Unassociated Document


    July
      21,
      2008

     

     

    Dear
      Jeffrey Ungar: 

     

    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 $8,719.23 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      sufficiently to allow them to be relaxed or rescinded.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 240,900 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

     

     

    _____________________