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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of the 13th day of
April, 1998, is entered into by and between ▇▇▇▇▇ ▇▇▇▇ ("Executive") and
RealTrust Asset Corporation, a Maryland corporation ("Company"), and is
effective as of and conditioned upon the completion of the Company's initial
public offering of up to 5,750,000 Units, each Unit consisting of one share of
Common Stock and One Stock Purchase Warrant ("IPO").
WHEREAS, the Company desires to establish its right to the continued
services of the Executive, in the capacity described below, on the terms and
conditions and subject to the rights of termination hereinafter set forth, and
the Executive is willing to accept such employment on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the Executive and the Company have agreed and do hereby agree as
follows:
1. Employment by the Company. The Company does hereby employ, engage and hire
the Executive as Executive Vice President of the Company, and the Executive does
hereby accept and agree to such hiring, engagement and employment. The
Executive's duties shall be such executive and managerial duties as the Board of
Directors of the Company or its subsidiaries shall from time to time prescribe
and as provided in the bylaws of the Company. The terms of this Agreement shall
be subject to the personnel policies of the Company as determined by the Board
of Directors from time to time, except to the extent that any such policy would
have a material adverse effect on the rights of the Executive under the terms of
this Agreement. The Executive shall devote such time, energy and skill to the
performance of his duties for the Company and for the benefit of the Company as
may be necessary or required for the effective conduct and operation of the
Company's business. The Executive agrees, during the Term of this Agreement and
any extension of this Agreement, to devote his entire business and professional
time, attention, and energies exclusively to the business of the Company as
shall be necessary, advisable or required to perform the duties of the
Executive's position, and to conform to the rules, regulations, instructions,
personnel practices and policies of the Company, as existing and amended from
time to time by the Company or its Board of Directors. Furthermore, the
Executive shall exercise due diligence and care in the performance of his duties
to the Company under this Agreement.
2. Term of Agreement. The term ("Term") of this Agreement shall commence on the
date of the closing of the IPO (the "Effective Date") and shall continue through
April 13, 2003; provided, however, that on each April 13 commencing April 13,
2003 the Term of the Agreement shall automatically be extended for one
additional year unless, not later than three months prior to any such April 13,
either party shall have given written notice to the other that it does not wish
to extend the Term of the Agreement.
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3. Compensation.
a. Base Salary. The Company shall pay the Executive, and the Executive
agrees to accept from the Company, in payment for his services to the Company
beginning on the Effective Date, a base salary at the rate per annum to be
determined by the Compensation Committee of the Board of Directors and provided
to the Executive in writing ("Base Salary"), which is subject to change upon
thirty (30) days' notice and shall initially be set at Two Hundred Thousand
Dollars ($200,000.00) and is subject to Annual Review by the Board of Directors.
Base Salary is payable in equal biweekly installments or at such other time or
times as the Executive and Company agree.
b. Performance Bonus. The Executive shall be entitled to receive an
incentive performance bonus equal to 20% of the Bonus Incentive Compensation
Plan established by the Company ("Bonus"), which, during the initial Term of
this Agreement, shall substantially reflect the provisions set forth in
Exhibit A. The Executive shall be entitled to receive the Bonus provided he is
employed at the time of its distribution.
c. Incentive Stock Options. At the Effective Date, the Company shall
grant Executive options to purchase 39,537 shares of its common stock at an
exercise price equal to the initial public offering price. Such options shall
vest and become exerciseable only as provided in the Company's 1998 Stock Option
Plan, subject to the completion of the Company's planned IPO.
d. Annual Review. The Compensation Committee of the Company's Board of
Directors shall, at least annually, review the Executive's entire compensation
package to determine whether it continues to meet the Company's compensation
objectives. Such annual review will include a determination of whether to
increase (i) the Base Salary set forth in Section 3(a) and (ii) the Bonus to be
awarded in accordance with Section 3(b).
4. Fringe Benefits. The Executive shall be entitled to participate in any
benefit programs adopted from time to time by the Company for the benefit of its
executive employees at an appropriate level for the duties of the officer, and
the Executive shall be entitled to receive such other fringe benefits as may be
granted from time to time by the Company's Board of Directors or its
Compensation Committee.
a. Benefit Plans. The Executive shall be entitled to participate in any
benefit plans relating to stock options, stock purchases, pension, thrift,
profit sharing, life insurance, medical coverage, education or other retirement
or employee benefits available to other executive employees of the Company at an
appropriate level for the duties of the office, subject to any restrictions
(including waiting periods) specified in such plans. The Company shall make
commercially reasonable efforts to obtain medical and disability insurance, and
such other forms of insurance as the Board of Directors shall determine, for its
employees.
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b. Vacation. The Executive shall be entitled to four (4) weeks of paid
vacation per calendar year, with such vacation to be scheduled and taken in
accordance with the Company's standard vacation policies.
5. Business Expenses. The Company shall reimburse the Executive for any and all
necessary, customary and usual expenses, properly receipted in accordance with
Company policies, incurred by the Executive on behalf of the Company.
6. Termination of Executive's Employment.
a. Death. If the Executive dies while employed by the Company, his
employment shall immediately terminate. The Executive's compensation and
benefits shall be determined in accordance with Section 8 below.
b. Disability.
(i) If, as a result of the Executive's incapacity due to
physical or mental illness ("Disability"), Executive shall have been absent from
the full-time performance of his duties with the Company for six (6) consecutive
months, and, within thirty (30) days after written notice is provided to him by
the Company, he shall not have returned to the full-time performance of his
duties, the Executive's employment under this Agreement may be terminated by the
Company for Disability. During any period prior to such termination during which
the Executive is absent from the full-time performance of his duties with the
Company due to Disability, the Company shall continue to pay the Executive his
Base Salary and Bonus at the rate in effect at the commencement of such period
of Disability. Subsequent to such termination, the Executive's compensation and
benefits upon termination by Disability shall be determined in accordance with
Section 8 below.
(ii) If, however, as a result of the Executive's partial
incapacity due to physical or mental illness in which Executive shall not have
been absent from his duties for six consecutive months and shall have returned
to work on a full-time basis but is not able to perform at the same level as
when hired and/or is not able to perform the same functions for which originally
hired ("Partial Disability"), the Company shall make reasonable efforts to
accommodate the Executive's Partial Disability by modifying his job description
appropriately, together with a commensurate adjustment in compensation;
provided, however, the Company shall be required to so continue the employment
of the Executive in the event of a Partial Disability of the Executive only if
the Company determines, in its sole discretion, that it can create a position
for which the Executive would be suited and that would be economically
advantageous to the Company.
c. Termination by the Company for Cause. The Company may terminate the
Executive's employment under this Agreement for "Cause," at any time prior to
expiration of the Term of the Agreement, only in the event of (i) acts or
omissions constituting gross negligence, recklessness or willful misconduct on
the part of the Executive in respect of his fiduciary obligations or otherwise
relating to the business of the Company, (ii) the Executive's material
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breach of this Agreement, or (iii) the Executive's conviction or entry of a plea
of nolo contendere for fraud, misappropriation or embezzlement. In such a case,
the Executive's employment under this Agreement may be terminated immediately
without any advance written notice, and the Company's obligation to pay the
Executive's Base Salary will cease, and the Company shall have no obligation to
pay any Bonus or Fringe Benefits which may have accrued or vested as of the
Termination Date.
d. Termination by the Executive. The Executive may at any time during
the Term of this Agreement terminate his employment hereunder for any reason or
no reason by giving the Company notice in writing not less than one hundred
twenty (120) days in advance of such termination. Except as may be provided in
Sections 11 and 12, the Executive shall have no further obligations to the
Company after the effective date of termination, as set forth in the notice.
Notwithstanding the foregoing, in the event any "person" (as defined in Section
10 below) begins a tender or exchange offer, circulates a proxy to shareholders
or takes other steps to effect a Change in Control, the Executive agrees that he
will not voluntarily leave the employ of the Company, and will render services
to the Company commensurate with his position, until such "person" has abandoned
or terminated efforts to effect a Change in Control or until a Change in Control
has occurred. In the event of a termination by the Executive under this
paragraph, the Company will pay only the portion of Base Salary or previously
awarded Bonus unpaid as of the termination date. Fringe benefits which have
accrued and/or vested on the termination date will continue in effect according
to their terms, but no additional benefits shall accrue or vest.
7. Compensation Upon Termination by the Company After Change in Control Other
than for Cause. Notwithstanding the provisions of Section 8 below, if the
Executive's employment shall be terminated by the Company after a Change in
Control (as defined in Section 10) by the Company other than for Cause, the
Executive shall be entitled to the following benefits:
a. Payment of Unpaid Base Salary. The Company shall immediately pay the
Executive any portion of the Executive's Base Salary or previously awarded Bonus
not paid prior to the termination date.
▇. ▇▇▇▇▇▇▇▇▇ Payment. The Company shall pay the Executive an amount (the
"Change in Control Severance Amount") equal to three times the Executive's
combined current year Base Salary and actual Bonus compensation for the
preceding fiscal year; provided, however, the Change in Control Severance Amount
shall not be less than Six Hundred Thousand Dollars ($600,000.00) nor more (once
the minimum is reached) than one percent (1.0%) of the book value of the Company
(i.e., the amount reported on the Company's balance sheet prepared in accordance
with generally accepted accounting principles as stockholders' equity). The
Change in Control Severance Amount shall be payable fifty percent (50%) within
five (5) days after the termination date and the remaining fifty percent (50%)
shall be payable in twelve (12) equal consecutive monthly installments beginning
on the first day of the month following the termination date.
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c. Immediate Vesting of Stock Options. The Company shall take all
appropriate action to ensure that all stock options on the Company's stock owned
by the Executive as of the Effective Date and which have not been exercised
prior to the termination date become immediately exercisable by the Executive,
whether or not the right to exercise such stock options would otherwise then be
vested in the Executive. The provisions of this Section 7(c) shall constitute an
amendment to any existing stock option agreements of the Company as of the
Effective Date. All other stock options owned by the Executive as of the
termination date shall be exercisable in accordance with the Company's stock
option plan and the applicable stock option agreements.
d. Continuation of Fringe Benefits. From and after termination of the
Executive's employment, the Company shall continue to provide the Executive with
all life insurance and medical coverage fringe benefits set forth in Section 4
as if the Executive's employment under the Agreement had not been terminated
until the earlier to occur of (i) such time as the Executive finds full-time
employment or (ii) the expiration of three years. Notwithstanding the
immediately preceding sentence, if, as the result of termination of the
Executive's employment, the Executive and/or his otherwise eligible dependents
or beneficiaries shall become ineligible for benefits under any one of the
Company's benefit plans or the cost of providing such benefits exceeds two
hundred percent (200%) of the cost of providing such benefits to other members
of senior management, the Company, at the Company's option, shall (i) continue
to provide the Executive and his eligible dependents or beneficiaries with
benefits at a level at least equivalent to the level of benefits for which the
Executive and his dependents and beneficiaries were eligible under such plans
immediately prior to the termination date or (ii) for any fringe benefit not so
provided, the Company shall pay the Executive 200% of the cost of providing such
fringe benefit to other members of senior management.
8. Compensation upon Termination by the Company upon Death, Disability or
Without Cause. If the Executive's employment shall be terminated either (i) by
Executive's Death, (ii) by the Company upon Executive's Disability or (iii) by
the Company without Cause, the Executive shall be entitled to the following
benefits:
a. Payment of Base Salary. The Company shall immediately pay the
Executive any portion of the Executive's Base Salary or previously awarded Bonus
not paid prior to the termination date.
▇. ▇▇▇▇▇▇▇▇▇ Payment. The Company shall pay the Executive an amount (the
"Other Severance Amount") equal to the Executive's current year Base Salary plus
any actual Bonus compensation for the preceding fiscal year; provided, however,
the Other Severance Amount shall not be less than Two Hundred Thousand Dollars
($200,000.00) nor more (once the minimum is reached) than one percent (1.0%) of
the book value of the Company (i.e., the amount reported on the Company's
balance sheet prepared in accordance with generally accepted accounting
principles as stockholders' equity). The Other Severance Amount shall be payable
immediately upon the termination date.
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c. Stock Options. Stock options owned by the Executive as of the
termination date shall be exercisable in accordance with the Company's stock
option plan and the applicable stock option agreements.
d. Continuation of Fringe Benefits. From and after termination of the
Executive's employment (other than Executive's Death), the Company shall
continue to provide the Executive with all life insurance and medical coverage
fringe benefits set forth in Section 4 as if the Executive's employment under
the Agreement had not been terminated until the earlier to occur of (i) such
time as the Executive finds full-time employment or (ii) the expiration of one
(1) year. Notwithstanding the immediately preceding sentence, if, as the result
of termination of the Executive's employment, the Executive and/or his otherwise
eligible dependents or beneficiaries shall become ineligible for benefits under
any one of the Company's benefit plans or the cost of providing such benefits
exceeds two hundred percent (200%) of the cost of providing such benefits to
other members of senior management, the Company, at the Company's option, shall
(i) continue to provide the Executive and his eligible dependents or
beneficiaries with benefits at a level at least equivalent to the level of
benefits for which the Executive and his dependents and beneficiaries were
eligible under such plans immediately prior to the termination date or (ii) for
any fringe benefit not so provided, the Company shall pay the Executive 200% of
the cost of providing such fringe benefit to other members of senior management.
9. No Mitigation Required; No Other Entitlement to Benefits under Agreement. The
Executive shall not be required in any way to mitigate the amount of any payment
provided for in Sections 7 or 8, including, but not limited to, by seeking other
employment, nor shall the amount of any payment provided for in Sections 7 or 8
be reduced by any compensation earned by the Executive as a result of employment
with another employer after the termination date of employment, or otherwise.
Except as set forth in Sections 7 or 8, following a termination governed by
Sections 7 or 8, the Executive shall not be entitled to any other compensation
or benefits set forth in this Agreement, except as may be separately negotiated
by the parties and approved by the Board of Directors of the Company in writing
in conjunction with the termination of Executive's employment under Sections 7
or 8.
10. Change in Control. A "Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied.
a. Any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (other than the Company;
any trustee or other fiduciary holding securities under an Executive benefit
plan of the Company; or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of the stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of the
securities of the Company (not including in the securities beneficially owned by
such person, any securities acquired directly from the Company or from a
transferor in a transaction expressly approved or
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consented to by the Board of Directors) representing more than 25% of the
combined voting power of the Company's then outstanding securities; or
b. During any period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the beginning of
such period constitute the Board of Directors and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (a), (c) or (d) of this
section), (i) whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved or (ii) whose election is to replace a person who ceases
to be a director due to death, disability or age, cease for any reason to
constitute a majority thereof; or
c. The shareholders of the Company approve a merger or consolidation of
the Company with another corporation, other than (i) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an Executive benefit plan of the Company, at least 75%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires more than 50% of
the combined voting power of the Company's then outstanding securities; or
d. The shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
11. Proprietary Information.
a. Executive acknowledges that certain technological and other
information may from time to time be disclosed to Executive by Company during
the continuance hereof. Executive hereby acknowledges that all such information
and technology, whether currently existing or hereafter developed by Company
through or involving the services and efforts of Executive hereunder, shall at
all times consist of and be preserved by Executive as valuable trade secrets and
confidential information which is proprietary to and owned exclusively by
Company, and that Executive does not have, and shall not have or hereafter
acquire, any rights in or to any of such information and technology, including
without limitation any patents, inventions, discoveries, know-how, trademarks or
trade names used or adopted by Company in connection with the design,
development, manufacture, or marketing of any financial or mortgage products
which at any time during the continuation hereof may be offered or sold by
Company. Executive further warrants and agrees that he shall not at any time,
whether during the continuance of this Agreement or after
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its expiration or earlier termination, whether by Executive or by Company, in
any manner or form, directly or indirectly, use, disclose, duplicate, license,
sell, reveal, divulge, publish or communicate any portion of any such
information or technology, nor use, disclose duplicate, license, sell, reveal,
divulge, publish or communicate any other confidential information concerning
Company, or any customers or products of Company, to any person, firm or entity.
b. Executive acknowledges that the Company possesses information
obtained from its customers and clients ("Customer Confidences"). Executive
agrees never to make use of Customer Confidences for any use not expressly
authorized by the Customer whose Customer Confidences are in question.
c. The Executive agrees that all styles, designs, lists, materials,
books, files, reports, correspondence, records and other documents ("Company
Materials") used, prepared or made available to the Executive, shall be and
shall remain the property of the Company. Upon the termination of employment or
the expiration of this Agreement, all Company Materials shall be returned
immediately to the Company, and the Executive shall not make or retain any
copies thereof.
d. Executive agrees that the terms of this Section 11 will survive the
term of this Agreement and will continue in full force and effect throughout his
tenure with the Company in any capacity, whether as an employee, officer,
director or outside consultant.
12. Competition. During the Term hereof, Executive shall not, without the
Company's prior written consent, directly or indirectly engage in any business
activity, or have any interest in any person, firm or other entity engaged in
any business activity, in which Company at the time is engaged or is planning to
engage. During the Term hereof and for a period of two (2) years thereafter,
Executive shall not directly or indirectly: (a) divert or take away or solicit
or attempt to divert or take away any of Company's customers, including without
limitation those customers with whom Executive became acquainted while retained
by Company; (b) employ, or knowingly permit any business entity controlled by
Executive to employ, any person who during the period of twelve (12) months
immediately preceding such time has been employed by Company; (c) solicit or
otherwise seek to induce any employee of Company to leave his or her employment
with the Company; or (d) undertake planning for or organization of any business
activity that will injure Company's business, or conspire with employees of
Company for the purpose of organizing any such injurious business activity.
Executive agrees that the terms of this Section 12 will survive the term of this
Agreement and will continue in full force and effect throughout his tenure with
the Company in any capacity, whether as an employee, officer, director or
outside consultant. However, this Section 12 shall not continue after
termination of employment in the event that the Company terminates Executive
without Cause.
13. Notices. All notices and other communications under this Agreement shall be
in writing and shall be given by fax or first class mail, certified or
registered with return receipt requested,
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and shall be deemed to have been duly given three (3) days after mailing or
twenty-four (24) hours after transmission of a fax to the respective persons
named below:
If to Company: RealTrust Asset Corporation
Attn: Board of Directors
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Executive: ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Either party may change such party's address for notices by notice duly given
pursuant hereto.
14. Attorneys Fees. In the event judicial determination is necessary of any
dispute arising as to the parties' rights and obligations hereunder, each party
shall have the right, in addition to any other relief granted by the court, to
attorneys' fees based on a determination by the court of the extent to which
each party has prevailed as to the material issues raised in determination of
the dispute.
15. Termination of Prior Agreements. This Agreement terminates and supersedes
any and all prior agreements and understandings between the parties with respect
to employment or with respect to the compensation of the Executive by the
Company.
16. Assignment; Successors. This Agreement is personal in its nature and neither
of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder; provided that,
in the event of the merger, consolidation, transfer, or sale of all or
substantially all of the assets of the Company with or to any other individual
or entity, this Agreement shall, subject to the provisions hereof, be binding
upon and inure to the benefit of such successor and such successor shall
discharge and perform all the promises, covenants, duties, and obligations of
the Company hereunder.
17. Governing Law. This Agreement and the legal relations thus created between
the parties hereto shall be governed by and construed under and in accordance
with the laws of the State of Utah.
18. Entire Agreement; Headings. This Agreement embodies the entire agreement of
the parties respecting the matters within its scope and may be modified only in
writing. Section headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
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19. Waiver; Modification. Failure to insist upon strict compliance with any of
the terms, covenants or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of, or
failure to insist upon strict compliance with, any right or power hereunder at
any one or more times be deemed a waiver or relinquishment of such right or
power at any other time or times. This Agreement shall not be modified in any
respect except by a writing executed by each party hereto.
20. Severability. In the event that a court of competent jurisdiction determines
that any portion of this Agreement is in violation of any statute or public
policy, only the portions of this Agreement that violate such statute or public
policy shall be stricken. All portions of this Agreement that do not violate any
statute or public policy shall continue in full force and effect. Further, any
court order striking any portion of this Agreement shall modify the stricken
terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
21. Indemnification. The Company shall indemnify and hold Executive harmless to
the maximum extent permitted by Maryland Law and the Bylaws of the Company.
22. Counterparts. This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
"Company" "Executive"
RealTrust Asset Corporation, ▇▇▇▇▇ ▇. ▇▇▇▇
a Maryland corporation
By: ____________________________ _______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, Executive Vice President
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EXHIBIT A
BONUS INCENTIVE COMPENSATION PLAN
The Bonus Incentive Compensation Plan shall be effective commencing upon
closing of the Company's initial public offering ("IPO"). The annual bonus
pursuant to the Bonus Incentive Compensation Plan will be paid one-half in cash
and one-half in shares of Common Stock of the Company, annually, following
receipt of the audit for the related fiscal year. This program will award
bonuses annually to those officers out of a total pool determined by shareholder
return on equity ("▇▇▇") as follows:
▇▇▇/(1)/ in Excess of Base Rate/(2) Bonus as % of Average Net
Worth/(3)/ Outstanding
Zero or less 0%
Greater than 0% but less than 6% 10% * (actual ▇▇▇ - Base Rate)
Greater than 6% (10% * 6%) + 15% * (Actual
▇▇▇ - (Base Rate + 6%))
Of the amount so determined, one-half will be deemed contributed to the
total pool in cash and the other half deemed contributed to the total pool in
the form of shares of Common Stock, with the number of shares to be calculated
based on the average price per share during the preceding year.
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/(1) /"▇▇▇" is determined for the fiscal year by averaging the monthly ratios
calculated each month by dividing the Company's monthly Net Income
(adjusted to an annual rate) by its Average Net Worth for such month. For
such calculations, the "Net Income" of the Company means the net income or
net loss of the Company determined according to GAAP, but after deducting
any dividends paid or payable on preferred stock issued after the IPO and
before giving effect to the bonus incentive compensation or any valuation
allowance adjustment to stockholders' equity. The definition "▇▇▇" is used
only for purposes of calculating the bonus incentive compensation payable
pursuant to the Bonus Incentive Compensation Plan, and is not related to
the actual distributions received by stockholders. The bonus payments will
be made before any income distributions are made to stockholders.
/(2) /"Base Rate" is the average for each month of the Ten-Year U.S. Treasury
Rate, plus 4%.
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/(3) /"Average Net Worth" for any month means the arithmetic average of the sum
of (i) the net proceeds from all offerings of equity securities by the
Company since formation (but excluding any offerings of preferred stock
subsequent to the IPO), after deducting any underwriting discounts and
commissions and other expenses and costs relating to the offerings, plus
(ii) the Company's retained earnings (without taking into account any
losses incurred in prior fiscal years, after deducting any amounts
reflecting taxable income to be distributed as dividends and without giving
effect to any valuation allowance adjustment to stockholders' equity)
computed by taking the daily average of such values during such period.