Exhibit 10.1


 


Spherix Incorporated


 


August 15, 2007


 


Claire L. Kruger, Ph.D., D.A.B.T.


19
Thorburn Road


Gaithersburg,
MD 20878


 


Dear Claire:


 


On behalf of the
Board of Directors (the “Board”) of Spherix Incorporated (the “Company”), I am
delighted that you have recently agreed to join the Company as of August 1,
2007 as Director of Health Sciences. I am now pleased to offer you the
positions of Chief Executive Officer and Chief Operating Officer of the Company
upon shareholder approval of the sale of our InfoSpherix Incorporated
subsidiary (“InfoSpherix”), which is expected to occur.


 


1.                                       POSITIONS;
START DATE


 


As Chief Executive Officer of the Company (“CEO”) and
as Chief Operating Officer of the Company (“COO”), you shall have the duties
and responsibilities customarily associated with such positions, including
direct responsibility for the overall profit and loss of the Company, and such
duties as may be assigned to you by the Board. So long as you are CEO, you
shall also be a voting member of the Board. You agree not to actively engage in
any other employment, occupation or consulting activity that conflicts with the
interests of the Company. Unless we mutually agree otherwise, you will commence
employment as the CEO and the COO immediately upon the closing of the sale by
the Company of InfoSpherix (the “Start Date”).


 


2.                                       BASE SALARY


 


Your annual base salary will be $180,000.00 (15,000.00
per month), payable in accordance with the Company’s standard payroll practice
and subject to applicable withholding taxes. Because your position is exempt
from overtime pay, your salary will compensate you for all hours worked. Your
base salary will be reviewed annually thereafter by the Board, or its
Compensation Committee, and any adjustments will be effective as of the date
determined by the Board, or its Compensation Committee.


 


3.                                       RESTRICTED STOCK AWARD


 


As a one-time “signing bonus” you will be granted a
restricted stock award of 30,000 shares of Company common stock as of the Start
Date which will vest over a three (3) year period in equal installments in
10,000 shares on an annual basis as set forth in the Restricted Stock Agreement.
The restricted stock will be issued pursuant to the provisions of a Restricted
Stock Agreement.


 


4.                                       ANNUAL BONUS


 


In addition to your salary, you will be eligible to
earn an annual bonus of up to fifty percent (50%) of your then-annualized base
salary if you meet or exceed certain performance standards,


 


1





















 


which will be
mutually determined by you and the Compensation Committee and approved by the
Board. Your annual bonus for 2007 shall be pro-rated based on the fact that you
will not have worked for the Company for a full calendar year in 2007. The
performance standards for 2007 will be mutually determined and approved within
thirty (30) days of the Start Date and prior to the beginning of each
subsequent calendar year. You will be eligible for an annual bonus for any
calendar year only if you remain employed as CEO and COO as of December 31 of
such calendar year. The bonus will be payable within thirty (30) days of the
filing by the Company of its Form 10-K for the relevant calendar year for which
the bonus applies. The bonus will be payable in cash, subject to applicable
withholding taxes.


 


5.                                       BENEFITS AND PERQUISITES; EXPENSES


 


You will also be entitled, during the term of your
employment, to participate in and receive such benefits from any and all
incentive compensation plans, retirement plans, pension plans, profit-sharing
plans, health and accident plans, medical and disability coverage, insurance
policies of any kind, stock option plans or agreements, vacation, sick leave,
and any other perquisites as the Company may offer from time to time to its
senior executives and/or key management employees as a group, subject to and
consistent with the terms, conditions, and administration of such plans and
arrangements. The Company shall pay or reimburse you for travel and other
expenses incurred by you in performing your duties in the lawful and ordinary
course of business and properly reported to the Company in accordance with its
accounting procedures.


 


6.                                       TERMINATION OF EMPLOYMENT


 


6.1                                 Death
or Disability. Your employment, and the Employment Period, shall terminate
automatically upon your death. The Company shall be entitled to terminate your
employment because of your Disability. A termination of the your employment by
the Company for Disability shall be communicated to you by written notice, and
shall be effective on the 30th day after receipt of such notice by
you (“Disability Effective Date”) at which time your employment shall end,
unless you return to full-time performance of your duties before the Disability
Effective Date. For purposes of this Agreement, “Disability” means that you
have been unable, for the period specified in the Company’s disability plan for
senior executives, but not less than a period of 60 consecutive business days,
to perform the your duties with or without reasonable accommodation under this
Agreement, as a result of physical or mental illness or injury.


 


6.2                                 Termination
by the Company. The Company may terminate your employment hereunder for
Cause or without Cause at which time your employment shall end, as set forth
herein.


 


“Cause” means, when used with respect to the
termination of your employment by the Company, termination due to (a) an act or
acts of personal dishonesty taken by you and intended to result in your
substantial personal enrichment at the expense of the Company; (b) your
continued failure to substantially perform your employment duties (other than
any such failure resulting from your incapacity due to physical or mental
illness) which are demonstrably willful and deliberate on your part and which
are not remedied in a reasonable period of time (to be no less than thirty (30)


 


2





















 


days)
after receipt of the “Notice of Termination for Cause”; or (c) conviction of,
or a plea of guilty or no contest by you to a crime that constitutes a felony
involving moral turpitude. No act or failure to act on your part shall be
considered “willful” unless it is done, or omitted to be done, by you in bad
faith or without reasonable belief that your action or omission was in the best
interests of the Company.


 


6.3                                 Termination
by Executive without Good Reason. You may terminate your employment
hereunder without the Company’s approval at any time without Good Reason upon
not less than 60 nor more than 90 days advance written notice to the Company
stating the date on which your employment shall end (the “Notice of Termination
without Good Reason”). A termination of your employment by you without Good
Reason shall be effected by giving the Company written notice of the
termination and setting forth the date of such termination. Notwithstanding the
foregoing, the Company may elect to have any such termination become effective
immediately or at such other date, not later than the date specified in the
Notice of Termination without Good Reason, as the Company may determine; provided,
however, that the Company will continue your Base Salary, Benefits and
Perquisites through the date specified by you for your termination in the
Notice of Termination without Good Reason.


 


6.4                                 Termination
by Executive for Good Reason. You may terminate your employment hereunder
for Good Reason by giving the Company written notice (“Notice of Termination
for Good Reason”) of the termination, setting forth in reasonable detail the
specific conduct of the Company that constitutes Good Reason and the specific
provision(s) of this Agreement on which you rely. The failure by you to set
forth in the Notice of Termination for Good Reason any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of
yours hereunder or preclude you from asserting such fact or circumstance in
enforcing your rights hereunder.


 


“Good Reason”  means
(a) a Change of Control as defined in Section 6.5 or (b) a material breach by
the Company of any provision of this Agreement which is not cured within thirty
(30) days after written notice by you to the Company of such breach (the “Cure
Period”). If you elect to terminate your employment for Good Reason due to a
Change of Control, such notice shall be provided no later than the end of the
Change in Control Period set forth in Section 6.5. For purposes of this
paragraph, a “material breach” shall include, (1) any action by the Company
which results in a diminution in such position, authority, comparable duties or
responsibilities, excluding for these purposes an isolated, insubstantial or
inadvertent action not taken in bad faith and which is remedied by the Company
within the Cure Period; (b) any failure by the Company to comply with any of
the provisions of Sections 2, 3, 4 and 5 of this Agreement other than an
isolated, insubstantial or inadvertent failure not occurring in bad faith and
which is remedied by the Company within the Cure Period; (3) the Company’s
requiring you to be based at any office or location other than the location
where you were employed immediately preceding the date of your employment or
any office or location more than 50 miles from such location; (4) any purported
termination by the Company of your employment otherwise than as expressly
permitted by this Agreement; (5) any failure by the Company to comply with and
satisfy Section 10 of this Agreement, which requires any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to


 


3





















 


perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place; (6) the
appointment of any other employee, consultant or officer (other than the Board)
to supervise the performance of your duties; (7) the removal of, or failure to
reelect or reappoint, you to the Board or as the CEO and COO unless (i) due to
your promotion to higher office with expanded duties, responsibilities, status
and compensation or due to Section 6.1 or 6.2.


 


6.5                                 Change
of Control Defined. “Change of Control” means:


 


(i)                                     The acquisition (whether by tender
offer, exchange offer or other business combination or by the purchase of
shares or other securities (including from the Company), and whether in a
single transaction or multiple transactions), by any Person or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 50% or more of either the then outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Company Voting Securities”);
provided, however, that any acquisition by the Company or its subsidiaries, or
any employee benefit plan (or related trust) of the Company or its subsidiaries,
or any corporation with respect to which, following such acquisition, more than
50% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Company Voting Securities
immediately prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the Outstanding
Company Common Stock and Company Voting Securities, as the case may be, shall not
constitute a Change of Control; or


 


(ii)                                  Individuals who, as of August 15,
2007, constitute the Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to August 15, 2007, who is elected by the
Company’s shareholders or was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Board (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act); or


 


(iii)                               The Company entering into (x) a
reorganization, merger, consolidation or other business combination, in each
case, with respect to which all of the Persons who were the respective
beneficial owners of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such reorganization, merger, business
combination or consolidation do not, following such reorganization, merger,
business combination or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such reorganization,


 


4





















 


merger, business combination or
consolidation, or (y) a plan of liquidation or dissolution of the Company or
similar event, or (z) the sale or other disposition of all or substantially all
of the assets of the Company in one transaction or series of related
transactions.


 


(iv)                              “Change of Control Period” means the
12-month period following a Change of Control; provided, that for purposes of
this Agreement there can be no more than one Change of Control Period.


 


7.                                       PAYMENTS UPON TERMINATION OF EMPLOYMENT


 


7.1                                 Termination
upon Death or Disability; Termination by the Executive without Good Reason;
and/or Termination by the Company for Cause. If your employment is terminated
by death or the Company terminates your employment for Disability the Company
shall:


 


(a) pay to you (or in the event of termination of
employment by reason of your death, your legal representative or your estate if
no representative has been appointed) in a lump sum in cash, within 30 days
after the Date of Termination, or as otherwise provided in this Section 7.1,
any portion of your Base Salary through the Date of Termination that has not
been paid plus any outstanding expenses due to you, and


 


(b) make available to you (or your eligible
dependents) any rights to continued health and welfare benefits provided by law
at your (or your eligible dependents) expense (i.e., COBRA) or payable to you
under the terms of such plans and programs in effect immediately prior to your
death or Disability.


 


7.2                                 Termination
by the Company other than for Cause. If your employment is terminated by
the Company other than for Cause or due to death or Disability and not during a
Change of Control Period, the Company shall:


 


(a) pay to you, in
accordance with the Company’s payroll procedures, an amount equal to six months’
of your then-existing Base Salary for the Fiscal Period in which the Date of
Termination occurs in lieu of any severance under the Company’s Severance Plan,
payable over the six month period following the Date of Termination and


 


(b) pay 6 months of health and welfare (COBRA)
benefits that provide you with coverage comparable to other executives that are
employed by the Company during that time.


 


7.3                                 Termination
following a Change of Control or By Executive with Good Reason. If (a)
contemporaneously with or during the Change of Control Period, your employment
is terminated (i) by the Company or a successor entity other than for Cause or
(ii) by you for Good Reason or (b) if your employment with the Company is
terminated or you cease to be an officer of the Company prior to the date on
which a Change of Control occurs and it is reasonably demonstrated that such
termination of employment or loss of title (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control
or (ii) otherwise arose in connection with or in anticipation of a Change of
Control, or iii) you otherwise terminate your employment with Good Reason, the
Company shall:


 


5





















 


(a) pay to you, in
accordance with the Company’s payroll procedures, an amount equal to six months’
of your then-existing Base Salary for the Fiscal Period in which the Date of Termination
occurs in lieu of any severance under the Company’s Severance Plan, payable
over the six month period following the Date of Termination and


 


(b) pay 6 months of health and welfare (COBRA)
benefits that provide you with coverage comparable to other executives that are
employed by the Company during that time.


 


8.                                       NON-COMPETITION


 


For a one (1) year period from and after termination
of your employment for any reason other than by the Company without Cause, you
shall not engage anywhere within the United States, directly or indirectly,
either on your own behalf or on behalf of any other person, firm, corporation
or other entity, in any business competitive with any business of the Company
(or any of its subsidiaries), on behalf of any person or entity which was a
customer or client of the Company (or any of its subsidiaries) at any time
during your employment. Upon a violation of the foregoing sentence, you will
forfeit any remaining amounts payable to you hereunder, in addition to any
other remedies available to the Company as a result of the violation, including
an action for injunctive relief. This provision regarding non-competition shall
not apply in the event: (1) the Board issues a resolution discontinuing the
development of Naturlose as a Type II diabetes treatment, which is currently
under in Phase 3 Clinical Trials and for which the Company is seeking approval
from the Food and Drug Administration; (2) the Food and Drug Administration
approves or denies the use of Naturlose of as a Type II diabetes treatment; (3)
the Company sells, licenses, trades or disposes of intellectual property rights
or rights to manufacture, use, or commercialize Naturlose; or (4) the Board
issues a resolution discontinuing the health sciences consultancy practice or division.


 


9.                                       CONFIDENTIALITY AND OTHER AGREEMENTS


 


With your employment comes the responsibility that you
will honor any confidentiality or other agreements you have signed with other
entities. If you have any confidential information or trade secrets, written,
or otherwise known by you, you agree not to bring them to the Company, and you
agree not to use them in any way. You attest that you have not signed a “non-competition”
agreement or any other agreement that would prohibit you from working here and
that you will fully comply with the provisions of all agreements with prior
employers.


 


10.                                 ADDITIONAL PROVISIONS


 


The terms described in this letter agreement will be
the terms of your employment, and this letter supersedes any previous
discussions or offers. This letter agreement will only become effective if the
Company sells InfoSpherix by December 31, 2007. Until such time, you will
continue to serve in your role as Director of Health Services. If such sale
does not occur by that date, this letter agreement will be of no further force
or effect. Any additions or modifications of these terms would have to be in
writing and signed by you and the Chairman of the Compensation Committee. The
obligations of the Company and you under Sections 7, 8 (if applicable pursuant
to its terms), and 9 shall survive the expiration or termination of this
Agreement.


 


6





















 


The validity, interpretation, construction and
performance of this letter agreement shall be governed by the laws of the State
of Delaware (except their provisions governing the choice of law).


 


This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The Company will
require any successor or assigns (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place and
you will consent to such successor’s assumption. As used in this Agreement, “Company”
shall mean the Company as previously defined and any successor or assign to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise.


 


Excepting only proven breaches of agreements set forth
in Section 9, the Company shall pay or indemnify you to the full extent
permitted by law and the by-laws of the Company for all expenses, costs,
liabilities and legal fees which you may incur in the discharge of your duties
hereunder. In any matter related to alleged breaches of agreements set forth in
Section 9, the total amount of expenses, costs, liabilities and legal fees
shall not exceed $150,000, unless mutually agreed to by the parties in writing
to pay more than that amount. To the extent the Company has advanced expenses,
costs, liabilities and legal fees in any matter arising out of Section 9 and
you are ultimately found to have breached any agreement that falls within
Section 9, then you agree that the Company shall be able to recoup the full
amount of such expended expenses, costs, liabilities and legal fees from you,
whether in the form of a set-off from your annual bonus or by other means
agreeable to you and the Company.


 


This Agreement may not be amended, waived, or modified
otherwise than by a written agreement executed by the parties to this Agreement
or their respective successors and legal representatives. No waiver by any
party to this Agreement of any breach of any term, provision or condition of
this Agreement by the other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same time, or any prior or subsequent
time.


 


All notices and other communications hereunder shall
be in writing and shall be deemed given when received by hand-delivery to the
other party, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, addressed, addressed as follows:


 


If to the Executive:


 


Claire
L. Kruger, Ph.D., D.A.B.T.


19 Thorburn Road


Gaithersburg, MD 20878


 


7





















 


If to the Company:


 


or to such other addresses as either party
furnishes to the other in writing in accordance with this section. Notices and
communications shall be effective when actually received by the addressee.


 


If you agree that this
letter agreement evidences our agreement concerning your employment as CEO and
COO, please indicate so by signing both copies of this letter retaining one for
your files.


 


We are very excited about
you joining us. I look forward to a productive and mutually beneficial working
relationship. Please let me know if I can answer any questions for you about
any of the matters outlined in this letter agreement.


 


	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert Vander Zanden

  	
   

  
	
   

  	
  Robert
  Vander Zanden,

  
	
   

  	
  Chairman
  of Compensation Committee of

  
	
   

  	
  Spherix
  Incorporated

  



 


ACCEPTANCE


 


I accept employment as CEO and COO of Spherix Incorporated under the
terms set forth in this letter agreement:


 


	
  /s/ Claire L. Kruger

  	
   

  
	
  Claire
  L. Kruger, Ph.D., D.A.B.T.

  



 


 


Spherix/Employment Agreement (Kruger)5


 


8