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EXHIBIT 10.3
AMENDMENT TO LETTER OF UNDERSTANDING
This Amendment to Letter of Understanding is entered into effective ________,
1999 between Xxx Xxxxxxxxxx for ReSource Phoenix, Inc. and Xxxxxx X. Xxxx.
WHEREAS, the parties entered into that certain Letter of Understanding and
Summary of Discussions dated June 1, 1998 ("Agreement").
WHEREAS, the parties now wish to amend the Agreement.
NOW, THEREFORE, the parties agree as follows:
A new Section 9 is added to the end of the Agreement to read as follows:
9. In the event of an initial public offering ("IPO") of the stock of
ReSource/Phoenix, Inc. ("Company") and the issuance of stock options to
me, the following changes to this Letter of Understanding and Summary of
Discussions will take effect:
a. Section 1 is replaced in its entirety with the following:
1. BASE COMPENSATION. My base compensation will be $275,000 per
year plus current benefits. I will also receive a car allowance
of $650 per month. I will not be included in the corporate bonus
pool used for the general Xxxxxxx xxxxx. The base compensation,
benefits and car allowance may be changed as the Company agrees
from time to time.
b. Section 2 is replaced in its entirety with the following:
2. BONUS COMPENSATION. Until the Company first achieves positive
net income before taxes ("Net Income") for a fiscal year of at
least $3,000,000, my annual bonus will be calculated using the
methods described in Section (A) below. After the Company first
achieves Net Income for a fiscal year of at least $3,000,000, my
bonus thereafter will be calculated solely using the methods
described in Section (B) below. The Bonus will be calculated and
will be payable in a lump sum as soon after the end of each
fiscal year that the Company's financial figures are available.
All accounting terms herein shall have the meanings ascribed to
them by generally accepted accounting principles.
(A) BONUS BEFORE COMPANY FIRST ACHIEVES $3 MILLION NET
INCOME. Only until the Company first achieves Net Income
for a fiscal year of at least $3,000,000, my bonus will be
the sum of X and Z below:
(i) X equals 60% of my then current base
compensation multiplied by the percentage shown in
the table below opposite the Company's actual
revenue for the fiscal year, expressed as a
percentage of projected revenue set forth in the
Company's then current published business plan
("Plan").
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Actual Revenue Percentage
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Below Plan 0
100% to 109+% of Plan 16.77
110% to 119+% of Plan 33.33
120% to 129+% of Plan 50
130% to 139+% of Plan 66.66
140% to 149+% of Plan 83.33
150% or greater of Plan 100
(ii) Z equals 40% of my then current base
compensation multiplied by the percentage shown in
the table below opposite the Company's actual
expenses for the year, expressed as a percentage of
projected expenses set forth in the Company's Plan.
Actual Expenses Percentage
--------------- ----------
Above Plan 0
91% to 100% of Plan 25
81% to 90+% of Plan 50
71% to 80+% of Plan 75
70% or less of Plan 100
(iii) Notwithstanding anything to the contrary
contained in this Section 2(A), I will not receive
a bonus based on either revenue or expenses if
actual revenues are below Plan OR if actual
expenses are above Plan. In such event, the
Company's Board of Directors, in its sole and
absolute discretion, may award me a bonus based on
other factors and circumstances.
(iv) For example, if my base compensation is
$275,000 and the Company's Plan provides for
revenues of $2,000,000, expenses of $1,000,000
leaving Net Income of $1,000,000, and in actuality:
(a) revenues were $2,500,000 (125% of Plan)
and expenses were $800,000 (80% of Plan),
then my bonus will be $165,000.
(b) revenues were $1,000,000 (50% of Plan)
and expenses were $500,000 (50% of Plan),
then I will not receive a bonus.
(c) revenues were $3,200,000 (160% of Plan)
and expenses were $500,00 (50% of Plan),
then my bonus will be $275,000.
(d) revenues were $2,750,000 (138% of Plan)
and expenses were $1,250,000 (125% of Plan),
then I will not receive a bonus.
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(B) BONUS AFTER COMPANY FIRST ACHIEVES $3 MILLION NET
INCOME. Commencing with the first fiscal year that the
Company has Net Income of at least $3,000,000 and
continuing for each fiscal year thereafter, regardless of
the Company's Net Income, my bonus will be the sum of the
amounts resulting from multiplying each increment of Net
Income by the percentage shown opposite such Net Income
increment in the table below.
Company Net Income before Taxes Percentage
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$0 to $2,000,000 5%
$2,000,001 to $4,000,000 4%
$4,000,001 to $6,000,000 3%
$6,000,001 to $8,000,000 2%
$8,000,001 and above 1%
For example, if the Company's Net Income was $6,000,000
then my bonus will be 5% of the first $2,000,000 plus 4%
of the next $2,000,000 plus 3% of the next $2,000,000, or
$240,000.
c. Section 3 is replaced in its entirety with the following:
3. TERMINATION. If my employment with the Company terminates for
any reason, I will receive a prorata portion of my bonus through
the termination date plus a one time termination payment equal to
my then current base compensation.
d. Sections 4, 5, 6, 7 and 8 are deleted.
e. The 3 year term of the Letter of Understanding with annual
renewals will continue except as changed herein.
ReSource/Phoenix, Inc.
/s/ XXXXXX X. XXXX /s/ XXX XXXXXXXXXX
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Xxxxxx X. Xxxx Xxx Xxxxxxxxxx
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