Exhibit 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made and entered into as of this 1st day
of March, 2000, by and between APPLIED DIGITAL SOLUTIONS, INC., a Missouri
corporation ("Company") and XXXXXXX X. XXXXXXXX ("Employee").
BACKGROUND
Employee has been and presently is employed by Company as its chairman
of the board and chief executive officer. The parties have entered into a formal
employment agreement dated March 23, 1999 covering the terms and conditions of
such employment. The parties desire to amend such agreement and to set forth in
this document such agreement, as hereby amended, in its entirety.
TERMS AND CONDITIONS
1. Employment. Company hereby employs Employee, and Employee hereby
accepts such employment by Company, on the terms and conditions set forth below.
2. Capacity. Employee shall serve as Company's chairman of the board
and chief executive officer. Employee shall perform such services for company
and its subsidiaries and affiliates as Company's board of directors shall direct
from time to time. However, no such services shall be of a nature which are not
commensurate with, and/or are beneath the dignity of, Employee's title.
3. Term. Company's employment of Employee under this Agreement shall be
for an initial term of five years commencing on March 1, 2000 and ending on
February 28, 2005. The term of Employee's employment under this Agreement shall
automatically be renewed for successive additional one year terms on each
anniversary of the commencement of Employee's employment under this Agreement,
beginning with the March 1, 2001 anniversary date, each of which terms shall be
added at the end of the then existing term (taking into account any prior
extensions or failures to extend), unless either party notifies the other at
least 30 days prior to an anniversary date of this Agreement. For example,
unless either party notifies the other to the contrary on or before January 29,
2001, the term of this Agreement shall be extended from March 1, 2005 to
February 28, 2006. For further example, and assuming the term of this Agreement
has been extended to February 28, 2006, if one party notifies the other that it
does not desire to extend the term of this Agreement for an additional year and
such notice is given on or before January 29, 2002, the term of this Agreement
shall not be extended from March 1, 2006 to February 28, 2007. Notwithstanding
the foregoing, the term of this Agreement may end prior to the termination date
determined under this paragraph 3 as provided in paragraphs 9, 10, 11 and 12.
4. Service While Employed. Employee agrees to devote his best efforts,
his full diligence and at least 60% his business time to his duties hereunder
and shall not engage, either directly or indirectly, in any business or other
activity which is competitive with or adverse to the interests or the business
of Company.
5. Items Furnished and Relocation. Company shall furnish Employee with
such private office, secretarial assistance, and such other facilities,
equipment and services suitable to his position and adequate to perform his
duties hereunder. Employee shall not be relocated by Company without his
consent.
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6. Compensation, Vacations and Reimbursement. As partial compensation
for his services to Company, Company agrees to pay Employee an annual salary in
regular monthly or other agreed upon installments of not less than $450,000 and
an annual bonus of not less than $140,000. Employee shall also be entitled to
receive such bonuses (in addition to that required under the preceding
sentence), incentive compensation, and other compensation, if any, as Company's
board of directors, executive committee, compensation committee, or other
designated committee shall award Employee from time to time whether in cash,
Company stock, stock options, other stock based compensation, other form of
remuneration, or any combination of the foregoing. In addition, Company shall
pay Employee monthly payments of $5,000 each as a flexible perquisite allowance
to be used by Employee for such purposes as he shall determine. All such
compensation shall be subject to legally required income and employment tax
withholding. Employee shall be entitled to paid vacations and reimbursement for
all reasonable business expenses in accordance with Company's policies for
executive officers.
7. Other Benefits. In addition to his compensation described in
paragraph 6 above, Employee shall be entitled to participate in such bonus,
profit sharing, deferred compensation and pension plans of Company for which he
is eligible.
8. Welfare and Fringe Benefits. In addition to his compensation
described in paragraph 6 and the benefits described in paragraph 7 above,
Employee shall be entitled to participate in such welfare and fringe benefits
plans and programs of the Company for which he is eligible.
9. Death and Disability. If Employee dies during the term of this
Agreement, his employment shall be deemed to have been terminated as of the last
day of the month in which his death occurs, and Company will pay to Employee's
personal representative all salary and other compensation due Employee through
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the end of such month. If Employee becomes permanently disabled so that he
cannot perform his duties hereunder, as determined by a physician selected by or
acceptable to Company, his employment shall be deemed to have been terminated as
of the last day of the month in which such determination is made, and he will
receive his salary and other compensation through the end of such month. For
purposes of the foregoing computations, Employee shall be deemed to have earned
the same percentage of his minimum annual bonus for such employment year as the
number of days in the employment year through the date his employment is deemed
to terminate is of 365.
10. Retirement. From and after the time Employee attains age 65, he may
retire at any time by notifying Company at least 120 days prior to his
retirement date or be retired by Company upon at least two years notice.
11. Default. In the event that Company fails to perform a material
provision of this Agreement and such failure continues for 30 days after
notification from Employee, the Employee may terminate this Agreement by notice
to the Company. Company may terminate this Agreement upon Employee's material
default. Employee's material default shall mean (a) Employee's willful and
continued failure to perform the requirements of his duties hereunder (other
than as a result of total or partial incapacity due to physical or mental
illness) for 30 days after a written demand is delivered to Employee on behalf
of Company which specifically identifies the manner in which it is alleged that
Employee has not substantially performed his duties, (b) Employee's dishonesty
in the performance of his duties hereunder, (c) an act or acts on Employee's
part involving moral turpitude or constituting a felony under the laws of the
United States or any state thereof, (d) any other act or omission which
materially injures the financial condition or business reputation of Company or
any of its subsidiaries or affiliates, or (e) Employee's material breach of his
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non-compete and confidentiality obligations under paragraphs 4 and/or 13 of this
Agreement, respectively. Any termination shall be without prejudice to any
rights or remedies which Employee or Company may have.
12. Change in Control. Notwithstanding any other provision of this
Agreement, should a Change of Control (as defined below) occur, Employee, 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 Employee a severance payment
equal to three times 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 Employee's
termination of employment. In addition, in the event of a Change of Control, all
outstanding stock options held by Employee (whether issued under Company's 1996
Stock Option Plan, Company's 1999 Flexible Stock Plan, or otherwise) shall
become fully exercisable (to the extent not already exercisable). For purposes
of this Agreement, a Change in Control shall be deemed to occur (a) if any
person, as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934 ("Exchange Act"), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of Company representing 20% or more of the combined
voting power (i) of Company's then outstanding securities or (ii) on a fully
diluted basis, (b) upon the first purchase of the common stock of Company
pursuant to a tender or exchange offer (other than a tender or exchange offer
made by Company), (c) upon the approval by Company's stockholders of a merger or
consolidation, a sale or disposition of all or substantially all of Company's
assets or a plan of liquidation or dissolution of Company, or (d) if, during any
period of 2 consecutive years, individuals who at the beginning of such period
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constitute the board of directors of Company cease for any reason to constitute
at least a majority thereof, unless the election or nomination for the election
by Company's stockholders of each new director was approved by a vote of at
least 2/3 of the directors then still in office who were directors at the
beginning of the period. Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur if Company either merges or consolidates with or
into another company or sells or disposes of all or substantially all of its
assets to another company, if such merger, consolidation, sale or disposition is
in connection with a corporate restructuring wherein the stockholders of Company
immediately before such merger, consolidation, sale or disposition own, directly
or indirectly, immediately following such merger, consolidation, sale or
disposition at least 80% of the combined voting power of all outstanding classes
of securities of the company resulting from such merger or consolidation, or to
which Company sells or disposes of its assets, in substantially the same
proportion as their ownership in Company immediately before such merger,
consolidation, sale or disposition.
13. Nondisclosure; Return of Records. Employee will not, except as
authorized by Company, publish or disclose to others, or use for his own
benefit, or authorize anyone else to publish or disclose or use, or copy or make
notes of any secret, proprietary, or confidential information or knowledge of
data or trade secrets of or relating to the business activities of Company which
may come to Employee's knowledge during his employment with the Company. Upon
termination of Employee's employment for any reason, Employee will deliver to
Company, without retaining any copies, notes or excerpts, all records, notes,
data, memoranda, and all other documents or materials made or compiled by
Employee, or made available to him by Company during his employment, which are
in Employee's possession and/or control and which are the property of Company
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and/or which relate to Employee's employment or the business activities of
Company.
14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Company and any successors or assigns of Company, and Employee,
his heirs, personal representatives and assigns, except that Employee's
obligations to perform services and rights to receive payment therefore shall be
nonassignable and nontransferable.
15. Entire Agreement: Modification. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter and
supersedes all prior or contemporaneous agreements not set forth in this
agreement. This Agreement may not be modified other than by an agreement in
writing signed by each of the parties.
16. Waiver. Any failure by either party to enforce any provision of
this Agreement shall not operate as a waiver of such provision or any other
provision. Any waiver by either party of any breach of any provision of this
Agreement shall not operate as a waiver of any other breach of such provision or
any other provision of this agreement.
17. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not effect the other provisions of this
Agreement, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
18. Paragraph Headings. Paragraph headings throughout this Agreement
are solely for the convenience of the parties and shall not be construed as a
part of any section or as modifying the contents of any section.
19. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri.
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20. Notices. All notices under this Agreement shall be personally
delivered, sent certified mail, postage prepaid, to Company at its corporate
office and to Employee at his principal residence, or sent by telecopy.
21. Supplemental Compensation. Upon the termination of Employee's
employment with Company for any reason other than Company's termination due to
his material default, as described in paragraph 11, Employee shall be entitled
to receive from Company 60 equal monthly payments, with the first such payment
due on the second first day of the month after termination of employment, of
$37,500 each. If Employee should die before all or any part of the above
described monthly payments have been made, all payments or all remaining
payments shall be made to his designated beneficiary, if any, otherwise to his
estate. Notwithstanding the foregoing, the aggregate amount payable under this
paragraph 21 shall be reduced by the amount, if any, payable under paragraph 12.
22. Non-Competition. During the period that Employee is entitled to
receive payments under paragraph 21, Employee shall not engage, directly or
indirectly, either on his own behalf or on behalf of any other person, firm,
corporation or other entity, in any business competitive with the business of
Company, in the geographic area in which Company is conducting business at the
time of termination of Employee's employment, or own more than 5% of any such
firm, corporation or other entity. In addition, Employee must furnish Company
with such information as Company shall from time to time request in order to
determine that Employee is in compliance with the requirements of the preceding
provisions of this paragraph 22. The payments to be made under paragraph 21 are
conditioned upon Employee's complying with the provisions of this paragraph 22,
and, in the event that such provisions are not complied with, Company may
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suspend such payments for any period of time in which Employee is not in
compliance with the preceding provisions of this paragraph 22.
23. Company. For purposes of paragraphs 4, 13, and 22 of this
Agreement, the Company shall mean Applied Digital Solutions, Inc. and all
subsidiaries and affiliates of it.
24. Salary in Stock or Cash. At least 10 days prior to each March 1
that this Agreement is in effect, Employee shall elect the amount or percentage,
if any, of his salary for the 12 month period beginning on that date which he
desires to be payable in company common stock ("Stock"). To the extent Employee
elects to have all or part of his salary paid in Stock, the per share value of
the Stock, which shall be used to determine the number of shares payable for the
employment year, shall be the average closing price for the last five business
days prior to the applicable March 1. Any election shall be irrevocable. If
Employee fails to make a timely election, his entire salary for the employment
year shall be paid in cash. Any shares of Stock payable to Employee shall be
subject to such transfer restrictions as are required by applicable securities
law and a legend to such effect shall be placed on the certificates. Employee
represents and warrants that any Stock which will be paid to him pursuant to
this paragraph 24 shall be acquired for investment purposes and not for resale
or distribution. Company shall include such Stock in any subsequent registration
to the extent practical. If any portion of Employee's salary is paid in Stock,
Employee shall tender to Company the amount required for income and employment
tax withholding on any such payment. If, and to the extent such amount is not so
tendered, Company may withhold the number of shares of Stock equal to the amount
such required withholding from the shares of Stock issued to Employee.
Notwithstanding the foregoing provisions of this paragraph 24, unless otherwise
elected by Employee on or before March 31, 2000, the election previously made
under the prior employment agreement for the employment year beginning July 1,
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1999 shall apply to the portion of the employment year beginning on March 1,
2000 which occurs after June 30, 2000 (with the election made for that
employment year under the prior agreement remaining in effect until June 30,
2000 in any event). Any such revised election shall apply only to salary payable
after such revised election is made.
25. Other Matters. For purposes of this paragraph 25, the following
words shall have the following respective meanings:
(a) Condominium. The condominium owned by Company known and
numbered as Xxxx #00, 0000 Xxxxx Xxxxx Xxxxxxxxx, Pelican Cove, Xxxxx
Xxxxx, Xxxxxxx 00000, or any condominium which the Company acquires to
replace it.
(b) Gross Up Payment. A payment that covers all federal and state
income taxes payable by Employee, if any, which would not have been
incurred by Employee if another payment or transfer and the Gross Up
Payment had not been made to Employee.
(c) Change of Control. As defined in paragraph 12 of this
Agreement.
(d) Triggering Event. A Change of Control, termination of
Employee's employment for any reason other than due to his material
default, as described in paragraph 11, if he ceases to be Company's
chairman of the board or chief executive officer for any reason other than
termination due to his material default, as described in paragraph 11, or
the sale by Company of the stock of Company subsidiaries or the sale by
Company subsidiaries of assets, outside the ordinary course of business,
having aggregate proceeds of at least $110 million.
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As soon as practicable following Employee's relocation to Southern Florida,
Company shall promptly transfer ownership of the Condominium free and clear of
all mortgages, deeds of trust, and other encumbrances to Employee and, in
addition, shall pay Employee an amount of cash equal to the Gross Up Payment. In
the event that the Condominium is not owned by Company at such time, Company
shall pay Employee in cash an amount equal to the value of the Condominium free
and clear of all mortgages, deeds of trust and other encumbrances (as determined
by a reputable appraiser selected by Employee whose fee shall be paid one half
by each party) plus the Gross Up Payment. Within 10 days of the occurrence of a
Triggering Event, Company shall also pay to Employee the sum of $12,105,000. If
the Triggering Event is the Employee's death, such amount shall be paid to his
designated beneficiary, if any, otherwise to his estate. Company may pay such
amount in cash or in Company's common stock or in a combination of cash and
common stock. Common Stock used in payment shall be valued at the average
closing price on the Nasdaq National Market over the last 5 business days prior
to the date of the Triggering Event. The allocation of cash and stock for
payments provided pursuant to this paragraph 25 shall include at least
sufficient cash to cover the tax liability associated with such payments, and
shall otherwise be structure to maximize tax efficiency to both Company and
Employee.
26. Excise Gross Up. In the event that any payment or benefit received
or to be received by Employee under this Agreement and/or under another plan of
or agreement with Company is subject to the excise tax ("Excise Tax") under
Section 4999 of the Internal Revenue Code of 1986, as amended ("Code"), Company
shall pay Employee an amount ("Excise Gross Up Payment") that covers all Excise
Taxes incurred or to be incurred by Employee because of any such payment or
benefit and all federal and state income taxes and Excise Taxes on the Excise
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Gross Up Payment and which, therefore, will place Employee in the same position
that he would have been in had no such payment or benefit been subject to the
Excise Tax. The Excise Tax Gross Up Payment (or portion thereof) shall be made
upon the earlier of the imposition of any Excise Tax upon Employee or his
payment of any Excise Tax. The Excise Gross Up Payment shall be in addition to
the Gross Up Payment payable under paragraph 25.
27. Effect of Amendment. This Agreement shall supersede all agreements
between the parties relating to Employee's employment by Company.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
APPLIED DIGITAL SOLUTIONS, INC.
By:
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Title:
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"Company"
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Xxxxxxx X. Xxxxxxxx
"Employee"
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