Document:

Exhibit 10.5

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT
(“Agreement”), made and entered into as of February 28, 2005, by and between
DAPLOMA INTERNATIONAL A/S, a Danish corporation (“Company”) and TORSTEN
NORDFJELD (“Executive”).

 

RECITALS

 

A.            This
Agreement is being executed and delivered contemporaneously with that certain
Stock Purchase Agreement dated as of the date hereof (the “Stock Purchase
Agreement”), pursuant to which Digital Angel Corporation, a Delaware
corporation (“Digital Angel”) will purchase all of the issued and outstanding
shares of capital stock of DSD Holding A/S, a Danish corporation that is the
sole owner of the Company.

 

B.            The
Executive is a founder of and a principal operating officer of the Company. The
Company has developed and acquired valuable information, know-how and ideas
relating to its business, all of which is regarded as valuable confidential
information. In the course of his employment with the Company, Executive has
had access to and has learned certain valuable and confidential information of
the Company. During such period, Executive has also developed valuable
relationships with suppliers, customers and other business associates of the
Company.

 

C.            The
Company desires to assure that Executive provides services to the Company as
its employee, and Executive desires to be employed by the Company, subject to
the terms and conditions set forth in this Agreement.

 

NOW,
THEREFORE, in consideration of the foregoing premises and the respective
agreements of the Company and Executive set forth below, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive, intending to be legally bound, agree
as follows:

 

1.             Employment.  The Company hereby employs Executive, and
Executive accepts such employment and agrees to perform services for the
Company, for the period and upon the other terms and conditions set forth in
this Agreement.  The Executive shall
serve in the employ of the Company as President, and shall serve in any other
capacity in the employ of the Company and its subsidiaries to which the
Executive may from time to time be elected or appointed.

 

2.             Term
of Employment.  Unless terminated at
an earlier date in accordance with Section 9 of this Agreement, the term
of Executive’s employment hereunder shall commence upon the date hereof and
continue until either party terminates the Executive’s employment by providing
the other party a twelve (12) month advance written notice.

 

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3.             Position
and Duties.

 

(a)           Service
with Company.  During the term of
Executive’s employment with the Company pursuant to this Agreement, Executive
agrees to perform such reasonable employment duties as the Chief Executive
and/or the Board of Directors of the Company shall assign to him from time to
time.  Executive’s title shall be
President of the Company, and he shall assume and discharge the
responsibilities of such offices as set forth in the Company’s Bylaws or as
otherwise determined by the Company’s Chief Executive Officer and/or Board of
Directors.

 

(b)           Performance
of Duties; Performance Review. 
Executive agrees to serve the Company faithfully and to the best of his
ability and to devote his full time, attention and efforts to the business and
affairs of the Company during his employment by the Company.  Executive further agrees that he shall not
engage, either directly or indirectly, in any business or other activity which
is competitive with or adverse to the interest or the business of the Company
or Digital Angel. The ownership by Executive, as a passive investment, of less
than 3% of the outstanding shares of capital stock of any corporation listed on
a national securities exchange or publicly traded in the over-the-counter market
shall not constitute a breach of this Section 3. Executive hereby confirms
that he is under no contractual commitments inconsistent with his obligations
set forth in this Agreement.  While he
remains employed by the Company, Executive may participate in other business
activities, including, without limitation, reasonable charitable activities,
personal investment activities and, if the Executive received prior approval
from the Chief Executive Officer of the Company, serving on the board of an
entity which is not competitive with or adverse to the interest or business of
the Company, so long as such activities do not interfere with the performance
of his obligations under this Agreement.

 

4.             Compensation.

 

(a)           Base
Salary.  The Company agrees to pay
the Executive for his services hereunder a base salary (the “Base Salary”),
which Base Salary shall be paid in accordance with the Company’s normal payroll
procedures and policies.  Effective on
the date of this Agreement, the Company shall pay to the Executive a Base
Salary of 900,000 Danish Krones per annum. Executive acknowledges that the
Company will withhold and deduct from such payments such amounts as are
required under applicable law to be withheld for income tax, Social Security
and other withholding purposes.

 

(b)           Performance
Bonus. As additional compensation for Executive, Executive will be eligible
to receive an annual bonus up to 30% of Executive’s Base Salary for each fiscal
year (the “Bonus”), based upon criteria determined by mutual agreement of the
Board of Directors, the Compensation Committee of the Board and the Executive.
The Bonus shall be paid annually not later than 45 days after the completion of
the Company’s fiscal year-end audit. The Bonus shall be pro-rated for any year
during which Executive is employed for less than the full year.

 

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(c)           Stock
Options. As additional compensation for Executive, Executive will receive
stock options to purchase 75,000 shares of the Company’s common stock as
approved by the Board of Directors of the Company or compensation committee of
the Board.

 

(d)           Benefits.  During the term of Executive’s employment
with the Company pursuant to this Agreement, Executive shall be entitled to
continue to participate in any of the employee benefit and deferred
compensation plans or programs of the Company as was available to Executive
prior to the closing of the Stock Purchase Agreement.

 

(e)           Other
Perquisites.  The Executive shall be
entitled to the same vacation, car allowance, office facilities and such other
facilities and services the Company provided to the Executive prior to the
closing of the Stock Purchase Agreement. 
In addition, the Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the Company’s normal
policies for expense verification. Without his consent, Executive shall not be
relocated from Denmark.

 

5.             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 previously acquired or will acquire
during the period of his employment by the Company pursuant to this Agreement,
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 term 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.

 

6.             Ventures.  If, during Executive’s employment, Executive
is engaged in or associated with the planning or implementing of any project,
program or venture involving the Company and a third party or parties, all
rights in such project, program or venture shall belong to the Company, as
applicable.  Except as approved by the
Company’s Board of Directors, Executive shall not be entitled to any interest
in such project, program or venture or to any commission, finder’s fee or other

 

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compensation in connection
therewith other than the compensation to be paid to Executive as provided in
this Agreement.  Executive shall have no
interest, direct or indirect, in any vendor or customer of the Company, unless
such interest has been disclosed to and approved by the Company’s Board of
Directors.  Notwithstanding the foregoing,
however, ownership by Executive, as a passive investment, of less than 3% of
the outstanding shares of capital stock of any corporation listed on a national
securities exchange or publicly traded in the over-the counter market shall not
constitute a breach of this Section 6.

 

7.             Noncompetition
Covenant.

 

(a)           Agreement
Not to Compete.  During the term of
Executive’s employment by the Company and for a period of 12 consecutive months
from the date of termination of such employment (whether such termination is
with or without cause, or whether such termination is occasioned by Executive
or the Company), Executive shall not, directly or indirectly, in any place in
Denmark or North America, engage in the business that the Company has engaged
in at the time of the termination of Executive’s employment or any part of such
business, including the design, development, manufacture, distribution,
marketing, leasing or selling of animal identification systems, in any manner
or capacity, including, but not limited to, as a proprietor, principal, agent,
partner, officer, director, stockholder, employee, member of any association,
consultant or otherwise.

 

(b)           Agreement
Not to Hire.  During the term of
Executive’s employment by the Company and for a period of 12 consecutive months
from the date of termination of such employment, Executive shall not, directly
or indirectly, hire, engage or solicit any person who is an employee of the
Company.

 

(c)           Limitation
on Covenant.  The ownership by
Executive, as a passive investment, of less than 3% of the outstanding shares
of capital stock of any corporation listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a breach of
this Section 7.

 

(d)           Acknowledgment.  Executive agrees that the restrictions and
agreements contained in this Section 7 are reasonable and necessary to
protect the legitimate interests of the Company and that any violation of this
Section 7 will cause substantial and irreparable harm to the Company that
would not be quantifiable and for which no adequate remedy would exist at law
and accordingly injunctive relief shall be available for any violation of this
Section 7.

 

(e)           Blue
Pencil Doctrine.  If the duration or
geographical extent of, or business activities covered by, this Section 7
are in excess of what is valid and enforceable under applicable law, then such
provision shall be construed to cover only that duration, geographical extent
or activities that are valid and enforceable. 
Executive acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Agreement be given the construction which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable laws.

 

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8.             Work
Product; Assignment of Inventions.

 

(a)           Work
Product.  Executive agrees that,
during the term of this employment with the Company pursuant to this Agreement:

 

(i)            He will disclose
promptly and fully to the Company all works of authorship, inventions,
discoveries, improvements, designs, processes, software or any improvements,
enhancements or documentation of or to the same that he makes, works on or
conceives, individually or jointly with others, in the course of his employment
by the Company or with the use of the Company’s time, materials or facilities,
in any way related or pertaining to or connected with the present or
anticipated business, development, work or research of the Company or which result
from or are suggested by any work he may do for the Company and whether
produced during normal business hours or on personal time (collectively the “Work
Product”);

 

(ii)           All Work Product of the
Executive shall be deemed to be “work made for hire” within the meaning of
Section 101 of the Copyright Act and all rights to copyright shall be
vested entirely in the Company. If for any reason the Work Product is deemed
not to be “work made for hire” and its rights to copyright are thereby in
doubt, this Agreement shall constitute an irrevocable assignment by the
Executive to the Company of all right, title and interest in the copyright of
all Work Product created under this Agreement. The parties intend that any and
all copyright and other intellectual property rights in the Work Product,
including without limitation any and all rights of whatever kind and nature now
or hereafter to distribute and reproduce such Work Product in any and all media
throughout the world, are the sole property of the Company.  The Executive hereby agrees to assist the
Company in any manner as shall be reasonably requested by the Company to
protect the Company’s interest in such legal instruments or documents as the
Company shall request in order for the Company to register the Company’s
worldwide copyright and/or the Work Product with the U.S. Copyright Office and
to register and protect the Company’s copyright or other intellectual property
rights in the Work Product throughout the world.  Likewise, the Executive hereby agrees to assist
the Company by executing such other documents and instruments which the Company
deems necessary to enable it to evidence, perfect and protect its rights, title
and interest in and to the Work Product.

 

(iii)          Executive shall make and
maintain adequate and current written records and evidence of all Work Product,
including drawings, work papers, graphs, computer records and any other
document which shall be and remain the property of the Company, and which shall
be surrendered to the Company upon request and upon the termination of the
Executive’s employment with the Company, regardless of cause.

 

(b)           Assignment
of Inventions.  Executive agrees
that, during the term of this engagement with Company, Executive may make,
develop or conceive of inventions, original works

 

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of authorship, developments,
concepts, improvements or trade secrets, whether or not patentable or
registrable under copyright or similar laws, which Executive may solely or
jointly conceive or develop to reduce to practice, or cause to be conceived of
developed or reduced to practice in connection with the Company’s business,
products or research and development or the services provided by the Executive
hereunder (collectively referred to as “Inventions”).  The term “Inventions” further includes any
useful process, composition of matter, software, machine, process, discovery,
document or improvement which relates to the business activities which Company
is or may become engaged.  Executive agrees
that it will promptly make full written disclosure to the Company, will hold in
trust for the sole and exclusive right and benefit of the Company and its
nominees and hereby assigns to the Company, or its designee, in perpetuity, all
of Executive’s right, title and interest in and to any and all Inventions,
including background information necessary to practice such Inventions.

 

(i)            Patent and
Copyright Registrations.  Company and
its nominees shall have the right to use and apply for common law and statutory
protections of such Inventions in any and all countries and jurisdictions.  Furthermore, Executive agrees to assist the
Company, or its designee, any copyrights, patents, mask work rights or other
intellectual property rights relating thereto in any and all countries and
jurisdictions, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive right, title and interest in and to such Inventions,
including all rights associated with works of authorship throughout the world,
any copyrights, patents, mask work rights, trade secrets or other intellectual
property rights relating thereto or analogous to those set forth herein.  Executive further agrees that his obligation
to execute or cause to be executed, when it is in his power to do so, any such
instrument or papers shall continue after the termination of this
Agreement.  If the Company is unable, for
any reason, to secure Executive’s signature to apply for or to pursue any application
for any United States or foreign patents or copyright registrations covering
Inventions or original works of authorship assigned to the Company as above,
then Executive hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents as Executive’s agent and attorney in fact,
to act for and in Executive’s behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by Executive.  The foregoing rights shall also apply to any
divisions, continuations, renewals, reissues and extensions of the foregoing,
as applicable, now existing or hereafter filed, issued or acquired.

 

(ii)           Inventions Retained
and Licensed.  Executive has attached
hereto, as Exhibit A, a list describing all inventions, original works
of authorship, developments, improvements and trade secrets which were made by
Executive prior to his engagement with the Company, which belong to Executive,
which relate to the Company’s business, products

 

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or research
and development, and which are not assigned to the Company hereunder (collectively
referred to as “Prior Inventions”); or, if no such list is attached, Executive
represents that there are no such Prior Inventions.  If in the course of Executive’s engagement
with the Company, Executive incorporates into any inventions, improvement,
development, product, copyrightable material or trade secret any invention,
improvement, development, concept, discovery or other proprietary information
owned by Executive or in which Executive has an interest, the Company is hereby
granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual,
worldwide license to make, have made, modify, use and sell such item as part of
or in connection with such product, process or machine.

 

(iii)          Inventions Assigned
to the United States.  Executive agrees
to assign to the United States government all of Executive’s right, title, and
interest in and to any and all Inventions whenever such full title is required
to be in the United States by a contract between the Company and the United
States or any of its agencies.

 

(iv)          Maintenance of
Records.  Executive agrees to keep
and maintain adequate and current written records of all Inventions made by it
(solely or jointly with others) during the term of his engagement with the
Company.  The records will be in the form
of notes, sketches, drawings and any other format that may be specified by the
Company.  The records will be available
to and remain the sole property of the Company at all times.

 

9.             Termination
of Employment.

 

(a)           Grounds
for Termination.  Executive’s
employment shall terminate prior to the expiration of the initial term set
forth in Section 2 or any extension thereof in the event that at any time:

 

(i)            Executive shall die;

 

(ii)           Executive:

 

(x)            has engaged in willful
and material misconduct, including fraud or embezzlement; or conviction of a
felony or a gross misdemeanor; or has engaged in gross neglect of his duties as
an officer or employee of the Company; or has committed any act or omission
which materially injures the financial condition or business reputation of the
Company or any of its subsidiaries or affiliates; or

 

(y)           has breached this
Agreement in any material respect, which breach is not cured by Executive or is
not capable of being cured by Executive within 30 days after written notice of
such breach is delivered to Executive.

 

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(iii)          The Board of Directors
shall determine that Executive has failed, by reason of illness, incapacity or
disability, to render services of the character contemplated by this Agreement
for at least 180 days during any 360-day period;

 

(iv)          The Board of Directors
shall terminate Executive’s employment other than pursuant to clause (ii)
above, not including delivery of a notice of nonrenewal given by the Company
pursuant to Section 2 of this Agreement; or Executive terminates his
employment for “Good Reason.”  For
purposes of this Agreement, “Good Reason” means a material breach of this
Agreement by the Company not caused by Executive (including, without limitation,
a material reduction in Executive’s duties or responsibilities without
Executive’s consent, or a material diminution in the compensation or benefits
payable to Executive)  which breach has
not been cured within 15 days after written notice thereof by the Executive to
the Company; or

 

(v)           The Executive shall
terminate his employment other than for Good Reason.

 

(b)           Entitlement
to Accrued Compensation.  If
Executive’s employment is terminated by the Company pursuant to Section
9(a)(ii) or by the Executive pursuant to Section 9(a)(v), Executive’s rights to
pay and benefits shall cease on the date his employment under this Agreement
terminates, and he shall be paid all accrued Base Salary, any unpaid Bonus due
under Section 4(b), any vested deferred compensation (other than pension plan
or profit-sharing plan benefits, which will be paid in accordance with the
applicable plan), any other benefits then due under Section 4(d) of this
Agreement, accrued vacation pay, and any appropriate business expenses incurred
by the Executive in connection with his duties hereunder, all to the effective
date of termination (collectively, the “Accrued Compensation”), but no other
compensation or reimbursement of any kind shall be owed to the Executive by the
Company.

 

(c)           Entitlement
to Accrued Compensation Upon Death. 
If Executive’s employment is terminated pursuant to Section 9(a)(i),
Executive’s rights to pay and benefits shall cease on the last day of the month
in which his death occurs, and his personal representative shall be paid all
Accrued Compensation up to and including such date, but no other compensation
or reimbursement of any kind shall be owed to the Executive’s estate by the
Company.

 

(d)           Entitlement
to Accrued Compensation Upon Disability. 
If Executive’s employment is terminated by the Company pursuant to
Section 9(a)(iii) upon a 90 day prior written notice to the Executive,
Executive’s rights to pay and benefits shall cease on the last day of the 90
day termination notice, and he shall be paid all Accrued Compensation (less any
payments received by Executive from any disability income insurance policy
provided to him by the Company) up to and including such date, but no other
compensation or reimbursement of any kind shall be owed to the Executive by the
Company.

 

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(e)           Salary
Continuation.  If Executive’s
employment is terminated by the Company pursuant to Section 9(a)(iv), or
by the Executive for Good Reason pursuant to Section 9(a)(iv), the Company
shall pay to the Executive all Accrued Compensation to the effective date of
termination, and the Company shall continue to pay to Executive his then
effective Base Salary and shall continue to provide all benefits to Executive
pursuant to Section 4(d) for the remainder of the then existing term of this
Agreement. No deduction shall be made by the Corporation under this Section for
any compensation earned by the Executive from any other employment or for any
other monies otherwise received by the Executive subsequent to termination of
employment hereunder.

 

(f)            Release.  The payment of any amounts to Executive under
Section 9(b) through Section 9(e) or otherwise after termination of
Executive’s employment with the Company shall be conditioned upon the Company
receiving a full and complete release from Executive of any current or future
claims Executive may have against the Company, its officers and directors and
other Company affiliates other than (i) those current and specific claims
identified on a list the Executive provides to the Company along with the
signed release (the “List”), (ii) with respect to the payment of amounts
specifically provided for herein, (iii) pursuant to rights of
indemnification under the Company’s Certificate of Incorporation or by-laws or
(iv) pursuant to the terms of any employee benefit plan of the Company in
which Executive is a participant.  If the
Company requires that Executive provide the release discussed in the prior
sentence as a condition to making any payments hereunder, and if Executive
delivers such a release, then the Company shall also be required to give to
Executive a full and complete release of any current or future claims the
Company may have against Executive other than under Sections 5, 6, 7, 8
and 9(g) of this Agreement and in connection with those claims provided on the
List.

 

(g)           Surrender
of Records and Property.  Upon
termination of his employment with the Company, Executive shall deliver
promptly to the Company all records, manuals, books, blank forms, documents, letters,
memoranda, notes, notebooks, reports, data, tables, calculations or copies
thereof that relate in any way to the business, products, practices or
techniques of the Company, and all other property, trade secrets and
confidential information of the Company, including, but not limited to, all
documents that in whole or in part contain any trade secrets or confidential
information of the Company, which in any of these cases are in his possession
or under his control.

 

10.           Change
of Control.

 

(a)           Severance.  Notwithstanding any other provision of this
Agreement, should a Change of Control (as defined below) occur, Executive, at
his sole option and discretion, may terminate his employment under this
Agreement at any time within one year after such change of control upon 15 days
notice.  In the event of such
termination, Company shall pay to Executive a severance payment equal to three
times the annual Base Salary and Bonus, averaged over the last five taxable
years of employment with the Company (“Base Period”), minus $1.00, which shall
be payable no later than one month after the effective date of the Executive’s
termination of employment. If there is a short taxable year during the Base
Period, the amount of taxable income 

 

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Executive earned during the
short taxable year will be annualized for purposes of calculating the severance
payment.

 

(b)           Options.  In the event of a Change of Control, all
outstanding stock options held by Executive shall become fully exercisable (to
the extent not already exercisable).

 

(c)           Definition.  For purposes of this Agreement, a “Change in
Control” shall be deemed to have occurred if (a) any “person” or “group”
(within the meaning of Sections 13 (d) and 14(d)(2) of the Exchange Act of 1934
(the “1934 Act”), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly,
of more than 33-1/3 of the then outstanding voting stock of the Corporation; or
(b) at any time during any period of three consecutive years, individuals who
at the beginning of such period constituted the Board of Directors (and any new
director whose election by the Board or whose nomination for election by the
Corporation’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority thereof; or (c) the
stockholders of the Corporation approve a merger or consolidation of the
Corporation with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 80% of the combined voting power of the voting securities of
the Corporation or such surviving entity outstanding immediately after such
merger or consolidation.

 

11.           Remedies.

 

(a)           Remedies.  Executive acknowledges that it would be
difficult to fully compensate the Company for damages resulting from any breach
by him of the provisions of Sections 5, 6, 7, 8 and 9(g) of this
Agreement.  Accordingly, in the event of
any actual or threatened breach of such provisions, the Company shall (in
addition to any other remedies it may have) be entitled to temporary and/or
permanent injunctive and other equitable relief to enforce such provisions, and
such relief may be granted without the necessity or proving actual damages.

 

(b)           Arbitration.  Except for disputes arising under
Sections 5, 6, 7, 8 or 9(g) hereof, all disputes arising under this
Agreement shall be settled in accordance with the Rules of Procedure of the
Danish Institute of Arbitration (“Rules of Procedure”). All members of the
Arbitration Tribunal shall be appointed by the Danish Institute of Arbitration
in accordance with the Rules of Procedure, and no member shall be affiliated
with either the Company, Digital Angel or the Executive.  The decision of the Arbitration Tribunal
shall be final and binding, and any court of competent jurisdiction may enter
judgment upon the award.  All fees and
expenses of the Arbitration Tribunal shall be paid by the party whose position
is not upheld by the Arbitration Tribunal. 
The Arbitration Tribunal shall have jurisdiction and authority to interpret
and apply the provisions of this Agreement and relevant Danish and United
States federal, state and local laws insofar as necessary to

 

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the determination of the
dispute and to remedy any breaches of the Agreement and/or applicable laws, but
shall not have jurisdiction or authority to award punitive damages or alter in
any way the provisions of this Agreement. 
The Arbitration Tribunal shall have the authority to award attorneys
fees and costs to the prevailing party. 
The parties agree that this arbitration provision shall be in lieu of
any claims procedure which may be required under US federal or Danish law.

 

12.           Miscellaneous.

 

(a)           Governing
Law.  All matters relating to the
interpretation, construction, validity and enforcement of this Agreement shall
be governed by the laws of Denmark.

 

(b)           Entire
Agreement.  This Agreement contains
the entire agreement of the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings with respect to such subject
matter, and the parties hereto have made no agreements, representations or
warranties relating to the subject matter of this Agreement which are not set
forth herein.

 

(c)           Amendments.  No amendment or modification of this
Agreement shall be deemed effective unless made in writing and signed by the
parties hereto.

 

(d)           No
Waiver.  No term or condition of this
Agreement shall be deemed to have been waived, nor shall there be any estoppel
to enforce any provisions of this Agreement, except by a statement in writing
signed by the party against whom enforcement of the waiver or estoppel is
sought.  Any written waiver shall not be
deemed a continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived, and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.

 

(e)           Other
Employment or Consulting Agreements. 
Executive represents and warrants that (i) Executive has terminated all
other employment or consulting agreements he has previously entered into and
(ii) neither Executive nor any entity which previously employed the Executive
has any obligations under such agreements following their termination.

 

(f)            Assignment.  This Agreement shall not be assignable, in
whole or in part, by either party without the written consent of the other
party, except that the Company may, without the consent of Executive, assign
its rights and obligations under this Agreement to any corporation, firm or
other business entity with or into which the Company may merge or consolidate,
or to which the Company may sell or transfer all or substantially all of its
assets, or of which 50% or more of the equity investment and of the voting
control is owned, directly or indirectly, by, or is under common ownership
with, the Company.  After any such
assignment by the Company, the Company shall be discharged from all further
liability hereunder, and such assignee shall thereafter be deemed to be the
Company for the purposes of all provisions of this Agreement, including this
Section.

 

11

 

(g)           Counterparts.  This Agreement may be executed in any number
of counterparts, and such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.

 

(h)           Severability.  Subject to Section 7(e), to the extent
any provision of this Agreement shall be invalid or unenforceable, it shall be
considered deleted herefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and effect.

 

(i)            Captions
and Headings. The captions and paragraph headings used in this Agreement
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement or any of the provisions hereof.

 

(j)            Payments
to Executive. Unless otherwise specified, all amounts payable to the
Executive shall be paid in Danish Krones.

 

IN WITNESS
WHEREOF, Executive and the Company have executed this Agreement as of the date
set forth in the first paragraph.

 

	
   

  	
  DAPLOMA INTERNATIONAL A/S

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ L. Nordfjeld

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James P.
  Santelli

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  James P.
  Santelli

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
  /s/ Torsten
  Nordfjeld

  	
   

  
	
   

  	
  Torsten
  Nordfjeld

  

 

12Exhibit 10.1

 

RESTRICTED STOCK AGREEMENT

 

THIS
RESTRICTED STOCK AGREEMENT (this “Agreement”) is made
             
(the “Grant Date”), by and between DIGIMARC CORPORATION, a Delaware corporation
(the “Company”) and                                             
(“Executive”).  In connection with his
services as                                                       ,
the Company desires to grant Executive a restricted stock award of                                
shares of the Company’s common stock.

 

1.             Grant of Restricted Stock.  The Company hereby grants to Executive as of
the Grant Date, a restricted stock award of                                           shares of
the Company’s common stock (the “Shares”) pursuant to the terms and conditions
contained in this Agreement and the terms and conditions of the Company’s
Restated 1999 Stock Incentive Plan (the “1999 Plan”).

 

2.             Vesting of the Shares.

 

2.1          Release Date. 
Subject to the terms of this Agreement, the Shares shall vest and no
longer be subject to the Reacquisition Right (as defined below) on the
following dates, so long as Executive has remained continuously employed by the
Company, or any parent or subsidiary of the Company, from the Grant Date
through such dates (the “Release Dates”):

 

[Specify
release date(s) -termination of forfeiture period(s) here.]

 

2.2          Termination
Without Cause Prior to Release Date.  In the event of
termination by the Company of Executive’s employment without “Cause” (as
defined below) prior to the Release Date, the Shares shall be fully vested in
Executive as of the date of termination of employment by the Company and the
Shares shall be released from the Reacquisition Right described below.

 

2.3          Termination Due
to Death or Disability.  In the event of termination of employment due
to Executive’s death or “Disability” (as defined in the 1999 Plan) prior to the
Release Date, the Shares shall be fully vested in Executive as of the date of
death or Disability and shall be released from the Reacquisition Right
described below.

 

2.4          Resignation for
Good Reason Following a Change in Control. 
In the event there is a “Change in Control” of the Company (as defined
below) and as a consequence of such Change in Control, Executive resigns for “Good
Reason” (as defined below), the Shares shall be fully vested in Executive as of
the date of Executive’s resignation for Good Reason.

 

2.5          Termination for
Other Reasons.  In the event that Executive’s employment with
the Company, or any parent or subsidiary of the Company, terminates prior to a
Release Date for any reason other than those specified in Sections 2.2, 2.3,
and 2.4 above, including termination voluntarily by Executive or by the Company
for Cause, the Company 

 

1

 

shall, upon the date of such termination, have an irrevocable,
exclusive option (the “Reacquisition Right”) to reacquire the unvested Shares
at no cost to the Company.

 

2.6          Exercise of
Reacquisition Right.  The Reacquisition Right shall be exercised by
the Company by delivering written notice to Executive or to Executive’s
executor within ninety (90) days following the date of termination.  Upon delivery of such notice, the Company
shall become the legal and beneficial owner of the Shares being reacquired and
all rights and interests therein, and the Company shall have the right to
retain and transfer to its own name the Shares being reacquired.

 

2.7          Termination of
Reacquisition Right.  If the Company does not elect to exercise the
Reacquisition Right conferred above by giving the requisite notice within
ninety (90) days following the termination of Executive’s employment by the
Company, or any parent or subsidiary of the Company, the Reacquisition Right
shall terminate and the Shares shall be fully vested in Executive.  The Shares released from the Reacquisition
Right shall be delivered to Executive as set forth in Section 4 below.

 

2.8          Certain
Definitions.

 

(a)           “Cause.”  For purposes of this Section 2, “Cause” shall
mean: (i) a willful act of embezzlement, fraud, or dishonesty by Executive,
which is materially injurious to the Company; (ii) Executive’s continued
violation of his obligation to perform the duties and responsibilities normally
required of an executive, which are willful or grossly negligent, after
Executive has been given written notice from the Company’s Board of Directors
describing his violations and has failed to cure or commence to cure such
violations within thirty (30) days; or (iii) Executive’s conviction of, or plea
of nolo contendere to, a felony which the Board of Directors reasonably
believes has had or will have a material detrimental effect on the Company’s
reputation or business.

 

(b)           “Good Reason.”  For purposes of this Section 2, “Good Reason”
shall mean a resignation by Executive of his employment with the Company, or
any parent or subsidiary of the Company, as a result of any of the following:

 

(i)  a meaningful and detrimental
alteration of his position, his title, or the nature or status of his
responsibilities (including his reporting responsibilities) from those in
effect immediately prior to the Change in Control.

 

(ii)  a reduction by the Company
in Executive’s annual base salary as in effect immediately prior to the Change
in Control or as the same may be increased from time to time thereafter;

 

(iii)  the relocation of the
Company’s office where Executive is employed as of the Change in Control to a
location which is more than seventy-five (75) miles away from such office, or a
requirement that Executive be based more than seventy-five (75) miles away from
his Company office as of the Change in Control.

 

(c)           “Change in Control.”  For purposes of this Section 2, “Change of
Control” means the direct or indirect acquisition by any person or related
group of persons (other 

 

2

 

than an
acquisition from or by the Company or by a Company-sponsored employee benefit
plan or by a person that directly or indirectly controls, is controlled by, or
is under common control with, the Company) of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company’s outstanding securities pursuant to a tender or exchange offer
made directly to the Company’s stockholders, which a majority of the Company’s
Board of Directors who are not affiliated with the offeror do not recommend
such stockholders accept.

 

3.             Restriction on Transfer.  Executive shall not sell, transfer, pledge,
hypothecate, or otherwise dispose of any Shares prior to their respective
Release Date or any earlier lapse or termination of the Reacquisition Right.

 

4.             Escrow of Shares. 
Promptly after the execution of this Agreement, the Company shall cause
the transfer agent for the Company’s common stock to make a book entry record,
showing ownership for the Shares in the name of Executive subject to the terms
and conditions of this Agreement.  The
Shares shall be issued from common stock reserved for issuance pursuant to the
1999 Plan as granted under such plan. 
Subject to the terms hereof, Executive shall have all rights of a
shareholder with respect to the Shares while they are held in escrow, including
without limitation the right to vote the Shares and receive any cash dividends
declared thereon.  If, from time to time
during the term of the Reacquisition Right, there is (a) any stock dividend,
stock split, or other change in the Shares, or (b) any merger or sale of all or
substantially all of the assets or other acquisition of the Company, any and
all new, substituted, or additional securities to which Executive is entitled
by reason of his ownership of the Shares shall be held on his behalf by the
Company’s transfer agent and included thereafter as “Shares” for purposes of
this Agreement and the Reacquisition Right. 
A certificate for the Shares granted pursuant to this Agreement will be
issued to Executive following the Release Date relating to such Shares, or, at
Executive’s election, such Shares may be transferred in book-entry form to
Executive’s brokerage account (subject to any adjustment made therein to
withhold Shares to pay taxes as provided in Section 5.2 below).

 

5.             Tax Consequences.

 

5.1          Section 83(b)
Election.  Executive understands that he (and not the
Company) shall be responsible for his own tax liability that may arise as a
result of the transactions contemplated by this Agreement.  Executive understands that Section 83 of the
Internal Revenue Code of 1986, as amended (the “Code”) taxes as ordinary income
the fair market value of the Shares as of the date any restrictions on the
Shares lapse.  In this context, “restriction”
includes the right of the Company to reacquire the Shares pursuant to its
Reacquisition Right.  Executive
understands that he may elect to be taxed at the time the Shares are granted
rather than when the Reacquisition Right lapses by filing an election under
Section 83(b) of the Code with the Internal Revenue Service within 30 days from
the Grant Date.  Executive understands
that failure to file such an election in a timely manner may result in adverse
tax consequences for Executive; provided, however, that if the election is
timely filed with the IRS, Executive will be responsible for the income taxes
due on the fair market value of the Shares determined as of the date of this
Agreement. The tax payments to the IRS in connection with an 83(b) election
cannot be recovered if the Shares are later forfeited because of the Company’s
Reacquisition Right. Executive further understands that an additional copy of

 

3

 

such election form should be filed with his federal income tax return
for the calendar year in which the Grant Date falls.  Executive acknowledges that the foregoing is
only a summary of the effect of United States federal income taxation with
respect to the grant of the Shares hereunder and does not purport to be
complete.  Executive further acknowledges
that the Company has directed Executive to seek independent advice regarding
the applicable provisions of the Code, the income tax laws of any municipality,
state, or foreign country in which Executive may reside, and the tax
consequences of Executive’s death. 
Executive agrees that he will execute and deliver to the Company with
this executed Agreement a copy of the Section 83(b) Election set forth on the
attached Exhibit A if Executive desires to make such an election within
thirty days from the date of this Agreement.

 

5.2          Withholding. 
The Company shall be required to withhold the amount of taxes required
to satisfy any applicable federal, state, and local tax withholding obligations
arising from either (a) Executive’s Section 83(b) election, or (b) the lapse of
restrictions on the Shares.  Executive
shall satisfy any such tax obligation in cash or by directing the Company to
withhold from the Shares issued to Executive as a result of the lapse of the
restrictions on the Shares the number of whole shares of the Company’s common
stock required to satisfy such tax obligation, the number to be determined by
the fair market value of the Shares on the date of the lapse of the
restrictions on the Shares.  If Executive
elects to withhold shares of the Company’s common stock to satisfy any such tax
obligation, Executive shall pay in cash any obligation that remains after the
application of whole shares that is less than the value of a whole share. It is
understood that if Executive makes an 83(b) election (which can only be made
within thirty days from the date of this Agreement), Executive cannot satisfy
the tax obligation by directing the Company to withhold from the Shares since
none of the Shares will be vested at the time of such election.

 

6.             Representations by Executive.  Executive represents that the Shares are
being acquired for investment and that Executive has no present intention to
transfer, sell, or otherwise dispose of the Shares, except in compliance with
applicable securities laws, and the parties agree that the Shares are being
acquired in accordance with and subject to the terms, provisions, and
conditions of this Agreement.

 

7.             General Provisions.

 

7.1          This Agreement and the 1999 Plan
represent the entire agreement and understanding between the parties as to the
subject matter hereof and supersede all prior or contemporaneous agreements, whether
written or oral.

 

7.2          Subject to the limitations
contained in this Agreement, all terms and conditions of the 1999 Plan are
incorporated in this Agreement and made part of this Agreement as if stated
herein.

 

7.3          Neither this Agreement nor the
issuance of any of the Shares shall confer on Executive any right with respect
to continuance of employment or other service with the Company, or any parent
or subsidiary of the Company, nor shall they interfere in any way with any
right the Company, or any parent or subsidiary of the Company, would otherwise
have to terminate or modify the terms of Executive’s employment or other
service at any time.

 

4

 

7.4          This Agreement shall be governed
by the laws of the State of Oregon without reference to its conflicts of law
principles.

 

7.5          No waiver, alteration, or
modification of any of the provisions of this Agreement shall be binding,
unless in writing and signed by duly authorized representatives of the parties
hereto.  This Agreement shall be binding
on, and shall inure to the benefit of, the parties and their respective
successors and assigns.

 

7.6          This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one instrument.

 

The parties
have duly executed this Agreement effective as of the date first set forth
above.

 

The Company:

 

	
  DIGIMARC CORPORATION

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
  Executive:

  
	
   

  
	
   

  	
   

  
	
  Printed Name:

  	
   

  	
   

  
							

 

5

 

EXHIBIT A

 

SECTION 83(b) ELECTION

 

The undersigned taxpayer
hereby elects, pursuant to Section 83(b) of the Internal Revenue Code, to
include in taxpayer’s gross income for the current taxable year, the amount of
any compensation taxable to taxpayer in connection with taxpayer’s receipt of
the property described below:

 

1.             The name, address, taxpayer identification
number and taxable year of the undersigned are as follows:

 

	
   

  	
  Name of Taxpayer:

  	
   

  	
   

  
	
   

  	
  Name of Spouse:

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Identification No. of Taxpayer:

  	
   

  	
   

  
	
   

  	
  Identification No. of Spouse:

  	
   

  	
   

  
	
   

  	
  Taxable Year:

  	
   

  	
   

  

 

2.             The property with respect to which the
election is made is described as follows:

 

                                  
shares of the Common Stock (the “Shares”) of Digimarc Corporation, a Delaware
corporation (the “Company”).

 

3.             The date on which the property was
transferred is:              .

 

4.             The property is subject to the following
restrictions:

 

Repurchase option at cost in favor of the Company
upon termination of taxpayer’s employment.

 

5.             The fair market value at the time of
transfer, determined without regard to any restriction other than a restriction
which by its terms will never lapse, of such property is: $                                        .

 

6.             The amount (if any) paid for such property
is: $0.00.

 

The undersigned has
submitted a copy of this statement to the person for whom the services were
performed in connection with the undersigned’s receipt of the above-described
property.  The transferee of such
property is the person performing the services in connection with the transfer
of said property.  The undersigned
understands that the foregoing election may not be revoked except with the
consent of the Commissioner.

 

	
   

  	
   

  	
  Date

  	
   

  	
   

  
	
  Taxpayer Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date

  	
   

  	
   

  
	
  Spouse Name:

  	
   

  	
   

  	
   

  
							

 

6

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