Document:

Exhibit 10.3

 

PROMISSORY NOTE

 

	
  $1,000,000

  	
   

  	
  Denmark

  
	
   

  	
   

  	
  February 28, 2005

  

 

FOR VALUE RECEIVED, DSD Holding
A/S, a Danish corporation (the “Borrower”), promises to pay to the order of
Digital Angel Corporation (the “Lender”), the principal sum of One Million and
00/100 Dollars ($1,000,000.00), in lawful money of the United States and
immediately available funds, together with interest on the unpaid balance
accruing as of the date hereof at a rate equivalent to the higher of (i) the
Prime Rate or (ii) the Reference Rate published by Wells Fargo Bank, N.A. plus
one percent (1%) or (iii) the LIBOR based amount.

 

1.             The principal balance represented by this Note, together
with any accrued but unpaid interests due hereunder, shall be due and payable
in full on May 28, 2008 (“Maturity Date”).

 

2.             Accrued interest on this Note shall be due and payable
quarterly. Interest payments shall be made on the first (1st) day of January,
April, July and October of each year prior to the Maturity Date, with the first
payment due on April 1, 2005.

 

3.             Interest hereunder shall be computed on the basis of a
year of three hundred sixty-five (365) days but charged for actual days
principal is unpaid.

 

4.             The principal and the accrued interest due and payable
hereunder will be valued at the fixed conversion rate of 5.75 Danish Krones per
US $1.00.

 

5.             All payments and prepayments shall, at the option of the
Lender, be applied first to any costs of collection, second to accrued interest
and last to principal.

 

6.             This Note may be prepaid at any time, at the option of
the Borrower, either in whole or in part, without premium or penalty.

 

7.             This Note is subordinate in payment to the Bank Loans
identified on Exhibit 5.2.12 to the Stock Purchase Agreement dated                 ,
2005 by and between the Lender and all of the shareholders of the Borrower.

 

8.             Any one or more of the following events shall constitute
an Event of Default hereunder:

 

a.             the Borrower shall fail to pay when
due, any amounts required to be paid by it under this Note or any other
indebtedness of the Borrower to the Lender whether any such indebtedness is now
existing or hereafter arises and whether direct or indirect, due or to become
due, absolute or contingent, primary or secondary or joint or joint and
several, and such default continues for a period of seven (7) consecutive days
after written notice thereof to the Borrower by the Lender; or

 

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b.             the Borrower shall file a petition
in bankruptcy or for reorganization or for an arrangement pursuant to any
applicable present or future bankruptcy laws, or shall be adjudicated a
bankrupt or insolvent, or shall make a general assignment for the benefit of
its creditors, or shall be unable to pay its debts generally as they become
due; or if an order for relief under any applicable present or future
bankruptcy laws shall be entered against the Borrower; or if a petition or
answer requesting or proposing the entry of such order for relief or the
adjudication of the Borrower as a debtor or a bankrupt or its reorganization
under any applicable present or future bankruptcy laws shall be filed in any
court and such petition or answer shall not be discharged or denied within
thirty (30) days after the filing thereof; or if a receiver, trustee or
liquidator of the Borrower or of all or substantially all of the assets of the
Borrower, or any part thereof, shall be appointed in any proceeding brought
against the Borrower and shall not be discharged within thirty (30) days of
such appointment.

 

9.             Upon the occurrence of an Event of Default, and at any
time thereafter, the unpaid principal balance hereof plus accrued interest
hereon plus all other amounts due hereunder shall, at the option of the Lender,
be immediately due and payable, without notice or demand.

 

10.           Upon the occurrence of an Event of Default, and at any
time thereafter, the Lender shall have the right to set off any and all amounts
due hereunder by the Borrower to the Lender against any indebtedness or
obligation of the Lender to the Borrower.

 

11.           Upon the occurrence of an Event of Default, and at any
time thereafter, the Borrower promises to pay all costs of collection of this
Note, including but not limited to attorneys’ fees, paid or incurred by the
Lender on account of such collection, whether or not suit is filed with respect
thereto and whether or not such cost or expense is paid or incurred, or to be
paid or incurred, prior to or after the entry of judgment.

 

12.           Demand, presentment, protest and notice of nonpayment and
dishonor of this Note are hereby waived.

 

13.           This Note shall be governed by and construed in accordance
with the laws of the State of Minnesota.

 

14.           Notwithstanding anything to the contrary contained herein,
if the rate of interest or any other charges or fees due hereunder are
determined by a court of competent jurisdiction to be usurious, then said
interest rate, fees and/or charges shall be reduced to the maximum amount
permissible under applicable Minnesota law.

 

	
   

  	
  DSD Holding
  A/S

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lasse
  Nordfjeld

  	
   

  
	
   

  	
   

  	
  Lasse
  Nordfjeld

  
	
   

  	
   

  	
  Its: Chief
  Executive Officer

  
	
   

  	
   

  

 

2Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT
(“Agreement”), made and entered into as of February 28, 2005, by and
between DIGITAL ANGEL CORPORATION, a Delaware corporation (“Company”) and LASSE
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 the Company will purchase all of the issued and
outstanding shares of capital stock of DSD Holding A/S, a Danish corporation
(the “DSD Holding”).

 

B.            The
Executive is a founder of and the principal operating officer of DSD Holding.
DSD Holding 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 DSD Holding, Executive has
had access to and has learned certain valuable and confidential information of
DSD Holding. During such period, Executive has also developed valuable
relationships with suppliers, customers and other business associates of DSD
Holding.

 

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 of the Animal Applications
Group, 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 be for an initial period of one year,
commencing upon the date hereof. 
Thereafter, the term of Executive’s employment under this Agreement
shall automatically be renewed for successive additional one year terms, each
of which terms shall be added at the end of the then existing term, unless
either

 

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party notifies the other at
least 90 days prior to the expiration of the then existing term.  Such notice, if given by either party and not
withdrawn prior to the expiration of the then existing term, shall be deemed a
termination of Executive’s employment under this Agreement.

 

3.             Position
and Duties.

 

(a)           Service
with Company.  During the term of
Executive’s employment with the Company, 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 shall be an executive officer of
the Company, Executive’s title shall be President, Animal Applications Group,
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.
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 1,200,000 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 50% of Executive’s Base Salary for each fiscal
year (the “Bonus”), based upon criteria determined by mutual agreement of the
Board of Directors, the

 

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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.

 

(c)           Stock
Options. As additional compensation for Executive, Executive will receive
stock options to purchase 150,000 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, Executive shall be entitled to continue to participate in any
of the employee benefit and deferred compensation plans or programs of DSD
Holding 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 DSD Holding 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 or DSD Holding that Executive previously acquired or
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 or DSD Holding,
(iii) customer or supplier lists of the Company or DSD Holding,
(iv) confidential or secret development or research work of the Company or
DSD Holding, or (v) other confidential information or secret aspects of the
business of the Company or DSD Holding. 
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 or DSD Holding, (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 DSD Holding, 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.

 

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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.  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 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
occasioned by Executive or the Company) or, if employment is terminated pursuant
to Sections 9(a)(ii), 9(a)(iii), 9(a)(v) or the Executive provides notice to
the Company that he will not renew the term of employment pursuant to Section
2, for a period of 12 consecutive months from the date of termination of such
employment or until the date the balance of the Purchase Price or Buyout
Purchase Price is paid under the Stock Purchase Agreement, whichever is latest,
Executive shall not, directly or indirectly, in any place in Denmark or North
America, engage in the business that the Company or DSD Holding 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 or DSD Holding.

 

(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

 

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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.

 

8.             Work
Product; Assignment of Inventions.

 

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

 

(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

 

5

 

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 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

 

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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 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:

 

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(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.

 

(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

 

8

 

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.

 

(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. In addition, if Executive’s
employment is terminated pursuant to Section 9(a)(iv), the Shareholders
(as defined in the Stock Purchase Agreement) shall have the right to demand
that the Company pay the Buyout Purchase Price as provided under paragraph
1.3.3 of the Stock Purchase Agreement.

 

(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

 

9

 

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.  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 the amount described in section 9(e) as the base amount as defined in
Section 280G(b)(3)  of the Internal
Revenue Code of 1986, as amended (“Code”) 
minus $1.00 which shall be payable no later than one month after the
effective date of the Executive’s termination of employment. In addition, 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).  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 submitted for final and binding arbitration to an
internationally recognized arbitrator located in England, not affiliated with
either the Company, DSD Holding or the Executive.  The decision of the arbitrator shall be final
and binding, and any 

 

10

 

court of competent jurisdiction
may enter judgment upon the award.  All
fees and expenses of the arbitrator shall be paid by the party whose position
is not upheld by the arbitrator.  The
arbitrator shall have jurisdiction and authority to interpret and apply the
provisions of this Agreement and relevant federal, state and local laws insofar
as necessary to 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 arbitrator 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 law.

 

12.           Miscellaneous.

 

(a)           Governing
Law.  All matters relating to the
interpretation, construction, validity and enforcement of this Agreement shall
be governed by the internal laws of the State of Minnesota without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Minnesota or any other jurisdiction) that would cause the application of
laws of any jurisdiction other than the State of Minnesota.

 

(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

 

11

 

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.

 

(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.

 

	
   

  	
  DIGITAL ANGEL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ James P.
  Santelli

  	
   

  
	
   

  	
   

  	
  James P.
  Santelli

  
	
   

  	
   

  	
  Its: Vice
  President, Finance and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
  /s/ Lasse
  Nordfjeld

  	
   

  
	
   

  	
  Lasse
  Nordfjeld

  
					

 

12

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