| EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS |
| [1] |
On
November 1, 2012, the Company entered into an employment agreement (the “Agreement”) with its Chairman and Chief
Executive Officer for three successive one year terms (unless terminated by the Company) at an annual base salary of $415,000. The
Agreement established an annual target bonus of $150,000 for the Chairman and Chief Executive Officer based on performance
criteria to be established on an annual basis by the Board of Directors (or compensation committee). For each of
the years ended December 31, 2014 and December 31, 2013, the Chairman and Chief Executive Officer received an annual
cash bonus of $200,000 and $175,000, respectively. In connection with the Agreement, the Chairman and Chief Executive
Officer was issued a 10-year option to purchase 500,000 shares of the Company’s common stock at an exercise price of
$1.19 per share, which vests in equal quarterly amounts of 41,667 shares beginning November 1, 2012 through August 31,
2015, subject to acceleration upon a change of control. The Chairman and Chief Executive Officer shall forfeit
the balance of unvested shares if his employment has been terminated “For Cause” (as defined) by the Company or
by him without "Good Reason" (as defined). Under the terms of the Agreement, the Chairman and Chief Executive
Officer also receives incentive compensation in an amount equal to 5% of the Company’s gross royalties or other payments
or proceeds (without deduction of legal fees or any other expenses) with respect to its Remote Power Patent and a 10% net
interest (gross royalties and other payments or proceeds after deduction of all legal fees and litigation expenses related
to licensing, enforcement and sale activities, but in no event shall he receive less than 6.25% of the gross recovery) of
the Company’s royalties and other payments with respect to its other patents besides the Remote Power Patent (the “Additional
Patents”) (the “Incentive Compensation”). For the years ended December 31, 2014 and December 31,
2013, the Chairman and Chief Executive Officer earned Incentive Compensation of $614,000 and $397,000, respectively. The
Incentive Compensation shall continue to be paid to the Chairman and Chief Executive Officer for the life of each of the Company’s
patents with respect to licenses entered into with third parties during the term of his employment or at anytime thereafter,
whether he is employed by the Company or not; provided, that, the Chairman and Chief Executive Officer’s
employment has not been terminated by the Company “For Cause” (as defined) or terminated by him without “Good
Reason” (as defined). In the event of a merger or sale of substantially all of the assets of the Company,
the Company has the option to extinguish the right of the Chairman and Chief Executive Officer to receive future Incentive
Compensation by payment to him of a lump sum payment, in an amount equal to the fair market value of such future interest
as determined by an independent third party expert if the parties do not reach agreement as to such value. In the
event that the Chairman and Chief Executive Officer’s employment is terminated by the Company “Other Than For Cause”
(as defined) or by him for “Good Reason” (as defined), the Chairman and Chief Executive Officer shall also be entitled
to (i) a lump sum severance payment of 12 months base salary, (ii) a pro-rated portion of the $150,000 target bonus provided
bonus criteria have been satisfied on a pro-rated basis through the calendar quarter in which the termination occurs and (iii)
accelerated vesting of all unvested options and warrants. |
In
connection with the Agreement, the Chairman and Chief Executive Officer has also agreed not to compete with the Company as follows:
(i) during the term of the Agreement and for a period of 12 months thereafter if his employment is terminated “Other Than
For Cause” (as defined) provided he is paid his 12 month base salary severance amount and (ii) for a period of two years
from the termination date, if terminated “For Cause” by the Company or “Without Good Reason” by the Chairman
and Chief Executive Officer.
| [2] |
On
April 12, 2012, the Company entered into an agreement with its Chief Financial Officer which amended the agreement, dated
February 3, 2011, pursuant to which he continued to serve the Company. The amendment (the "Amendment")
provided as follows: (i) the term of service of the Chief Financial Officer shall be extended until December 31, 2013;
(ii) monthly compensation shall be increased to $11,000 per month; and (iii) the Chief Financial Officer was granted a 5-year
option to purchase 75,000 shares of the Company’s common stock at an exercise price of $1.40 per share, which option
vests over a one year period in equal quarterly amounts of 18,750 shares. |
On
April 9, 2014, the Company’s Chief Financial Officer entered into an offer letter with the Company pursuant to which
he continues to serve as Chief Financial Officer, on an at-will basis, at an annual base salary of $157,500. The Chief
Financial Officer is eligible to receive incentive or bonus compensation on an annual basis in the discretion of the Compensation
Committee. The Chief Financial Officer received an annual bonus of $30,000 for 2014. In connection with
the offer letter, the Chief Financial Officer was issued, under the
Company’s
2013 Stock Incentive Plan, a 5-year stock option to purchase 50,000 shares of our common stock, at an exercise price of $1.65
per share, which option vests in two equal amounts (25,000 shares each) on each of December 31, 2014 and December 31,
2015. In addition, in the event the Chief Financial Officer’s employment is terminated without “Good Cause”
(as defined), he shall receive (i) (a) 6 months base salary or (b) 12 months base salary in the event of a termination without
“Good Cause” within 6 months following a “Change of Control” of the Company (as defined) and (ii) accelerated
vesting of all remaining unvested shares underlying his options or any other awards he may receive in the future.
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