Document:

Exhibit 10.5 (9/21/11)

SEPARATION AGREEMENT

This Agreement and General Release (the "Agreement") is made and entered into this 29 day of June, 2011, by and between Digitiliti. Inc., a Delaware corporation, with its principal office at 266 East Seventh Street, St. Paul, MN 55101 ("Company") and Ehssan Taghizadeh ("Employee") collectively referred to as the "Parties".

RECITALS

WHEREAS, Employee was employed by Company as President and Chief Executive Officer pursuant to that agreement dated September 30,2010 ("Employment Agreement"); and

WHEREAS, Employee's employment relationship with Company has terminated; and

WHEREAS, under the terms of the Employment Agreement and in recognition that Company and Employee desire to compromise and settle any and all claims Employee may have or claims to have against Company, Company will make a payment of money in consideration of the execution of a release on the terms and conditions provided herein; and,

WHEREAS, Employee desires receiving such payments and therefore agrees the receipt of such consideration
represents the full and complete satisfaction under the Employment Agreement including the satisfaction of any
and all claims or liabilities Employee may have or claim to have.

NOW, THEREFORE, in consideration of the foregoing, and for other consideration described below, the receipt and sufficiency of which is hereby acknowledged, it is agreed as follows:

1.Effective Termination Date. Employee's employment with Company has terminated June __, 2011 and, as of that date, Employee is no longer authorized to act on Company's behalf in the capacity of an officer or employee of Company, and, accordingly, Employee may act only in a manner consistent with the terms herein.

		
	2.
	Compensation for Past Services/Expenses. Company agrees to pay Employee compensation for the following:

(i)regular hours worked through the termination date;
(ii)accrued, unused Vacation in the amount of $7,115.38.

In addition, during the five (5) business days following the termination date, Employee may present receipts in accordance with Company's expense reimbursement policy for any expenses Employee has incurred prior to June 30, 2011.

3.Non-disparagement. Parties agree not to disparage or defame the other Party or any of Company's officers. agents, directors, representatives and employees in any respect or make any comments concerning the employment relationship, except as agreed herein. Moreover, unless agreed to by both Parties, Parties agree not to make any further statements concerning Employee's relationship with Company either in the employment or personal context with exception of necessary public filings with the SEC.

4.Reaffirmation of Covenant Not to Comoete. Employee hereby reaffirms his promises of confidentiality, non-competition and non-soliCitation contained in Sections 3.4. and 3.5 of the Employment Agreement.

5.Payments. Company hereby agrees to pay Employee cash and non-cash payments as follows and as set out on Exhibit B - Total Payments and Payment Terms:
		
	a)
	Total cash payments as set forth on Exhibit B as due under the Employment Agreement for severance payments, earned and unused vacation as well as reimbursable expenses;

		
	b)
	Common stock of Company in the amount of 597,129 shares as agreed to by both parties for five months of Employee's unpaid net salary, aU applicable federal and state taxes have already been paid in full by Company; and,

		
	c)
	Five-year stock warrants in the amount of 200,000 and valued at $.06 per share as consideration for entering into this Agreement, including but not limited to the release of all daims in Section 6 and covenant not to sue in Section 7. 

Any cash payments under this section shall be subject to all applicable deductions for federal and state income tax withholding and employment taxes.

Payments shall continue to be subject to the surviving sections of the Employment Agreement per section 9, below.

Except for sales of the Company's securities under that Junior Secured Convertible Promissory Note and Warrant Purchase Agreement made as of June _, 2011 ("Purchase Agreement"), in the event of a third party investment into Company of a minimum of ten percent (10%) of Company's value, or the equivalent shares of stock, which value will be as used in the transaction and agreed to by Company and the third party, the payments set out in this Agreement will be accelerated and paid out to Employee in a lump sum on the date of closing of the investment transaction and/or receipt of monies due and owing 

Digitiliti Confidential - Separation Agreement

Company into Company's designated account or control.

6.    Release and Discharge of All Claims. In consideration of the payment to be made under Section 5, Employee hereby agrees and does hereby permanently and irrevocably remise, release and forever discharge Company and its respective directors, officers, advisory board members, consultants, agents, representatives, employees, shareholders, attorneys and assigns (hereinafter collectively referred to as the "Released Parties"). all of whom are third party beneficiaries hereof, from all manner of actions and causes of action, suits, debts, claims and demands whatsoever, in law or in equity, known or unknown, which Employee may have or may claim to have from the beginning of time up to and including the effective date of termination
against any of the Released Parties, arising out of Employee's employment with Company or termination therefrom, or in any other manner concerning any relationship Employee may have had with all or any of the Released Parties. Without
limiting the foregoing, Employee expressly agrees to refrain forever from instituting any action or making any demand or claim of any kind for any compensation, bonus, wages, unpaid commiSSions, vacation, other payments or rights; discrimination,
harassment, or retaliation; or any alleged violation of the Minnesota Human Rights Act; Title VII of the Civil Rights Act of 1964, as amended, 42, U.S.C. § 2000e et seq., any other federal, state, or local civil rights laws; the AGE DISCRIMINATION IN EMPLOYMENT ACT, 29 U.S.C. § 621 et seq., the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., the Americans with Disabilities Act Amendments Act; the Family and Medical Leave Act. 29 U.S.C. § 2601 e/ seq.; Section 4980B of Internal
Revenue Code of 1986 (COBRA); the Fair Labor Standards Act; the Worker Adjustment and Retraining Notification Act; the Minnesota Whistleblower Act; claims for alleged breach of fiduciary duty under Section 409 of the Employee Retirement Income Security Act alleging the impairment in value of Employee's accounts, if any; claims for breach of contract, fraud, or misrepresentation; defamation; intentional or negligent infliction of emotional distress; breach of covenant of good faith and fair dealing; promissory estoppel; negligence; wrongful separation of employment; and any other claims for wrongful employment practices. 

Nothing contained herein shall be construed to prohibit Employee from filing a charge with the Equal Employment Opportunity Commission ("EEOC") or any state or local agency, but Employee's release contained in this Section 6 includes a release of Employee's right to file a court action or seek individual remedies of damage in any EEOC-filed court action or any other proceeding, including, but not limited to, any administrative proceeding. Employee's release of these rights shall apply with full force and effect to any proceedings arising from or relating to any administrative charge.

7.     Covenant Not To Sue. Employee agrees and covenants that neither Employee nor anyone claiming on behalf of or through Employee will claim, charge, sue or cause to permit any third party to claim, charge or sue any of the Released Parties for any claims released in this Agreement.

8.     Entire Agreement. This Agreement contains the entire agreement between the Employee and the Company and supersedes and cancels any and all other prior agreements, whether oral or in writing, between the Company and Employee with respect to the matters referred to herein. Notwithstanding any language in this Agreement to the contrary, Sections 3.4., 3.5., 3.6., and 3.7. of the Employment Agreement are not cancelled, terminated, or superseded in any respect.

9.     General Cooperation. For the duration of any payments hereunder or, in any event, for no more than three months from the Effective Date of this Agreement, Employee agrees to be available to answer questions and attend meetings by telephone or in person as reasonably requested by Company and as agreed to by Employee as it relates to Company's business as well as Employee's former duties and responsibilities. Company will not unreasonably request assistance and Employee will not unreasonably deny providing such assistance to Company. Company acknowledges Employee may initiate meeting requests as well. Both Company and Employee agree to use good faith and best efforts in requesting and responding to meeting requests as well as accommodating the other. If Employee engages in other business activities, including full time employment, both Parties will cooperate to schedule meetings in a manner that least interferes with the performance of either Party's business activities. Accordingly, the requesting Party shall provide the other Party no less than twenty-four (24) hours notice of a meeting. In the event the meeting requested is in person and the other Party is unavailable to meet in person, the non-requesting Party will either be available by telephone or offer at least two dates within the following five (5) business days when it will be available.

10.    Indemnification. Company acknowledges it has maintained Directors and Officers Insurance (D&O) Coverage throughout the period of employment of Employee. Furthermore, pursuant to its corporate bylaws, Article VIII - Indemnification of Directors and Officers, Company agrees to indemnify Employee, to the maximum extent permitted by law, against any and all liabilities, costs, expenses, amounts paid in settlement and damages incurred by Employee as a result of any lawsuit, judicial, administrative or investigative proceeding (Criminal or civil, including an action by or in the right of the Company) in which
Employee at any time is sued or made a party, or is threatened to be made a party, as a result of Employee's service as an officer or member of the Board of Directors of the Company (or Employee's providing services at the request of the Company as
a director, Officer, agent or employee of another corporation or other entity).

11.    Miscellaneous. Employee represents that in executing this Agreement Employee is not relying and has not relied on any representations or statements not set forth in this Agreement. Employee acknowledges that he/she has been advised and has been given the opportunity to seek legal advice concerning this Agreement prior to entering into this Agreement This Agreement, together with the attached Exhibits. incorporated herein by reference, constitutes the entire agreement and understanding of the Parties and supersedes all prior agreements and understandings and shall be construed as a waiver of all prior understandings, 

Digitiliti Confidential - Separation Agreement

claims and agreements relating to the subject matter of this Agreement.

12.    Liquidation of Claim Accounts. Company's maximum liability under this Agreement shall be the total amount payable to Employee under Section 5 and Employee releases, discharges and waives any and all claims, known and unknown, against the Released Parties. whether legal. equitable, or otherwise that Employee may now have or may have in the future.

13.    Severability. If, for any reason, a court of    competent jurisdiction finds any provision of this Agreement, or any portion thereof, to be unenforceable that provision will be severed or adjusted as held by the court and otherwise enforced to the maximum extent permissible so as to effect the intent of the Parties, and the remainder of this Agreement will continue in full force and effect.

14.    Rescission.
(i) To the extent that Employee waives and releases all claims Employee may have against the Released Parties under Minnesota Human Rights Act, Minn. Stat §363.01 ~. or other local law, Employee may rescind this waiver and release of such claims within fifteen (15) calendar days of signing this Agreement. Employee further acknowledges and agrees that Employee has been informed of the right to rescind this Agreemem to reinstate potential claims under the Age Discrimination in Employment Act, 29 U.S.C. §621, et. seq. within seven (7) calendar days of signing this Agreement

(ii) To be effective, Employee's rescission must be in writing and delivered to Digitiliti, Inc., 266 East Seventh Street, st. Paul, MN 55101, either by hand or by mail within the respective 15-day or 7-day period. If sent by mail, the rescission must be: a)
postmarked within the respective 15-day or 7 -day period; b) properly addressed to Company Human Resources department; and c) sent by certified mail, return receipt requested.

15.    Cancellation By Company. If Employee exercises Employee's right of rescission under Section 13 of this Agreement, the Company will have the right, exercisable by written notice delivered to Employee, to terminate this Agreement in its entirety, in which event Company will have no obligation whatsoever to Employee hereunder, except as otherwise provided in this Agreement, and all obligations to Employee will be as provided under the original terms of the Employment Agreement, which shall then be controlling and enforceable. If Employee exercises Employee's right of rescission and the Company does not exercise its right to terminate this Agreement hereunder, the remaining proVisions of this Agreement shall remain valid and
continue in full force and effect.

16.    Performance By Parties. Nothing contained herein shall operate as a waiver or an election of remedies by a Party should the other Party fail to perform any duty or obligation imposed upon it hereunder. Notwithstanding anything contained herein to the contrary, this Agreement and the duties and obligations of the Parties hereunder shall continue in full force and effect irrespective of any violation of any term or provision of this Agreement by the Parties. In the event that a Party violates any
term or provision of this Agreement, then the violating Party shall pay any of the non-viOlating Party's reasonable attorneys' fees related to such violation.

17.    Consideration Period. Employee has twentyone (21) calendar days from the date of this Agreement to consider whether or not to sign it; the Agreement may be Signed anytime during the 21 day period. If, within the 21-day period, Employee fails to
sign this Agreement, this entire Agreement is null and void. If Employee executes this Agreement prior to the expiration of the 21-day period, Employee acknowledges that Company notified him of his right to consider Company's offer of settlement for a period of 21 days and that he voluntarily waived his right to do so.

18.    Governing Law and Venue. The Parties agree that this Agreement will be exclusively governed, interpreted and construed in accordance with the laws of the State of Minnesota and applicable federal law. The location for the resolution of a/l disputes
shall be exclusively in Hennepin County, Minnesota and Parties waive any right to contest this venue location or the claim that this venue location is an inconvenient forum for the resolution of disputes.

UNDERSTOOD AND AGREED:

EHSSAN TAGHIZADEH •
	
	
	 

	Signature

	 

	 

	Date

Digitiliti Confidential - Separation Agreement

	
	
	DIGITILITI, INC.

	 

	Bill McDonald, CFO

	 

	 

	Date

EXHIBIT A - EM.J'LOYMENT AGREEMENT

EXHIBIT B - TOTAL PAYMENTS AND PAYMENT TERMS

	
				
	Based on the original annual compensation rate of $185,000
	 

	CASH PAYMENTS
	 

	Cash Severance, 50% of base salary
	$
	92,500.00
	

	First HaIf 2011 Bonus as of June 30
	$
	10,000.00
	

	Fourth Quarter 2010 Bonus
	$
	20,000.00
	

	Vacation
	$
	7,115.38
	

	Expenses
	$
	13,000.00
	

	Sub-Total
	$
	130,815.38
	

	 
	 

	 
	 

GOOD FAITH DISCOUNr $13.115.38
TOTAL CASH PAYMENTOUE $111,500.00
PAYMENT TERMS - CASH PAYMENT
cash due at Closing of First Tranche $70,500.00
Cash due at Closing of Second Tranche $47,000.00*"
NON-CASH PAYMENTS
Common Stock 597.129 shares"·
five-wa! Stock Warrnnts 200 000 shares at $.06lshare .... ••
TOTAl STOCK 797.129 shares
The Good Faith Discount is a reduction in cash that was offered by Employee to benefit the Company.
.... Empfoyee has the right to either (t) use this amount 10 purchase Notes and Warrants sold under the
Purchase Agreement on the same terms as under the Purchase Agreement or (2) receive this amount
in cash. However, if this amount is used 10 purchase Notes and Warrants, the amount shall not be
counted towards reaching either the Minimum or Maximum amounts under the Second Tranche.
.... During the period of February 1 to June 30, 20t 1, Employee suspended cash payment of his net base
salary to benefit Ute cash position of Company. The receipt of stock for salary due and owing was
agreed upon by both parties and represents a net cash equivalent equal to Employee's monthly salary
less applicable taxes that have already been paid in full by the Company.
_ ... This special grant of stock warrants was agreed to by both parties and SeJVeS as consideration in 6eu
of cash for the surrendering of rights as set out under this Separation Agreement..
M9SI61v5

Digitiliti Confidential - Separation AgreementExhibit 10.6 (9/21/11)

EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement") is made effective as of the 29 day of June, 2011 (the "Effective Date"), by and between DIGITILITI, INC., a Delaware corporation (the "Company"), and Jack Scheetz ("Executive").

WHEREAS, the Company desires to retain the services of Executive for and on behalf of Company as Company's Interim President and Chief Executive Officer ("CEO") until Company hires and employs a new President and CEO, on the terms and subject to the conditions set forth herein;

WHEREAS, the Company and certain investors are entering into the Junior Secured Convertible Promissory Note and Warrant Purchase Agreement dated even date herewith ("Purchase Agreement"), which requires the Company and Executive to enter into this Agreement upon the Closing of the First Tranche (all words capitalized but not defined in this Agreement shall have the meanings attributed to them under the Purchase Agreement); and

WHEREAS, each of the parties acknowledge that they are receiving good and valuable consideration for entering into this Agreement, and Executive acknowledges that this Agreement, including the confidentiality, non-competition and non-disclosure agreements set forth hereinbelow, were negotiated between the parties hereto and that Executive received bargained-for consideration in the form of benefits resulting to Executive from the terms and conditions of such employment, in exchange for entering into this Agreement.

NOW THEREFORE, in consideration of the foregoing premises, mutual covenants and obligations contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.Employment. Subject to the terms and conditions of this Agreement, including without limitation, Sections 5 and 6 of this Agreement, the Company hereby employs Executive, and Executive hereby accepts employment with the Company, as its Interim President and CEO, subject to the supervision of the Board of Directors of Company.

1.1Services. Executive shall perform all duties and obligations charged to Executive by the Board of Directors of Company, as the same may be determined from time to time. The Board of Directors shall assure adequate time, resources, and authority for Executive to achieve goals mutually agreed upon by Company and Executive.

1.2Time and Effort.

a)Executive agrees to devote substantially all of his working time and to give his best effort to performing his duties on behalf of Company. Executive shall perform the duties and obligations required of Executive hereunder in a competent, efficient, and satisfactory manner at such hours and under such conditions as the performance of such duties and obligations may require.

b)Subject to the obligations of Executive under this Section 1, Executive may serve on the Board of Directors or Board of Governors of any other entity; provided the Board of Directors, in its sole discretion, authorizes Executive to undertake such activity in writing prior to Executive's appointment or election to such position or ratifies any current and on~going positions.

1.3Certificate of Incorporation and By-Laws. Executive shall act in accordance with and abide by the Certificate of Incorporation of Company, the Bylaws of Company, and all decisions of the Board of Directors of Company.

2.Term. This Agreement shall take effect upon commencement of employment and shall remain in effect until terminated in accordance with Section 9. Upon termination of this Agreement, except as otherwise provided herein, neither the Company nor Executive shall have any further rights, duties, privileges, or obligations hereunder.

3.Compensation. During the term of this Agreement, Company shall compensate Executive as follows, provided that the compensation terms in this Section 3 are agreed to by the Investors under the Purchase Agreement and ratification by Company's Board of Directors.

3.1.Salary.  In exchange for the provision of services, Executive's base salary shall be Fourteen Thousand Two Hundred Fifty Dollars ($14,250.00) per month ("Base Salary"). Payment of fifty percent (50%) of the Base Salary, which equals Seven Thousand One Hundred Twenty-Five Dollars ($7,125.00) (the "Monthly Deferred Base Salary 

Payment"), will be·deferred until Company hires a new President and CEO. After the Company hires a new President and CEO, the Monthly Deferred Base Salary Payment shall be paid each month for the number of months equal to the period of deferral, which shall not exceed six months. After six months from the effective date of this Agreement, if Executive is still serving as Company's Interim President and CEO, then the Company shall pay Executive $14,250.00 per month until the Company hires a new President and CEO or Executive is terminated earlier under the terms of this Agreement, plus the Company shall pay Executive the Monthly Deferred Base Salary Payment each month for six months. Executive's compensation under this Section 3.1. will be subject to standard withholdings and deductions and will be paid in accordance with the general practices of the Company.

3.2.Bonus Payments. In the event that Company enters into an agreement for DigiLIBE with the United States Army or Honeywell International Inc. (a "DigiLIBE Agreement") during the first three months after the Effective Date of this Agreement, Executive shall be paid bonus payments equal to Four Percent (4%) of the recognized monthly revenue from the DigiLIBE Agreement for a period of two years, commencing on the date on which Company enters into the DigiLIBE Agreement. In the event that Company enters into a DigiLIBE Agreement during the first month after the Effective Date of this Agreement, Executive shall be paid bonus payments equal to Six Percent (6%) for the first year and Four Percent (4%) for the second year of the recognized monthly revenue from the DigiLIBE Agreement, commencing on the date on which Company enters into the DigiLIBE Agreement.

3.3.Benefits. Company will provide Executive with any of Company's standard benefit policies or plans, according to their terms. These policies may be modified or terminated from time to time by Company, but not retroactively. The written terms of the policies shall govern any questions of eligibility, coverage, and duration of coverage.

3.4.Equity Compensation. Executive shall be entitled to receive warrants as follows:

a)A five-year warrant to purchase One Hundred Fifty Thousand (150,000) shares of Company common stock to be granted on the Effective Date of this Agreement, exercisable at a price of $0.06 per share.

b)A five-year warrant to purchase an additional One Hundred Fifty Thousand (150,000) shares of Company common stock to be granted at the time of the Closing of the Second Tranche, as such term is defined in the Purchase Agreement, with such warrant exercisable at the market price per share as of the date of grant

c)A five-year warrant to purchase an additional Forty Thousand (40,000) shares of Company common stock for each $100,000 increment above the $500,000 Minimum of securities sold in the Second Tranche, up to a maximum total 200,000 additional shares, to be granted at the time of the Closing of the Second Tranche, with such warrant exercisable at the market price per share as of the date of grant. 

d)The exercise of any of these warrants shall be subject to the Company having a sufficient number of shares of common stock authorized but unissued. Upon the Closing of the Second Tranche, if the Company's Articles of Incorporation does not then authorize a sufficient number of shares of common stock to cover the exercise of these warrants, as well as the conversion and exercise of the securities sold under the Purchase Agreement, the Company shall hold the shareholder meeting as referenced in Section 7(d) of the Purchase Agreement and propose an amendment to the Articles of Incorporation to increase the number of authorized shares by a sufficient amount for approval by the shareholders at such shareholder meeting.

4.Expenses. Company will reimburse Executive for any and all ordinary, necessary and reasonable business expenses that Executive incurs in connection with the performance of Executive's duties under this Agreement. Executive shall be required to comply with Company's policies and procedures regarding expense reimbursement, including documentation for such expenses in a form sufficient to sustain Company's deduction for such expenses under the Internal Revenue Code and in compliance with Company policy. Any reimbursement request made pursuant to this Section 4 shall be subject to review and approval by the Company's Chief Financial Officer.

5.Use and Return of Confidential Information. Except as permitted by the Company's Board of Directors, Executive shall not divulge, furnish or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Company) any confidential or secret knowledge or information of the Company that Executive will acquire during the period of his employment by the Company, whether developed by himself or by others, concerning any (i) trade secrets; (ii) confidential or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or 

indirectly useful in any aspect of the business of the Company; (iii) customer or supplier lists of the Company; (iv) confidential or secret development or research work of the Company; or (v) other confidential information or secret aspects of the business of the Company. Executive acknowledges that the above described knowledge or information constitutes a unique and valuable asset of the Company and represents a substantial investment of time and expense by the Company, and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. During the tenn of this Agreement, Executive will refrain from any acts or omissions that would reduce the value of such knowledge or information to the Company_ The foregoing obligations of confidentiality shall not apply to any knowledge or information that (x) is now or subsequently becomes generally publicly known in the form in which it was obtained from the Company, (y) is independently made available to Executive in good faith by a third party who has not violated a confidential relationship with the Company, or (z) is required to be disclosed by legal process, other than as a direct or indirect result of the breach of this Agreement by Executive. Upon the termination of Executive's employment with Company, Executive shall promptly deliver to Company (i) all records, manuals, books, documents, letters, reports, data, tables, calculations, and all copies of any of the foregoing which are the property of Company or which relate in any way to the customers, business, practices, or techniques of Company; and (ii) all other property of Company and Confidential Infonnation which, in any of these cases, are in his possession or under his control.

6.Restrictive Covenants. During the term of Executive's employment with the Company, and for a period of one (1) year thereafter, Executive will not:

a.own, manage, operate or control, or participate in the ownership, management, operation or control of: or be employed by, or act as a consultant or advisor to or be connected in any manner with, any corporation, person, finn or other entity that manufactures, distributes, or sells products or services similar to any product or service which is or has been sold by the Company or any of its affiliates; provided, however, this section will not apply to business activities conducted by Executive for the entity named JS Consulting Group;

b.solicit customers, or the business of any person, finn, corporation or other entity who shall have been a customer or account of any office or location of the Company or any of the Company's affiliates (whether currently in existence or opened during Executive's employment). or any customer or account of Company or any of Company's affiliates, for the purpose of selling to such customer or account any product or service which is or has been sold by Company or any of its affiliates; or

c.induce or attempt to induce any employee of or consultant to the Company to do any of the foregoing or to discontinue such person's association with the Company.

7.Remedies for Violation. If Executive violates this Agreement, the Company will suffer irreparable harm for which there is no adequate remedy at law, and Executive therefore consents to the issuance of any injunction or other equitable relief of the Company enjoining any violation of this Agreement, which relief shall be in addition to any other remedies available to Company, including without limitation, Company's right to the costs and attorney fees incurred by Company to enforce this Agreement.

8.Work for Hire. Executive acknowledges that all Work Product, as deflned below, created during Executive's employment with the Company is a "work made for hire" as defined by U.S. copyright laws, as is owned by the Company. Work Product includes but is not limited to, all discoveries, improvements, processes, developments, designs, know-how, data, computer programs and formulae, whether patentable or unpatentable or protectable by copyright or other intellectual property law. If any Work Product does not qualify as a ''work made for hire," Executive shall, and hereby does assign all rights, title and interest in the non-qualifying Work Product to the Company, including all copyrights, patents, trademarks, and other proprietary rights. On request, Executive will take such steps as are necessary to enable the Company to record such assignment at its expense. 

Any provision in this Agreement requiring Executive to assign his rights to any Work Product does not apply to inventions which qualify for exclusion under Minnesota Statutes section 181.78. That section provides that the requirement to assign "does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee's own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer's actual or demonstrably anticipated research or development, or (2) which does not result from any work perfonned by the employee for the employer." Executive understands that it is his obligation to promptly disclose (i) any Work Product that he created prior to his employment with the Company that he believes should not be subject to this Agreement; and (ii) any Work Product that he created during his employment with the Company that he believes should not be subject to this Agreement. If Executive does not promptly disclose any Work Product that he believes should
not be subject to this Agreement, Executive acknowledges that such non-disclosure will be considered a representation that he 

has created no such Work Product prior to signing this Agreement, and that, during the course of his employment with the Company, he created no such Work Product.

9.Termination. This Agreement may be terminated (i) by the Executive prior to the hiring of a new President and CEO upon 30 days notice to the Company; (ii) immediately upon the death or incapacity of Executive; (iii) by the Company for "Good Cause," as defined herein; or (iv) by the Company, effective as of the hiring and employment of a new President and CEO by the Company. For purposes of this Section 9 of this Agreement, "Good Cause" shall mean: (a) engaging in acts of dishonesty at the expense of the Company, including but not limited to theft or embezzlement; or (b) engaging in conduct constituting a felony.

10.Miscellaneous.

10.1Notices. All notices, requests, and other communications shall be in writing, and except as otherwise provided herein, shall be considered to have been delivered if personally delivered or when deposited in the United States Mail, first class, certified or registered, postage prepaid, return receipt requested, addressed to the proper party at its address as set forth below, or to such other address as such party may hereafter designate by written notice to the other party:

a) If to Company, to: Digitiliti, Inc.
      266 East 7th Street, 4th Floor
      St. Paul, MN 55101
      ATTN: Chief Financial Officer
b) If to Executive, to: Interim President
       Digitiliti, Inc.
       266 East 7th Street, 4th Floor
       St. Paul, MN 55101

10.2. Successors and Assigns. This Agreement is binding on and inures to the benefit
of the Company's successors and assigns, provided, however, that this Agreement may
not be assigned by any of the parties hereto without the prior written consent of each of
the parties hereto. This Agreement shall be binding upon and inure to the benefit of any
successor of the Company, including a purchaser of either the stock or assets of the
Company, and any such successor shall absolutely and unconditionally assume all of the
Company's obligations hereunder.
10.3. Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
1004. Construction. Wherever possible, each provision of this Agreement will be
interpreted so that it is valid under the applicable law. If any provision of this Agreement
is to any extent invalid under the applicable law, that provision will still be effective to
the extent it remains valid. The remainder of this Agreement also will continue to be
valid, and the entire Agreement will continue to be valid in other jurisdictions.
10.5. Waivers. No failure or delay by either the Company or Executive in exercising
any right or remedy under this Agreement will waive any provision of this Agreement,
nor will any single or partial exercise by either the Company or Executive of any right or
remedy under this Agreement preclude either of them from otherwise or further
exercising these rights or remedies, or any other rights or remedies granted by any law or
any related document.
10.6. Captions. The headings in this Agreement are for convenience of reference only
and do not affect the interpretation of this Agreement.
10.7. ModificationlEntire Agreement. This Agreement may not be altered, modified or
amended except by an instrument in writing signed by all of the parties hereto. No
person, whether or not an officer, agent, employee or representative of any party, has
made or has any authority to make for or on behalf of that party any agreement,
representation, warranty, statement, promise, arrangement or understanding not expressly
-6-
set forth in this Agreement or in any other document executed by the parties concurrently
herewith. This Agreement constitutes the entire agreement between the parties on the
subject matters contained herein and supersedes all express or implied, prior or

concurrent, with respect to the subject matter hereof.
10.8. Governing Law. The laws of the State of Minnesota shall govern the validity,
construction and performance of this Agreement. Courts in the State of Minnesota shall
be the exclusive forum for resolving any disputes relating to this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and
year first above written.

JACK SCHEETZ: 
DIGITILITI, INC.
610S212v3
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