EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, effective as of the 1st day of November, 1996, is made by
and between fonix [trademark] corporation, a Delaware corporation having its
principal place of business in Salt Lake City, Utah (the "Company"), and
Xxxxxxx X. Xxxxxxxx, a resident of Utah (the "Executive"). The Company and
Executive are collectively referred to as the Parties and individually as
Party.
RECITALS:
A. Executive is a shareholder, Chief Executive Officer and Chairman
of the Board of Directors of the Company. Prior to the Company's formation,
Executive was and continues to serve as a principal of Studdert Companies
Corp. ("SCC"). SCC has had a management contract with the Company and has over
time acted in various capacities with the Company such as business consultant,
and shareholder.
B. During the initial period of the Company's existence, Executive
used personal funds and SCC used its funds to pay from time to time expenses
of the Company. This enabled the Company to continue in business when capital
was not otherwise available to the Company.
C. Prior to the effective date of this Agreement, at times the
Company provided (when it was able to do so) consideration to Executive and to
SCC which represents partial compensation to Executive and SCC, and which has
been used by them for certain of the office and staff expenses of SCC.
D. Executive has since March of 1993, expended great effort on behalf
of and created significant value for the Company. The Company, therefore, as
part of this Agreement, desires to acknowledge the effort and personal funds
expended by Executive and by SCC on its behalf, and the Company also desires
to acknowledge, reconcile and ratify the expenditures which have been made by
the Company to Executive and SCC as reasonable and necessary for the pursuit
of the Company's interests under the foregoing circumstances; and
E. The Company desires to assure the continued services of the
Executive into the future. The Parties thus desire to enter into this
Employment Agreement ("Agreement") to specify more fully each Party's rights
and obligations under the contemplated employment relationship between them.
Accordingly, the Company and the Executive agree as follows:
ARTICLE I
Duties
1.01 Duties. At all relevant times prior to this Agreement, the
Executive has served the Company in the capacity of Chief Executive Officer.
The Company acknowledges that prior to his involvement with the Company and at
all times prior to this Agreement and during the performance to date of his
duties as Chief Executive Officer of the Company, Executive has been and
continues to serve as a principal and officer of SCC and other entities which
take a portion of his time. The Company also acknowledges that Executive has
had significant experience in government, and that at all times prior to this
Agreement and during the performance of his duties as Chief Executive Officer
of the Company, Executive has been and continues to be significantly and
commendably involved in charitable, community and civic affairs. The Company
acknowledges that the Executive's involvement in the foregoing activities
has significantly contributed to the ability of the Executive to serve the
interests of the Company and to enhance the Company's value, and is a proper
part of corporate citizenship. It is therefore contemplated and expected
that Executive's involvement in the foregoing activities will continue;
provided, however, that the Executive shall, to the satisfaction of the
Company's Board of Directors, continue to devote sufficient time to faithfully
discharge the duties of his office as required under the By Laws of the
Company and as assigned from time to time by the Company's Board of
Directors. In accordance with the foregoing, the Executive's position as
Chief Executive Officer of the Company is hereby ratified and confirmed by the
Company, and Executive hereby agrees to continue in this office subject to the
provisions and for the term of this Agreement.
ARTICLE II
Term of Agreement
The term of this Agreement shall commence as of the effective date hereof
and end on December 31, 2001 (the "Contract Term").
ARTICLE III
Compensation
During the Contract Term, the Company shall pay or cause to be paid to
the Executive in cash in accordance with the normal payroll practices of the
Company for key executives, including deductions, withholdings and collections
as required by law, in installments not less frequently than monthly, an
annual base salary ("Annual Base Salary") as set forth in Exhibit "A" attached
hereto.
ARTICLE IV
Other Benefits
4.01 Incentive, Savings and Retirement Plans. In addition to Annual
Base Salary, the Executive shall be entitled to participate during the
Contract Term in the Incentive Pay Arrangement set forth in Exhibit "A,"
together with any savings and retirement plans, practices, policies and
programs applicable to other key executives of the Company.
4.02 Welfare Benefits. During the Contract Term, the Company will
provide to the Executive and/or the Executive's family, as the case may be,
health (including prescription coverage) and dental insurance similar in scope
and coverage to what Executive currently receives at Company expense. In
addition, Executive shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and programs
provided by the Company (including, and without limitation, disability, salary
continuance, employee life, group life, dependent life, accidental death and
travel accident insurance plans and programs) and applicable to other key
executives of the Company.
4.03 Fringe Benefits. During the Contract Term, the Company will
provide to executive fringe benefits commensurate with the office of Chief
Executive Officer and all other fringe benefits made available to key
executives of the Company.
4.04 Expenses. During the Contract Term, the Executive shall be
entitled to receive prompt reimbursement for all reasonable employment-related
expenses incurred by the Executive upon the Company's receipt of accountings
in accordance with practices, policies and procedures applicable to other key
executives of the Company.
4.05 Office and Support Staff. During the Contract Term, the Company
will provide Executive with personal secretarial and support staff, and with
an office or offices of a size and with furnishings, equipment (such as
personal computer, cellular phone with adequate air time, etc.) and other
appointments sufficient to enable Executive to carry out the duties as
contemplated under this Agreement. Such personal secretarial and support
staff, office facilities, equipment and other appointments shall in any event
be at least comparable to those which are currently available to Executive,
and in a location reasonably suitable to Executive.
4.06 Vacation. During the Contract Term, the Executive shall be
entitled to paid vacation time in accordance with the plans, policies, and
programs applicable to other key executives of the Company.
4.07 Automobile. During the Contract Term, the Executive shall have
the use of an automobile of a make, size and model reasonably satisfactory to
the Executive and the Company. The Company shall pay all acquisition or
rental costs therefore as well as all business-related costs of operation,
maintenance and insurance.
ARTICLE V
Change of Control
5.01 Definitions. For purposes of this Article V, the following
terms shall have the meaning set forth below:
(a) The term "Continuing Directors" shall mean those members of
the Board of Directors at any relevant time (i) who were directors on the
effective date of this Agreement or (ii) who subsequently are approved for
nomination, election or appointment to the Board by at least three-fourths of
the Continuing Directors on the Board at the time of such approval (the
directors described in subsection (ii) are referred to herein as the "Approved
Directors").
(b) The term "Change in Control" means a change in control of
beneficial ownership of the Company's voting securities of a nature that would
be required to be reported pursuant to Item 6(e) of Schedule 14A of Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
or any similar item on a successor or revised form; provided, however, that a
Change in Control shall be deemed to have occurred if:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
representing 30% or more of the combined voting power of the Company's then
outstanding voting securities; or
(ii) During any period of two consecutive years, the
individuals who at the beginning of such period constituted the Board of
Directors, together with any Approved Directors elected during such period,
cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that if a Change in Control under this clause
(b)(ii) has not occurred, the Continuing Directors (by a vote of at least
three-fourths of the Continuing Directors then on the Board) may: (1) approve
in advance an acquisition resulting in beneficial ownership as described in
clause (b)(i), in which case it shall not constitute a Change in Control; or
(2) if at any time after such an acquisition as describe din clause (b)(i), no
person beneficially owns securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities,
declare that a Change in Control has ceased, in which case the provisions of
this Article V shall not apply from that time forward, unless another Change
in Control occurs.
(c) The term "Good Reason," in connection with the termination
by the Executive of his employment with the Company subsequent to a Change in
Control, means:
(i) A diminution in the responsibilities, title or office
of the Executive such that he does not serve as President or Chief Executive
Officer of the Company (which diminution was not a result of the Executive's
disability), or the assignment (without the Executive's express written
consent) by the Company to the Executive of any significant duties that are
inconsistent with the Executive's position, duties, responsibilities and
status as Chief Executive Officer of the Company;
(ii) Any reduction by the Company in the Executive's Annual
Base Salary incentive compensation or benefits as in effect on the date of a
Change in Control or as the same may be increased from time to time thereafter
in accordance with this Agreement;
(iii) The Company's transfer or assignment of the
Executive, without the Executive's prior express written consent, to any
location other than the Company's principal executive offices in Utah, except
for required travel on Company business to an extent that does not constitute
a substantial abrupt departure from the Executive's business travel
obligations prior to the Change in Control; or
(iv) The failure by the Company to continue in effect any
benefit or compensation plan, life insurance plan, health and medical benefit
plan, disability plan or any other benefit plan in which the Executive is a
participant at the time of a Change in Control, or the taking of any action by
the Company that would adversely affect the Executive's right to participate
in or materially reduce the Executive's benefits under any of such plans or
benefits, or deprive the Executive of any material fringe benefit enjoyed by
the Executive at the time of the Change in Control, or as the same may be
increased from time to time thereafter.
(d) The terms "Parachute Payments" and "Excess Parachute
Payments" shall each have the meanings attributed to them under Section 280G
of the Internal Revenue code of 1986, as amended (the "Code"), or any
successor section, and any regulations which may be promulgated in connection
with said section.
5.02 Severance payments. In the event that, during the Contract
Term, both (a) a Change of Control occurs, and (b) within six (6) months after
such Change in Control occurs, the Executive's employment is terminated either
(1) by the Company for any reason, other than (A) for Cause (as defined
below), (B) as a result of the Executive's death or disability or (C() as a
result of the Executive's retirement in accordance with the Company's general
retirement policies, or (2) by the Executive for Good Reason, then the
Executive shall be entitled to receive from the Company, and at Executive's
option within thirty (30) days after such termination, an amount in cash equal
to all Annual Base Salary then and thereafter payable hereunder. The Company
shall be obligated to maintain in full force and effect for three (3) years
after termination or for the remaining Contract Term (whichever is longer),
all employee health and medical benefit plans and programs in which the
Executive, his family, or both, were participants immediately prior to
termination, provided that such continued participation is possible under the
general terms and provisions of such plans and programs. If such health and
medical coverage is not available under current Company plans and programs,
the Company will provide substitute coverage of substantially similar content
for three (3) years after termination or for the remaining Contract Term
(whichever is longer) provided, however, that if the Executive becomes
eligible to participate in a health and medical benefit plan or program of
another employer which covers substantially similar benefits, the Executive
shall cease to receive benefits under this subparagraph in respect of such
plan or program. All stock options, warrants and other similar rights granted
by the Company and then vested or earned shall be immediately granted to
Executive without restriction or limitation of any kind, and any incentive
compensation or portion thereof then earned shall be paid in a lump sum
payment to Executive; provided however, that if incentive compensation has not
been earned by Executive at the date of termination but Executive otherwise
would have been entitled to incentive compensation at the end of the Company's
next fiscal year or next period designated by the Company for the
determination of incentive compensation for peer executives (the "Bonus
Determination Date"), the Company shall pay such incentive compensation to
Executive within ten (10) business days after the Bonus Determination Date,
pro rated in amount to the date of Executive's termination. Any amount
payable pursuant to this Section, together with any compensation pursuant to
Article III that is payable for services rendered through the effective date
of termination, shall constitute the sole obligation of the Company payable
with respect to the termination of the Executive as provided in this Section.
5.03 Parachute Payment Limitation. Notwithstanding any other
provision of this Agreement, if the severance payments under Section 5.2 of
this Agreement, together with any other Parachute Payments made by the Company
to the Executive, if any, are characterized as Excess Parachute Payments, then
the following rules shall apply:
(a) The Company shall compute the net value to the Executive of
all such severance payments after reduction for the excise taxes imposed by
Section 4999 of the Code and for any normal income taxes that would be imposed
on the Executive if such severance payments constituted the Executive's sole
taxable income;
(b) The Company shall next compute the maximum amount of
severance payments that can be provided without any such payments being
characterized as Excess Parachute Payments, and reduce the result by the
amount of any normal income taxes that would be imposed on the Executive if
such reduced severance benefits constituted the Executive's sole taxable
income;
(c) If the amount derived in Section 5.3(a) is greater than the
amount derived in Section 5.3(b), then the Company shall pay the Executive the
full amount of severance payments without reduction. If the amount derived in
Section 5.3(a) is not greater than the amount derived in Section 5.3(b), then
the Company shall pay the Executive the maximum amount of severance payments
that can be provided without any such payments being characterized as Excess
Parachute Payments.
5.04 No Mitigation. The Executive shall not be required to mitigate
the amount of any payment provided for in Section 5.2 by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Section 5.2 be reduced by any compensation earned by the Executive as a result
of employment by another company, self-employment or otherwise.
ARTICLE VI
Restrictive Covenants
6.01 Trade Secrets, Confidential and Propriety Business
Information.
(a) The Company has advised the Executive and the Executive
acknowledged that it is the policy of the Company to maintain as secret and
confidential all Protected Information (as defined below), and that Protected
Information has been and will be developed at substantial cost and effort to
the Company. "Protected Information" means trade secrets, confidential and
propriety business information of the Company, any information of the Company
other than information which has entered the public domain (unless such
information entered the public domain through effects of or on account of the
Executive), and all valuable and unique information and techniques acquired,
developed or used by the Company relating to its business, operations,
employees, customers and suppliers, which give the Company a competitive
advantage over those who do not know the information and techniques and which
are protected by the Company from unauthorized disclosure, including but not
limited to, customer lists (including potential customers), sources of supply,
processes, plans, materials, pricing information, internal memoranda,
marketing plans, internal policies, and products and services which may be
developed from time to time by the Company and its agents or employees.
(b) The Executive acknowledges that the Executive will acquire
Protected Information with respect to the Company and its successors in
interest, which information is a valuable, special and unique asset of the
Company's business and operations and that disclosure of such Protected
Information would cause irreparable damage to the Company.
(c) Either during or after termination of employment by the
Company, the Executive shall not, directly or indirectly, divulge, furnish or
make accessible to any person, firm, corporation, association or other entity
(otherwise than as may be required in the regular course of the Executive's
employment) nor use in any manner, any Protected Information, or cause any
such information of the Company to enter the public domain.
6.02 Non-Competition.
(a) The Executive agrees that the Executive shall not during the
Executive's employment with the Company, and, for a period of one (1) years
after the termination of this Agreement, directly or indirectly, in any
capacity, engage or participate in, or become employed by or render advisory
or consulting or other services in connection with any Prohibited Business as
defined in Section 6.02(c).
(b) The Executive agrees that the Executive shall not during the
Executive's employment with the Company, and, for a period of one (1) year
after the termination of this Agreement, make any financial investment,
whether in the form of equity or debt, or own any interest, directly or
indirectly, in any Prohibited Business. Nothing in this Section 6.02(b)
shall, however, restrict the Executive from making any investment in any
company whose stock is listed on a national securities exchange or actively
traded in the over-the-counter market; provided that (i) such investment does
not give the Executive the right or ability to control or influence the policy
decisions of any Prohibited Business, and (ii) such investment does not create
a conflict of interest between the Executive's duties hereunder and the
Executive's interest in such investment.
(c) For purposes of this Section 6.02, "Prohibited Business"
shall be defined as any business and any branch, office or operation thereof,
which is a competitor of the Company and which has established or seeks to
establish contact, in whatever form (including but not limited to solicitation
of sales, or the receipt or submission of bids), with any entity who is at any
time a client, customer or supplier of the Company (including but not limited
to all subdivisions of the federal government).
(d) The provisions of this paragraph 6.02 and paragraph 6.03
shall not apply to Executive's relationship with Synergetics, Inc. Executive
shall have the unfettered right to continue his activities and relationships
with Synergetics, Inc. during the term of this Agreement and after its
termination.
6.03 Disclosure of Employee-Created Trade Secrets, Confidential and
Propriety Business Information. The Executive agrees to promptly disclose to
the Company all Protected Information developed in whole or in part by the
Executive during the Executive's employment with the company and which relate
to the Company's business. Such Protected Information is, and shall remain,
the exclusive property of the Company. All writings created during the
Executive's employment with the Company (excluding writings unrelated to the
Company's business) are considered to be "works-for-hire" for the benefit of
the Company and the Company shall own all rights in such writings.
6.04 Survival of Undertakings and Injunctive Relief.
(a) The provisions of Sections 6.01, 6.02, 6.03 and 6.04 shall
survive the termination of the Executive's employment with the Company
irrespective of the reasons therefor.
(b) The Executive acknowledges and agrees that the restrictions
imposed upon the Executive by Sections 6.01, 6.02, 6.03 and 6.04 and the
purpose of such restrictions are reasonable and are designed to protect the
Protected Information and the continued success of the Company without unduly
restricting the Executive's future employment by others. Furthermore, the
Executive acknowledges that, in view of the Protected Information which the
Executive has or will acquire or has or will have access to and in view of the
necessity of the restrictions contained in Sections 6.01, 6.02, 6.03 and 6.04,
any violation of any provision of Sections 6.01, 6.02, 6.03 and 6.04 hereof
would cause irreparable injury to the Company and its successors in interest
with respect to the resulting disruption in their operations. By reason of
the foregoing, the Executive consents and agrees that if the Executive
violates any of the provisions of Sections 6.01, 6.02, 6.03 or 6.04 of this
Agreement, the Company and its successors in interest as the case may be,
shall be entitled, in addition to any other remedies that they may have,
including money damages, to an injunction to be issued by a court of competent
jurisdiction, restraining the Executive from committing or continuing any
violation of such Sections of this Agreement.
In the event of any such violation of Sections 6.01, 6.02, 6.03 and 6.04
of this Agreement, the Executive further agrees that the time periods set
forth in such Section shall be extended by the period of such violation.
ARTICLE VII
Termination
7.01 Termination of Employment. Executive's employment may be
terminated at any time during the Contract Term by mutual agreement of the
Parties, or as otherwise provided in this Article.
7.02 Termination for Cause. The Company may terminate Executive's
employment without notice at any time for cause. For purposes of this
Agreement, cause for termination shall include: conviction of or entering a
plea of guilty or nolo contendre to a felony; the Company, in good faith,
after reasonable investigation, determines that Executive has committed
willful fraud, misappropriation or embezzlement; Executive grossly and
willfully breaches a material provision of this Agreement, and does not cure
or cannot cure the breach after notice; or Executive habitually or grossly
neglects his duties. Upon termination for cause, Executive shall not be
entitled to payment of any compensation other than salary and benefits under
this Agreement earned up to the date of such termination and any stock
options, warrants or similar rights which have vested at the date of such
termination.
7.03 Termination Without Cause. Should Executive's employment be
terminated for a reason other than as specifically set forth in Section 7.01
and 7.02 above, all salary then and thereafter payable hereunder shall, at
Executive's option, be immediately paid in a lump sum payment to Executive,
and all stock options, warrants and other similar rights granted by the
Company and then vested or earned shall be immediately granted to Executive
without restriction or limitation of any kind, and any incentive compensation
or portion thereof then earned shall be paid in a lump sum payment to
Executive; provided however, that if incentive compensation has not been
earned by Executive at the date of termination but Executive otherwise would
have been entitled to incentive compensation at the Bonus Determination Date,
the Company shall pay such incentive compensation to Executive within ten (10)
business day s after the Bonus Determination Date, pro rated in amount to the
date of Executive's termination, and all other benefits described in Article
IV (excluding stock options, warrants or other similar rights and bonuses)
hereof shall continue through the end of the Contract Term.
ARTICLE VIII
Prior Management Services
SCC Management Fees. In April of 1995, all the disinterested directors
of the Company approved the issuance of warrants to purchase 3,700,000 shares
of common stock of the Company to SCC with the right to convert SCC accrued
management fees due from the Company for the purchase of 3,700,000 warrants
and the exercise price of the warrants. The warrants offered in April 1995,
were purchased on July 31, 1995 for a purchase price of $.033 per warrant and
were then exercised on August 11, 1995 for a purchase price at $.35 per share
of common stock. SCC cancelled invoices for $1,417,100 in management fees due
from the Company as consideration for the warrants and exercise price of the
warrants. The Company will bonus to Executive, a one-time cash bonus on or
before March 15, 1997, an amount sufficient (i) for Executive to pay all
personal taxes on his portion of the shares received by SCC in exchange for
the management fees and (ii) to pay all personal taxes on the bonus which is
paid pursuant to this Section.
ARTICLE IX
Miscellaneous
9.01 Assignment, Successors. This Company may freely assign its
respective rights and obligations under this Agreement to a successor of the
Company's business, with the prior written consent of the Executive. This
Agreement shall be binding upon and insure to the benefit of the Executive and
the Executive's estate and the Company and any assignee of or successor to the
Company.
9.02 Beneficiary. If the Executive dies prior to receiving all of
the salary payable hereunder, such salary shall be paid in a lump sum payment
to the beneficiary designated in writing by the Executive ("Beneficiary") and
if no such Beneficiary is designated, to the Executive's estate.
9.03 Nonalienation of Benefits. Benefits payable under this
Agreement shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind, either voluntary or involuntary, prior to
actually being received by the Executive, and any such attempt to dispose of
any right to benefits payable hereunder shall be void.
9.04 Severability. If all or any part of this Agreement is declared
by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any portion of this
Agreement not declared to be unlawful or invalid. Any paragraph or part of a
paragraph so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such paragraph or
part of a paragraph to the fullest extent possible while remaining lawful and
valid.
9.05 Amendment and Waiver. This Agreement shall not be altered,
amended or modified except by written instrument executed by the Company and
the Executive. A waiver of any term, covenant, agreement or condition
contained in this Agreement shall not be deemed a waiver of any other term,
covenant, agreement or condition, and any waiver of any other term, covenant,
agreement or condition, and any waiver of any default in any such term,
covenant, agreement or condition shall not be deemed a waiver of any later
default thereof or of any other term, covenant, agreement or condition.
9.06 Notices. All notices and other communications hereunder shall
be in writing and delivered by hand or by first class registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: fonix [trademark] corporation
00 Xxxx Xxxxx Xxxxxx
0000 Xxxxx Xxxx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
If to the Executive: Xxxxxxx X. Xxxxxxxx
0000 Xxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Either party may from time to time designate a new address by notice given in
accordance with this Section. Notice and communications shall be effective
when actually received by the addressee.
9.07 Counterpart Originals. this Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
9.08 Entire Agreement. This Agreement forms the entire agreement
between the parties hereto with respect to any severance payment and with
respect to the subject matter contained in the Agreement.
9.09 Applicable Law. The provisions of this Agreement shall be
interpreted and construed in accordance with the laws of the state of Utah,
without regard to its choice of law principles.
9.10 Forum Selection. The parties agree that any action or
proceeding to enforce, interpret, terminate, or rescind this Agreement shall
be commenced solely in the United States District Court for the District of
Utah or in the Third Judicial District Court for Salt Lake County, State of
Utah, and that such courts shall have sole and exclusive personal jurisdiction
over the parties to any such action or proceeding.
9.11 Effect on Other Agreements. This Agreement shall supersede all
prior agreements, promises and representations regarding employment by the
Company and severance or other payments contingent upon termination of
employment. Notwithstanding the foregoing, the Executive shall be entitled to
any other severance plan applicable to other peer executives of the Company.
9.12 Incorporation of Recitals. All recitals are incorporated as
part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
fonix [trademark] corporation
By:/s/ Xxxxxx X. Xxxxxxx
--------------------------
Its Chief Operating Officer
Executive
/s/ Xxxxxxx X. Xxxxxxxx
___________________________________
Xxxxxxx X. Xxxxxxxx
EXHIBIT "A" TO EMPLOYMENT AGREEMENT
FOR XXXXXXX X. XXXXXXXX
Annual Base Salary and Incentive Pay Arrangement.
Annual Base Salary for the first three (3) years of the Contract Term
shall be as follows: for the salary year of November 1, 1996, $250,000; for
1997-$325,000; for 1998-$425,000. Executive will also be entitled to receive
an Incentive Bonus payable on or before December 31 of each calendar year
during the Contract Term. During the first three (3) years of the Contract
Term, Incentive Bonus will be based upon the market price of the Company
stock, adjusted for stock dividends and splits, etc.
For the last two years of the Contract Term, Annual Base Salary will be
as follows: for 1999, $550,000; and for 2000, $750,000. Provided, however,
that Incentive Bonus will be determined and Annual Base Salary will be subject
to review based upon either or both the market price of the Company stock, and
profits derived by the Company from annual revenues from sales, royalties or
any other source of revenue, as determined by the Board of Directors for that
year.
Whenever Incentive Bonus is based solely upon the market price of the
Company stock, in order to qualify for a bonus the Company stock price must
maintain an average price equal to or above the level set forth below over the
period of three consecutive calendar months during the calendar year in which
the bonus is to be paid, and such bonus will be a percentage of Annual Base
Salary for each year of November 1st through October 31st. One such bonus
will be paid each year based on the highest average stock price during a three
consecutive calendar month period, during the calendar year. The percentage
that will be applied to the Annual Base Salary for purposes of calculating any
such bonus that is based solely on stock price shall be as follows:
Quarterly Average Percentage Bonus
Stock Price
$10. 30%
$12.50 35%
$15. 40%
$20. 45%
$25.+ 50%
