    

    
      	 	
              5.

            	
              Benefit
                Plans
                -
                You will be eligible to participate in the Company’s other health and
                welfare benefit plans and programs in accordance with their terms.
                If your
                employment terminates for any reason other than cause, you may continue
                your participation in the Company’s healthcare insurance program for a
                period of up to one (1) year, on the same terms and to the same extent
                to
                which you participated in that program immediately prior to your
                termination. During the continuation period, the Company will continue
                to
                be responsible for the Company’s share of the
                premium.

            

    

    

    
      	 	
              6.

            	
              Temporary
                Living Expenses -
                During the three (3) month period following your Employment Start
                Date,
                the Company will reimburse you for reasonable and customary expenses
                incurred for room and board while in the Atlanta metropolitan area.
                In
                addition, the Company will reimburse you for up to ten (10) personal,
                round trip flights between Vermont and Atlanta, incurred at any time
                following your Employment Start
                Date.

            

    

    

    
      
        
          2

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    

    

    
      	 	
              7.

            	
              Relocation
                Expenses
                -
                The Company will reimburse you for reasonable and customary expenses
                relating to one move of your household belongings, from your then
                current
                residence in Vermont to the Atlanta metropolitan area, completed
                at any
                time during the two (2) year period following your Employment Start
                Date.
                In addition, upon your purchase or lease of housing in the Atlanta
                area,
                the Company will pay you a lump sum amount equal to one-month’s base
                salary, grossed up for taxes, for associated
                expenses.

            

    

    

    
      	 	
              8.

            	
              Miscellaneous
                -
                During your employment, the Company will reimburse you for the cost
                of
                maintaining a membership in one airline club of your choosing. In
                addition, until the current lease expires for the 2006 Lexus automobile
                maintained by the Company in Atlanta, you will have full use of that
                vehicle while in the Atlanta area. All associated costs will be paid
                or
                reimbursed by the Company. The current lease is scheduled to expire
                June
                30, 2008.

            

    

    

    
      	 	
              9.

            	
              Employment
                Start Date -
                Your employment will begin Monday, November 27, 2006 (the “Employment
                Start Date”).

            

    

    

    
      	 	
              10.

            	
              Employment
                Agreement -
                Upon receiving your signed acceptance of this offer
                we will prepare a written employment agreement for your consideration
                that
                will include the material terms summarized above, as well as other
                customary provisions relating to confidentiality, non-competition,
                etc. As
                agreed, and as part of this offer, the Employment Agreement will
                provide
                that, in the event your employment terminates for any reason other
                than
                cause, and subject to the execution of a customary settlement agreement
                and release, you will continue to be paid for a period of one (1)
                year
                following termination payments equal to your then current base
                salary.

            

    

     

    If
      you
      have any questions, or would like to discuss any of the above, please feel
      free
      to call me. Otherwise, I ask that you sign and return a copy of this letter
      to
      me at your earliest convenience. Since you plan to be in the St. Louis office
      on
      Monday of next week, you may return a signed copy at that time if that’s more
      convenient.

    

    I
      look
      forward to working with you, Jack.

    

    

    Sincerely,

    

    /s/
      Stephen M. O’Hara

    ACCEPTED
      AND AGREED

    

    /s/
      John
      Olbrych                            
  

    John
      Olbrych

     

     

    3Exhibit 10.1

    
      

    

    Exhibit
      10.1

    

    APPLIED
      DIGITAL SOLUTIONS, INC.

    EMPLOYMENT
      AND NON-COMPETE AGREEMENT

    

    

    AGREEMENT
      made
      this 6th day of December 2006 (the “Effective Date”), by and between the parties
      to this Agreement (hereinafter individually referred to as “Party” and
      collectively referred to as “Parties”), APPLIED
      DIGITAL SOLUTIONS, INC.,
      a Missouri
      Business Corporation (hereinafter referred to as “ADS”), and MICHAEL
      KRAWITZ (hereinafter
      referred to as “Executive”). 

    WHEREAS,
      ADS is
      an advanced digital technology development company (the “Business”);
      and

    WHEREAS,
      Executive has contributed meaningfully in his capacity as Executive Vice
      President and General Counsel of ADS; and

    WHEREAS,
      ADS
      finds it is in its best interest to enhance Executive’s contribution to the
      Business, to protect its technologies and business relationships, and to engage
      Executive’s services as Chief Executive Officer of ADS; and

    WHEREAS,
      Executive is willing to assume the fulltime role as ADS’s Chief Executive
      Officer;

    NOW
      THEREFORE,
      in
      consideration of the promises and the mutual obligations set forth
      in
      this Agreement, the Parties agree as follows:

    1. EMPLOYMENT.
      ADS
      agrees to continue to employ Executive, and Executive agrees to accept such
      continued employment by ADS, pursuant to the terms and conditions set forth
      in
      this Agreement. Executive agrees that the provisions and benefits under the
      2003
      Severance Policy, and the 2004 Executive Management Change in

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Control
      Plan shall terminate with respect to Executive and Executive specifically waives
      any rights he may have thereunder.

    2. POSITION
      AND RESPONSIBILITIES.
      During
      the term of this Agreement, as defined below, Executive shall serve as Chief
      Executive Officer of ADS and will perform such duties and exercise such
      supervision with regard to the business of ADS as are associated with such
      positions, as well as such additional duties as may be prescribed from time
      to
      time by ADS’s Board of Directors (the “Board”). Executive agrees to render
      services to the best of Executive’s ability for and on behalf of ADS. Executive
      agrees to devote his full business time to rendering such services on behalf
      of
      ADS, other than reasonable time for charitable works, managing personal
      investments and, with the consent of the Board, service on boards of other
      companies. 

    3. TERM.
      Except
      as terminated in this Section 3 or Section 8(c) of this Agreement, the term
      of
      this Agreement (the “Term”) shall commence on the Effective Date and shall
      continue in force thereafter. Notwithstanding the foregoing, upon the happening
      of any of the following events, this Agreement shall terminate (unless otherwise
      provided herein for a termination after a period of time) and Executive shall
      cease to be an employee of ADS: 

    
      	 	
              (a)

            	
              Executive’s
                resignation upon sixty (60) days advance written
                notice;

            

    

    
      	
            	
              (b)

            	
              Executive’s
                Total Disability upon ADS’s election. For purposes of this Agreement,
                “Total Disability” shall be defined as Executive’s inability, due to
                illness, accident or any other physical or mental incapacity, to
                perform
                Executive’s usual responsibilities performed by Executive for ADS prior to
                the onset of such disability, for one hundred eighty (180) consecutive
                days during the Term. ADS may elect, by written notice
                to

            

      	 	
               

            	
            

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    Executive,
      within thirty (30) days of the end of such period of Total Disability defined
      above, to terminate Executive’s employment herein;

    (c)          
      the
      death
      of Executive; 

    
      	 	
              (d)

            	
              Executive’s
                Constructive Termination. For purposes of this Agreement, “Constructive
                Termination” shall be defined as a material breach by ADS of its
                obligations under this Agreement, including but not limited to (i)
                any
                reduction of Executive’s Base Salary or incentive compensation as provided
                herein, (ii) a diminution in duties or position, (iii) moving Executive’s
                workplace away from headquarters or moving headquarters outside of
                Palm
                Beach, Broward or Dade Counties. If Executive chooses to treat such
                material breach as a Constructive Termination, Executive shall provide
                ADS
                with written notice describing the circumstances being relied upon
                by
                Executive for such termination with respect to this Agreement within
                thirty (30) days after the event giving rise to the Constructive
                Termination. ADS shall have thirty (30) days after receipt of such
                notice
                to remedy the situation prior to the Constructive Termination being
                deemed
                final;

            

    

    
      	 	
              (e)

            	
              ADS
                terminates this Agreement without cause upon sixty (60) days advance
                written notice; or 

            

    

    
      	 	
              (f)

            	
              ADS
                terminates this Agreement for cause, with said cause being defined
                as a
                conviction of a felony or Executive’s being prevented from providing
                services hereunder as a result of Executive’s violation of any law,
                regulation and/or rule.

            

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    
      	 	
              (g)

            	
              Executive’s
                resignation by written notice within one hundred twenty (120) days
                following a Change in Control, such term being defined as a transaction
                or
                series of transactions in which any person or entity (or persons
                or
                entities acting as a group) acquires stock of ADS that, together
                with
                stock then held by such person, entity or group, results in such
                person,
                entity or group holding more than fifty (50%) percent of the fair
                market
                value or total voting power of ADS, as well as the Board members
                prior to
                the transaction no longer constituting a majority of the Board members
                following such transaction.

            

    

    4. ANNUAL
      COMPENSATION.
      

    (a) During
      the Term, Executive shall be entitled to compensation for all services performed
      by Executive pursuant to this Agreement (“Compensation”) as
      follows:

    (i) Executive
      shall, during the Term, be entitled to a base salary (the “Base Salary”) of
      THREE HUNDRED FIFTY THOUSAND ($350,000.00) DOLLARS per annum. The Base Salary
      may be increased (but not decreased) in the reasonable discretion of ADS. The
      “Base Salary” shall, for all purposes of this Agreement, mean the Base Salary
      then being paid by ADS to Executive.

    (ii) During
      the Term, Executive shall be eligible for incentive bonus compensation for
      each
      calendar year, to be reasonably determined by the Board, which shall consider
      bonuses paid by similarly situated employers to similarly situated
      employees.

    (b) ADS
      shall
      deduct from the Compensation all taxes and other deductions which are required
      to be deducted or withheld under any provision of any federal, state, or local
      law now in effect or which may become effective at any time during the term
      of
      this Agreement (collectively, the “Withholdings”).

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    5. FRINGE
      BENEFITS.
      During
      the
      Term, Executive shall be entitled to all fringe benefits (the “Fringe Benefits”)
      provided to senior executive employees of ADS, as reasonably determined by
      the
      Board. The Fringe Benefits shall specifically include executive health benefits
      which shall entitle Executive to full reimbursement for all physical
      examinations and other related services, use of an automobile leased by ADS
      for
      use by Executive, premium payments of life and disability insurance comparable
      to that currently provided, as well as the payment by ADS of all reasonable
      expenses relating to a foreign language course in which Executive may be
      enrolled.

    6. BUSINESS
      AND OTHER EXPENSES.
      ADS
      will reimburse Executive for all reasonable travel, entertainment and other
      expenses incurred by Executive in connection with the performance of his duties
      and obligations under this Agreement. Executive will comply with all reasonable
      reporting requirements with respect to business expenses as may be established
      by ADS from time to time. In addition, ADS shall pay to Executive TWENTY
      THOUSAND ($20,000.00) DOLLARS per year during the Term, payable in ten thousand
      dollar installments on or before January 15 and July 15, representing
      non-allocable expenses that shall be deemed additional compensation to
      Executive.

    7. ADDITIONAL
      BENEFITS.

    (a) Executive
      will be entitled to participate in all other compensation or employee benefit
      plans or programs and receive all benefits for which salaried employees of
      ADS
      generally are eligible under any plan or program now or later established by
      ADS
      on the same basis as similarly situated senior executives of ADS. Executive
      will
      participate to the extent permissible under the terms and provisions of such
      plans or programs, in accordance with program provisions.

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    (b) Upon
      the
      execution of this Agreement, ADS shall issue 100,000 shares (the “Shares”) of
      common stock of ADS to Executive under an applicable stock incentive plan
      previously approved by shareholders. It is agreed that 50,000 of the Shares
      will
      vest immediately, while the remaining 50,000 Shares (the “Unvested Shares”)
      shall be restricted and subject to a substantial risk of forfeiture in the
      event
      that this Agreement is terminated on or before December 31, 2008 pursuant to
      subparagraphs (a) or (f) of Section 3 of this Agreement, in which event the
      Unvested Shares shall immediately be forfeited.

    8. PAYMENT
      UPON TERMINATION OF AGREEMENT.

    (a) Upon
      the
      termination of this Agreement, ADS will pay to Executive any and all earned
      but
      unpaid Base Salary and earned but unpaid incentive bonus compensation as of
      the
      date of termination. ADS shall pay such amounts due Executive within thirty
      (30)
      days of Executive’s last day of service. Any outstanding stock options held by
      Executive on Executive’s last day of service shall remain exercisable for the
      life of the option. In addition, ADS shall remain responsible for all rental
      payments relating to the leased vehicle then used by Executive until the
      expiration of the lease. Further, Executive shall be permitted to maintain
      possession of all computer equipment owned by ADS which is then being used
      by
      Executive. Executive shall remain reasonably available by electronic mail or
      telephone to assist with any post-separation transition relating to
      pre-separation issues.

    (b) To
      the
      extent that this Agreement is terminated other than pursuant to subparagraphs
      (a) or (f) of Section 3, Executive shall be entitled to receive: ONE MILLION
      FOUR HUNDRED EIGHTY THOUSAND ($1,480,000.00) DOLLARS (the “Severance Amount”) as
      severance. The Severance Amount shall be payable in common stock of ADS (“ADS
      Stock”), except for the Withholdings, which shall be payable in cash. In the
      event that (i) ADS is unable to pay part of the Severance Amount in the form
      of
      common ADS Stock, or (ii) at

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    the
      time
      of issuance or delivery the shares of ADS Stock are not both traded and expected
      for the foreseeable to be traded in the public markets on a national exchange
      (for example, without limitation, because a Change in Control results in ADS
      being a private company), then and in that event, ADS shall pay the Severance
      Amount in cash. Within twenty (20) business days of the termination of this
      Agreement, ADS will contribute to a Rabbi Trust (as defined in Section 8(c))
      the
      Severance Amount (whether cash or, if applicable, the number of shares of ADS
      Stock determined pursuant to section 8(d)). 

    (c) Payments
      pursuant to Section 8(b) and 10(c) shall be deposited in the Rabbi Trust. As
      used herein, the “Rabbi Trust” shall mean a “rabbi trust” to be on terms
      reasonably acceptable to the Executive and ADS, but in no event less favorable
      to the Executive than the terms of the rabbi trust set forth in Rev. Proc.
      92-64. The amount contributed to the rabbi trust will be released from the
      trust
      (together with any earnings thereon) and paid or delivered to the Executive
      as
      follows: (i) as to the Severance Amount, the cash or the shares of ADS Stock
      (as
      applicable) shall be released from escrow and paid or delivered to Executive
      six
      (6) months and one (1) day following termination of this Agreement, and (ii)
      as
      to the Covenant Consideration pursuant to Section 10(c), the cash or the shares
      of ADS Stock (as applicable) shall be released from escrow and paid or delivered
      to Executive one year following termination of this Agreement, assuming for
      this
      clause (ii) only that Executive does not materially breach the provisions of
      Section 10, in which case such cash or ADS Stock shall be returned to ADS.
      

    (d) To
      the
      extent that ADS Stock shall be issued pursuant to subparagraph (b) or (c) of
      this Section 8, the ADS Stock shall be included on an applicable registration
      statement filed by ADS as soon as practicable, which is anticipated to be within
      six (6) months from the date of issuance of any such stock. ADS shall utilize
      good faith efforts to include ADS Stock in any other registration statement
      filed by ADS, but shall not be obligated to file a separate

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    registration
      statement for the ADS Stock. In all events, ADS shall bear all costs of
      registration of the ADS Stock. In the event that the ADS Stock is not registered
      within one (1) year from the date of issuance, ADS shall fully cooperate at
      all
      times thereafter in allowing Executive to benefit from any and all registration
      requirement exemptions that shall then exist. In all events, the number of
      shares of ADS Stock due will be calculated based upon the average closing price
      of one (1) share of common stock of ADS for the ten (10) trading days preceding
      the day in which the ADS Stock is issued. Any ADS Stock issued hereunder shall
      be price protected through the later of: (i) the date on which the applicable
      registration statement becomes effective, or the date in which such ADS Stock
      should otherwise become eligible for trading without restriction pursuant to
      an
      exemption from registration, or (ii) the date such ADS Stock is delivered to
      Executive from the Rabbi Trust (such later date, the “Price Protection Date”),
      such that if the value of the ADS Stock on such Price Protection Date is less
      than the intended applicable amount as set forth in Section 8(b) or Section
      10(c), cash or freely tradable shares of ADS Stock (at ADS’s option) will be
      issued to Executive to subsidize any shortfall, which cash or additional shares
      shall be due fourteen (14) months following termination of this Agreement.
      ADS
      agrees that it shall not announce or effect any stock split, reverse split
      or
      similar transaction for a period of three (3) months following any Price
      Protection Date. The
      Parties agree that the various provisions regarding payment of ADS Stock
      pursuant to the Agreement is intended to benefit both ADS and the Executive
      as a
      substitute for cash value, so that notwithstanding any provision herein, any
      payment hereunder shall be made in cash and not ADS Stock if (i) it is
      reasonably likely that Executive will not be able, within a reasonable period
      of
      time (complying with applicable securities laws), to sell such ADS Stock for
      cash for any reason including, without limitation, if shares of ADS Stock are
      not publicly traded following a transaction or (ii)

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    any
      such
      issuance would not be in full compliance with applicable securities laws and
      stock exchange or stock market rules. 

    9. CONFIDENTIAL
      INFORMATION.

    (a) Executive
      recognizes and acknowledges that all information pertaining to this Agreement
      or
      to the affairs; business; results of operations; accounting methods, practices
      and procedures; shareholders; acquisition candidates; financial condition;
      clients; customers or other relationships of ADS or any of its affiliates
      (“Information”) is confidential and is a unique and valuable asset of ADS or any
      of its affiliates. Access to and knowledge of the Information is essential
      to
      the performance of Executive’s duties under this Agreement. Executive will not,
      during the Term or thereafter, except to the extent reasonably necessary in
      performance of his duties under this Agreement, give to any person, firm,
      association, corporation, or governmental agency any Information, except as
      may
      be required by law. Executive will not make use of the Information for his
      own
      purposes or for the benefit of any person or organization other than ADS or
      any
      of its affiliates. Executive will also use his best efforts to prevent the
      disclosure of this Information by others. All records, memoranda, etc. relating
      to the business of ADS or its affiliates, whether made by Executive or otherwise
      coming into his possession, are confidential and will remain the property of
      ADS
      or its affiliates.

    (b) Executive
      will, with reasonable notice during or after the Term, furnish information
      as
      may be in his possession and reasonably cooperate (taking into account
      Executive’s then current employment situation) with ADS and its affiliates as
      may be required in connection with any claims or legal action in which ADS
      or
      any of its affiliates is or may become a party to the extent that such claim
      or
      legal action reasonably relates to Executive’s pre-termination duties with
      ADS.

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    
      10. RESTRICTIONS.

    

    (a) During
      the Term and thereafter for a one (1) year period (the “Restriction Period”),
      Executive agrees that, without the prior express written approval from the
      Board, he shall not compete with ADS and its affiliates by directly or
      indirectly engaging in the Business or by engaging in any business comparable
      to
      that of ADS or its affiliates, either directly or indirectly, as an individual,
      partner, member, corporation, limited liability company, limited liability
      partnership, officer of a corporation or in any
      other capacity whatsoever
      at any
      location at which ADS or its affiliates conducts business and/or provides
any
      services.

    (b) Executive
      acknowledges that the restrictions contained in this Section 10 of this
      Agreement, in view of the nature of the activities in which ADS and its
      affiliates are engaged, are reasonable and necessary in order to protect the
      legitimate interests of ADS and its affiliates, and that any violation thereof
      would result in irreparable injuries to ADS and/or its affiliate(s), as the
      case
      may be. Executive, therefore, acknowledges that, in the event of the violation
      of any of these restrictions, ADS shall be entitled to seek from any Court
      of
      competent jurisdiction preliminary and permanent injunctive relief, as well
      as
      attorneys fees and costs, damages and an equitable accounting of all earnings,
      profits and other benefits arising from such violation, which rights shall
      be
      cumulative, and in addition to any other rights or remedies to which ADS may
      be
      entitled. 

    (c) In
      consideration for the restrictions contained in this Section 10, as well as
      in consideration for the services to be provided by Executive pursuant to the
      terms of Section 9(a), ADS shall pay to Executive the amount of TWO HUNDRED
      FIFTY THOUSAND ($250,000.00) DOLLARS (the “Covenant Consideration”) payable in
      ADS Stock, except for the Withholdings, which shall be payable in cash. In
      the
      event that ADS is unable to pay part of the Covenant Consideration in the form
      of ADS Stock, then and in that event, ADS shall pay the Covenant Consideration
      in cash. Whether in cash or ADS Stock, the cash or ADS Stock shall
      be

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    deposited
      in the Rabbi Trust within twenty (20) business days of the termination of this
      Agreement, and shall be released as provided in Section 8(c). To the extent
      that
      ADS is able to pay part of the Covenant Consideration in the form of ADS Stock,
      then and in that event, all of the terms and conditions set forth in Section
      8(d) applicable to the ADS Stock shall similarly be applicable to the common
      stock issued by ADS incident to the Covenant Consideration, including the issue
      of those circumstances upon which the Covenant Consideration may be paid in
      ADS
      Stock.

    (d) If
      any of
      the restrictions set forth in this Section 10 should, for any reason, be
      adjudged invalid or unreasonable in any proceeding, then the validity or
      enforceability of the remainder of such restrictions or provisions shall not
      be
      adversely affected. If the Restriction Period or the area specified in this
      Section 10 of this Agreement shall be adjudged unreasonable in any proceeding,
      then the Restriction Period shall be reduced by such number of months, or the
      area shall be reduced by the elimination of such portion thereof or both, so
      that such restrictions may be enforced in such area and for such period of
      time
      as is adjudged to be reasonable. If Executive violates any of the restrictions
      contained in this Section 10, the Restriction Period shall not run in favor
      of
      Executive from the time of commencement of any such violation until such time
      as
      such violation shall be cured by Executive to the satisfaction of
      ADS.

    (e) The
      terms
      of this Section 10 shall survive the termination of this Agreement. Executive
      acknowledges that he can be gainfully employed and still comply with the terms
      of this Section 10 and that it is not unduly inconvenient to him.

    11. INDEMNIFICATION;
      LITIGATION.

    (a) ADS
      will
      indemnify Executive to the fullest extent permitted by the laws of the State
      of
      Florida in effect at that time, or the certificate of incorporation and by-laws
      of ADS, whichever affords the greater protection to Executive. Executive will
      be
      entitled to any

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    insurance
      policies ADS may elect to maintain generally for the benefit of its officers
      and
      directors against all costs, charges and expenses incurred in connection with
      any action, suit or proceeding to which he may be made a party by reason of
      being an officer of ADS.

    (b) In
      the
      event of any litigation or other proceeding between ADS and Executive with
      respect to the subject matter of this Agreement, ADS will reimburse Executive
      for all costs and expenses related to the litigation or proceedings, including
      attorney’s fees and expenses, providing that the litigation or proceedings
      results in either a settlement requiring ADS to make a payment to Executive
      or
      judgment in favor of Executive.

    12. MITIGATION.
      Executive will not be required to mitigate the amount of any payment provided
      for hereunder by seeking other employment or otherwise, nor will the amount
      of
      any such payment be reduced by any compensation earned by Executive as the
      result of employment by another employer after the date Executive’s employment
      hereunder terminates.

    13. REMEDIES.

    (a) In
      the
      event of a breach of this Agreement, the nonbreaching Party may maintain an
      action for specific performance against the Party who is alleged to have
      breached any of the terms of this Agreement. This subparagraph (a) of this
      Section 13 of this Agreement will not be construed to limit in any manner any
      other rights or remedies an aggrieved Party may have by virtue of any breach
      of
      this Agreement. 

    (b) Each
      of
      the Parties has the right to waive compliance with any obligation of this
      Agreement, but a waiver by any Party of any obligation will not be deemed a
      waiver of compliance with any other obligation or of its right to seek redress
      for any breach of any obligation on any subsequent occasion, nor will any waiver
      be deemed effective unless in writing and signed by the Party so
      waiving.

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    14. CONSOLIDATION,
      MERGER OR SALE OF ASSETS.
      Subject
      to the terms of Section 8, this Agreement shall not preclude ADS from
      consolidating or merging into or with, or transferring all or substantially
      all
      of its assets to, another corporation which, subject to the express written
      consent of Executive, which consent may be withheld for any reason or for no
      reason, may then assume this Agreement and all obligations and undertakings
      of
      ADS hereunder. In that event, “ADS” will mean the other corporation and this
      Agreement will continue in full force and effect.

    15. ATTORNEY’S
      REPRESENTATIONS.
      Executive acknowledges that ADS’ counsel, COOPER LEVENSON APRIL NIEDELMAN &
WAGENHEIM, P.A., prepared this Agreement on behalf of and in the course of
      its
      representation of ADS, and that:

    1. Executive
      has been advised to seek the advice of independent counsel; and

    2. Executive
      has had the opportunity to seek and has, in fact, received the advice of
      independent counsel of his choosing.

    16. NOTICES.
      Any
      notices required or permitted by this Agreement or by law to be served on,
      or
      delivered to, any Party to this Agreement, shall be in writing and shall be
      signed by the Party giving or delivering it and sent by courier that guarantees
      overnight delivery, or by registered or certified mail, return receipt
      requested, addressed to the Party to whom any communication under this Agreement
      is to be made. Notice given as provided herein shall be deemed to have been
      given on the mailing date and, unless otherwise provided herein, shall be
      effective from that date. Notice shall be sent to the respective Party at the
      address set forth below. Any Party may change its address for purposes of
      receiving notices by furnishing notice of such change in the manner set forth
      above.

    If
      to
      ADS:  

    APPLIED
      DIGITAL SOLUTIONS, INC. 

    1690
      South Congress Avenue- Suite 200

    Delray
      Beach, Florida 33445

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    

    If
      to
      Executive                     
 Michael
      Krawitz

    400
      South
      Pointe Drive, Apt. 2204

    Miami
      Beach, Florida 33139

    

    17. INVALID
      PROVISIONS.
      The
      invalidity or unenforceability of any particular provision of this Agreement
      shall not affect the other provisions hereof, and the Agreement shall be
      construed in all respects as though such invalid or unenforceable provisions
      were omitted. 

    18. ASSIGNMENT.
      This
      Agreement shall inure to the benefit of and be binding upon ADS, its successors
      and assigns, and Executive. This Agreement, being for the personal services
      of
      Executive, shall not be assignable or subject to anticipation by Executive.
      

    19. AMENDMENTS.
      The
      terms and provisions of this Agreement may not be modified except by written
      instrument duly executed by the Parties. 

    20. ENTIRE
      AGREEMENT.
      This
      Agreement supersedes all other oral and written agreements between the Parties
      with respect to the matters contained in this Agreement and, except as otherwise
      provided herein, this Agreement contains all of the covenants and agreements
      between the Parties with respect to those matters.

    21. LAW
      GOVERNING AGREEMENT.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Florida. Any terms and conditions of this Agreement which apply to
      Executive and/or govern Executive’s behavior after Executive’s termination of
      employment and/or after the termination of this Agreement shall automatically
      survive the termination of this Agreement. 

    22. CONSENT
      TO JURISDICTION AND VENUE.
      The
      Parties hereby consent and submit to the jurisdiction and venue of any state
      or
      federal court within the State of Florida, Palm Beach County in any litigation
      arising out of this Agreement. 

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    23. CAPTIONS
      AND GENDER.
      The
      headings contained in this Agreement are inserted for convenience and reference
      purposes only and are not intended to describe, interpret, define or limit
      the
      scope, extent or intent of this Agreement or any provisions hereof, and shall
      not affect in any way the meaning or interpretation of this Agreement or any
      provisions hereof. All personal pronouns used in this Agreement shall include
      the other genders whether used in the masculine or feminine or neuter gender,
      and the singular shall include the plural and vice versa, whenever and as often
      as may be appropriate.

    24. COUNTERPART
      EXECUTION.
      This
      Agreement may be executed in two or more counterparts either by facsimile or
      otherwise, each of which shall be deemed an original, but all of which together
      shall constitute one and the same instrument.

    IN
      WITNESS WHEREOF,
      the
      Parties hereto have set their hands and seals as of the date set forth on the
      first page of this Agreement.

    

      
        	
                ATTEST:

              	 	
                APPLIED
                  DIGITAL SOLUTIONS, INC.

              
	 	 	 
	 	 	 
	
                   /s/
                  Kay E.
                  Langsford                                                   
                  

              	 	
                /s/ Evan
                  C.
                  McKeown                                         
                  12/5/06

              
	
                 

              	 	
                By:  Evan
                  C. McKeown CFO and Senior Vice President

              
	 	 	 
	
                WITNESS:

              	 	
                EXECUTIVE:

              
	 	 	 
	 	 	 
	
                /s/
                  Chris R.
                  Hines                                                         
                                                                              
                  

              	 	
                /s/ Michael
                  Krawitz         
                                                                                                          
                  

              
	 	 	
                MICHAEL
                  KRAWITZ

              

      

     

     

     

    -15-

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