Unassociated Document


    
      July
        21,
        2008

       

       

      Dear
        Paul
        Rudy: 

       

      QPC
        Lasers is currently experiencing a cash shortage.  In order to enable the
        company to continue its operations during this difficult period, we have
        undertaken a number of steps to cut our operating costs and preserve our
        cash
        resources.

       

      It
        is in
        this context that QPC Lasers must unfortunately ask your agreement to a
        reduction of your salary to $6,250.00 per pay period, effective tomorrow,
        Tuesday, July 22, 2008.  This reduction will remain in effect until such
        time that, in the judgment of the Board of Directors, conditions have improved
        sufficiently to allow them to be relaxed or rescinded. In addition to the
        reduction of salary, we are also passing through to you 15% of your health
        insurance premium cost. This amount will be deducted from your future paychecks
        on a pre-tax basis. Accordingly, the effect on your net pay will be less
        than
        the dollar amount passed through.

       

      We
        recognize that some employees may be unwilling or unable to accept these
        changed
        compensation levels, employees who choose to remain employed by the Company
        must
        indicate their acceptance by the end of work on Tuesday, July 22,
        2008.

       

      We
        highly
        value your service to the Company and would not seek these reductions if
        we did
        not believe that they were essential to solving our current cash
        problems. Executive officers of the Company will be taking a salary
        reduction which is proportionately greater than your reduction. 


       

      Our
        goal
        is to continue to build our business and emerge from this cash shortage as
        quickly as possible.  We continue to have confidence in our technology and
        products and hope that you share that confidence.  There is of course no
        guarantee of success, but by undertaking reductions in operating expenses,
        including these salary reductions, we enhance our prospects for
        success.

       

      In
        recognition of your sacrifice and dedication to the Company, our Board of
        Directors has approved issuing to you 112,500 shares of common stock of QPC
        Lasers, Inc. These shares will vest on July 21, 2009. Until that time, they
        are
        forfeitable upon termination of employment for any reason. 

       

      In
        addition, we plan to offer a contingent retention incentive bonus equal to
        150%
        of the difference between the salary you are actually paid and the amount
        that
        you would have been paid if your current salary was not reduced.  The
        contingent retention incentive bonus would be payable upon the first anniversary
        of the effective date of your salary reduction (the "Payment Date"), subject
        to
        the following conditions:

       

             
        1. 
        You remain an employee in good standing of the Company on the Payment Date;
        and 

       

             
        2. 
        The Company has, in the judgment of the Board of Directors, adequate cash
        resources on the Payment Date to make the bonus payments without jeopardizing
        its ability to meet its other obligations during the 12 months
        following.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      We
        cannot
        provide any assurances that the contingent retention incentive bonus will
        be
        paid, nor should you view this potential bonus as a guaranty of continued
        employment or as consideration for your agreement to a salary reduction. 


       

      Thank
        you
        for your understanding and your continuing service to the Company. We intend
        to
        exert every effort to resolve our current difficulties, build a company of
        which
        we all can be proud and reward those who have contributed to this
        success.

       

       

      Sincerely,

       

       

      Jeff
        Ungar

       

      QPC
        Lasers, Inc.

       

       

      If
        you
        accept these reductions, please check the box below, sign, and return to
        Natalie
        in HR by the end of work on Tuesday July 22, 2008. Thank you!

       

       

      __
        I
        understand and accept the compensation changes as described in this
        letter

       

       

      _____________________