Exhibit 10.1


 


EMPLOYMENT AGREEMENT


 


THIS AGREEMENT is effective this 1st day
of January, 2004, by and between Ballistic Recovery Systems, Inc., a Minnesota
corporation (the “Company”) and Mark B. Thomas, a Minnesota resident (the
“Executive”).


 


WITNESSETH


 


WHEREAS, the Company desires to continue to employ
Executive and Executive desires to be employed by the Company all upon the
terms and conditions hereinafter set forth.


NOW, THEREFORE, in consideration for the foregoing,
the parties agree as follows:


1.               EMPLOYMENT.  The Company hereby employs Executive and
Executive hereby accepts employment by the Company on the terms and conditions
hereinafter set forth.


2.               TERM.  The term of this Agreement shall commence on
and shall continue for a period of twenty-four (24) months from the date of
this Agreement (the “Initial Term”).  In
the event that (a) a new employment agreement has not been entered into as of
the end of the Initial Term; (b) this Agreement has not been terminated during
the Initial Term; and (c) the parties are negotiating in good faith to enter
into a new employment agreement, then the terms of this Agreement shall
automatically be extended for a 12 month period following the Initial
Term.  All provisions of this Agreement,
except those with respect to Section 4.2.1 (Non-Discretionary Bonus only with
respect to the payment of any earned and unpaid Non-Discretionary Bonus for any
fiscal year or portion of a fiscal year that the Agreement was in force),
Section 5 (Board of Directors Position), Sections 8.1, 8.2, 8.3, 8.4 and 8.5
(Confidentiality) and Section 9 (General Provisions), shall be null and void if
(i)(a) Executive has not been terminated during the Initial Term and (b) the
Initial Term has not been extended for a 12-month period or (ii)(a) the
Initial Term is extended for a 12-month period and (b) the parties do not
execute a new employment agreement superceding this Agreement during such
12-month period.


3.               POSITION AND DUTIES.  The Executive shall serve as the President
and Chief Executive Officer of the Company as set forth in the bylaws of the
Company.  The Executive shall report to
the Board of Directors of the Company (the “Board”) as set forth in the bylaws
of the Company and shall perform the duties required of such position and as
directed by the Board.  The Executive
also agrees to serve as the Treasurer and Chief Financial Officer as set forth
in the bylaws of the Company throughout the term of this Agreement, or until
such time as a qualified successor is named to that position by the Board.  Notwithstanding the foregoing, it is the
intent of the parties that the Company select a new Treasurer and Chief
Financial Officer.  The Executive shall
devote substantially all of his working time and efforts to the business of the
Company.


4.               COMPENSATION.  Subject to the provisions of Section 8,
Executive shall be compensated for the services that Executive renders to the
Company pursuant to this Agreement as follows:


4.1  Base
Salary.  During the term of this
Agreement, Executive shall be paid a salary at the annual rate of $180,250 (the
“Base Salary”), subject to withholding for federal and state income taxes and
all other required deductions payable in accordance with Company payroll
policies but in no event, less than monthly. 
The Base Salary may be increased at the discretion of the Board and will
be reviewed on an annual basis by the Board.


4.2               Bonus Compensation.  The Executive is eligible for an annual
bonus for each fiscal year of the Company during which he is an Executive.  The annual bonus will be broken down into
two components: the non-discretionary bonus (the “Non-Discretionary Bonus”) and
the discretionary bonus (the “Discretionary Bonus”).  The maximum bonus compensation payable to the Executive hereunder
shall in no event exceed 100% of the Base Salary for such fiscal year.  The bonus compensation is a gross bonus
subject to withholding for federal and state income taxes and all other
required deductions.  The bonus
compensation guidelines can be reviewed at any point during the term of the
Agreement as requested by either party, but any adjustments in the terms of the
bonus compensation clause must be agreed upon by both the Company and Executive
before the adjustments take effect.  The
description of each component of the bonus and the basis for calculation will
be as follows:


4.2.1  Non-Discretionary
Bonus.  The Non-Discretionary Bonus
shall not exceed 75% of the Executive’s Base Salary for such fiscal year.  The purpose of the Non-Discretionary Bonus
is to provide compensation to the Executive for meeting certain performance
goals of the Company as determined by the Board’s Compensation Committee as set
forth hereto as Exhibit A and shall be paid to Executive within 75 days of
fiscal year-end provided that the Company has received its audited financial
statements for such fiscal year within such 75 day period.


4.2.2 Discretionary
Bonus.  The Discretionary Bonus shall not exceed 25% of the Executive’s
Base Salary for such fiscal year.  The
purpose of the Discretionary Bonus is to provide compensation to the Executive
for Executive’s performance.  The amount
of the Discretionary Bonus shall be determined annually by the Board’s
Compensation Committee and shall be paid to Executive within 75 days of fiscal
year-end.


4.3               Stock Options.  All stock options and/or stock option
agreements heretofore entered into shall remain in full force and effect,
according to the terms and conditions previously agreed upon.


5.               BOARD OF DIRECTORS POSITION.  The Executive will continue to serve on the
Board along with the other elected Directors for the term so elected.  In the event that the Executive is
terminated or resigns his position from the Company for any reason, the
Executive agrees to resign from his position on the Board.


6.               EXECUTIVE BENEFITS.


6.1               Fringe Benefits.  The Executive shall be entitled to
participate in or receive benefits under all of the Company’s employee and any
executive benefit plans and arrangements in accordance with applicable
policies, agreements and plan documents for such period of time as such plan
and arrangements shall remain in effect. 
These benefits shall include any pension plan, profit sharing plan,
savings plan, stock option plan (subject to the terms of Section 4.3), life
insurance, health and accident plan.  Nothing
paid to the Executive under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of any other compensation
payable to the Executive hereunder, except that the Executive’s bonus payments
shall be calculated as provided in Section 4.


6.2               Vacations.  The Executive shall be entitled to the
number of paid vacation days in each calendar year, and to compensation for
earned but unused vacation days, determined by the Company from time to time
for its senior executive officers.


6.3               Expenses.  The Company shall reimburse Executive for
all reasonable and necessary out-of-pocket expenses incurred by the Executive
in connection with the performance of duties hereunder, in accordance with the
Company’s policy in effect from time to time with respect to the reimbursement
of expenses but only upon presentation by Executive of receipts detailing such
expenses.


 

















 


7.               TERMINATION OF EMPLOYMENT.


7.1               Death or Disability. 
The Executive’s employment herein shall automatically terminate if
Executive shall die during the term of this agreement.


If as a result of the Executive’s incapacity
due to physical or mental illness, the Executive shall have been absent from
his duties with the Company on a full-time basis for six months, and if within
90 days after written notice of termination is thereafter given by the Company,
the Executive shall not have returned to the full-time performance of the
Executive’s duties, the Company may terminate this Agreement for “Disability”.


7.2               Termination by Company. 
The Company may terminate the Executive’s employment, with or without
Cause, upon written notice to the Executive. 
The Executive’s employment may also be terminated by “Constructive
Termination.”


a.               “Cause” shall mean: (A) dishonesty, fraud,
material and deliberate injury or attempted injury, in each case related to the
Company or its business, (B) any felony, or (C) material and intentional
failure or neglect of duties by Executive to satisfactorily perform the duties
assigned to him pursuant to this Agreement which continues for a period of 60
days after a written demand to Executive by the Board detailing the material
and intentional failure or neglect of duties for such satisfactory performance
which specifically identifies the manner in which it is alleged that Executive
has not satisfactory performed such duties.


b.              “Constructive Termination” means, in each
case, without Executive’s prior consent: 
(A) a material adverse change of Executive’s responsibilities as
President and Chief Executive Officer with respect to the Company, (B) an
adverse change in Executive’s Base Salary, Non-Discretionary Bonus components
as determined in Exhibit A or as otherwise agreed to by the parties, or other
benefits, provided that a change in Executive’s Base Salary or Bonus
Compensation or other benefits shall not be deemed to be an adverse change if a
similar change is made to the compensation or other benefits of similarly
situated Company management employees, or (C) a requirement to relocate in
excess of 50 miles from Executive’s then current place of employment, provided,
however, that it shall not be deemed a Constructive Termination pursuant
to (C) hereunder if (i) an acquisition of substantially all the assets by or a
merger with Cirrus Design is consummated and closed prior to January 1, 2005 (a
“Cirrus Transaction”) and (ii) Executive is required to relocate in
excess of 50 miles from Executive’s then current place of employment prior to
January 1, 2005.  In case of a Cirrus
Transaction prior to January 1, 2005 and the Executive is required to, but does
not relocate in excess of 50 miles from Executive’s then current place of
employment, then the severance provisions of Section 7.2(d) and the
non-competition provisions of Section 8.6 shall not apply.


c.               Termination for Cause.   
In the event that the Executive is terminated for Cause as defined in
Section 7.2 (a) herein, the Executive will receive the Base Salary and be
entitled to Executive’s accrued but unpaid time off pay (including, but not
limited to, vacation, any unpaid expense reimbursements, and any other accrued
benefits other than Bonus provided in Section 4.2 herein) and reimbursement for
any expenses incurred through the last date of employment.  Executive’s rights in regard to stock
options, pension, profit sharing, group health, life and other insurance
benefits shall be governed by applicable agreements and plan documents.    In the case of termination for Cause, no
bonus shall be paid to the Executive for the fiscal year in which such
Executive was terminated.  In the event
that the Executive is terminated for Cause, the Executive will not be entitled
to any other severance pay provisions of this Agreement.


d.              Termination Without Cause or by Constructive
Termination.  Except as provided in Section 7.2(b)(C), if
the Executive’s employment is terminated because of Constructive Termination or
by the Company for any reason other than for Cause, both as defined in Section
7.2, then the Executive shall be paid severance pay equal to (a) twelve (12)
month’s pay of his Base Salary; (b) Executive’s accrued but unpaid time off pay
(including, but not limited to, vacation); (c) any pro rata bonuses provided in
Section 4.2 for the fiscal year in which termination occurs; and (d) and any other
accrued benefits and reimbursement for any expenses incurred through the last
date of employment.  Executive’s rights
in regard to stock options, pension, profit sharing, group health, life and
other insurance benefits shall be governed by applicable agreements and plan
documents.  Payment of such severance
shall be conditioned upon Executive entering into a mutually acceptable
release, releasing the Company, its officers, directors and agents from claims
relating to employment pursuant to this Agreement or otherwise.  Said severance pay shall be paid to the
Executive in six (6) equal installments, less any applicable withholding for
federal and state taxes and other required deductions; and it shall be paid
starting fourteen (14) days after Executive’s last day of work, and take the
form of six (6) equal payments beginning with the fourteenth (14th)
day and continuing every thirty (30) days until complete.


e.               No Requirement to Mitigate. 
The Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for under this section
be reduced by any compensation earned by the Executive as the result of
employment by another employer after the Date of Termination, or otherwise.


7.3               Termination by Executive. 
Executive may, upon thirty (30) days written notice, terminate
Executive’s employment at any time and for any reason.  During the thirty (30) days after notice is
given, Executive agrees that he shall continue to render his normal services to
the Company, and the Company agrees that it shall continue his compensation and
benefits under this Agreement during the notice period.  In the event the Executive voluntarily
terminates his employment, the Company is not obligated to continue to pay the
Executive his Base Salary through the end of the term of this Agreement, but
the Company is obligated to pay the Executive any bonuses or benefits earned or
accumulated as of Executive’s last day of employment.  For example, with respect to bonus, if the Executive terminates
the Executive’s employment at the end of the 9th month of a fiscal
year, the Executive would be entitled to receive 9/12th of that
fiscal year’s bonus as calculated under Section 4.2.  The bonus portion of this section will be paid to the Executive
no later than 120 days following the conclusion of the applicable fiscal
year.  All other payments due under this
section will be paid to the Executive within fourteen (14) days of the
Executive’s last day of employment.  The
Company shall pay Executive his Base Salary then in effect through his last day
of employment according to the normal payroll schedule; any accrued and unused
vacation; and reimbursement for any expenses incurred through his last date of
employment; as well as any other accrued benefits.  Executive’s rights in regard to stock options, pension, profit
sharing, group health, life and other insurance benefits shall be governed by
applicable agreements and plan documents.


7.4               The provisions of this Section 7, and any
payment provided for hereunder, shall not reduce any amounts otherwise payable,
or in any way diminish the Executive’s existing rights, or rights which would
accrue solely as a result of the passage of time, under any benefit plan,
incentive plan, securities plan, or other contract, plan, or arrangement.


7.5               The Company will use its best efforts to
require any successor or assign 
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly,
absolutely, and unconditionally to assume 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.  As used in this
Agreement, “the Company” shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid which executes
and delivers the agreement provided for in this section or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.  If any successor or assign of the
Company fails to assume the performance of this Agreement in its entirety,
Executive’s employment will be deemed to have


 

















 


been terminated by the Company without Cause
under Section 7.2(d) and all provisions, including but not limited to the
severance pay and pro rata bonus provisions, of Section 7.2(d) shall apply.


7.6               The provisions of this Agreement shall inure
to the benefit of and be enforceable by the Executive’s personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. If the Executive should die while any amounts are still
payable to him hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Section 7 to the Executive’s
devisee, legatee, or other designee or, if there be no such designee, to the
Executive’s estate.  If the Executive
should die, any amount due to him through the date of his death shall be paid
to the Executive’s devisee, legatee, or other designee or, if there be no such
designee, to the Executive’s estate.


8.               CONFIDENTIALITY AND NON-COMPETITION.


8.1               All records of the accounts of Company, of any
nature, whether existing at the time of Executive’s employment, procured
through the efforts of Executive, or obtained by Executive from any other
source, and whether prepared by Executive or otherwise, shall be the exclusive
property of Company regardless of who actually purchased the original book,
record or magnetic storage unit on which such information is recorded.


8.2               All such books and records shall be immediately
returned to Company by Executive on any termination of employment, whether or
not any dispute exists between Company and Executive at, regarding, and/or
following the termination of employment.


8.3               During the term of employment under this Agreement,
Executive will have access to and become acquainted with various trade secrets,
consisting of formulas, programs, patterns, devices, inventions, processes,
compilations of data and information, sources of data and information, records,
and specifications, all of which are owned by Company and regularly used in the
operation of Company’s business.


8.4               All files, records, documents, drawings,
specifications, programs, equipment and similar items relating to the business
of Company, whether they are prepared by Company or by Executive, or come into
Executive’s possession in any other way and whether or not they contain or
constitute trade secrets owned by Company, are and shall remain the exclusive
property of Company and shall not be removed from the premises of Company under
any circumstances whatsoever without the prior written consent of Company.


8.5               Executive promises and agrees that Executive shall
not misuse, misappropriate, give, sell, furnish, nor disclose, whether for consideration
or for no consideration, and whether or not during or following his or her
employment with Company, or at any other time thereafter, any trade secrets
described herein, directly or indirectly, or use them in any way or manner, for
his or her own benefit or the benefit of others, except as required in the
course and scope of Executive’s employment with Company. Executive agrees and
promises not to make known to other person, firm, or corporation the names,
addresses or any other information of any of Company’s customers or vendors.


8.6               Except as provided in Section 7.2(b)(C), for a
period of two years following termination of employment during the term of this
Agreement, (A) Executive agrees and promises not to call on, solicit, or take
away any of the customers of Company on whom Executive called on or with whom
Executive became acquainted with during his or her employment herein and (B)
Executive agrees that within the United States or any international country in
which the Company can demonstrate that it actively markets its products at the
time of this Agreement, Executive shall not directly or indirectly become
employed by, consult with, own, manage, operate, or conduct any business
engaged in the design, manufacturing, marketing or distribution of emergency
parachute recovery systems for use with recreational, general and commercial
aviation aircraft and unmanned aircraft.


9.               GENERAL PROVISIONS.


9.1               Notices.  Any
notices to be given by either party to the other may be effected either by
personal delivery in writing or by mail, registered and certified, postage
prepaid with return receipt requested. Mailed notices shall be addressed to the
parties at their last known addresses as appearing on the books of Company.


9.2               Entire Agreement.  This
Agreement supersedes any and all other agreements, either oral or written,
between the parties with respect to the employment of Executive by Company for
the purposes set forth in Section 3 above, and contains all of the covenants
and agreements between the parties with respect to such employment whatsoever.
Each party to this Agreement acknowledges that no representations, inducements,
promises or agreements, orally or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein, and that
no other agreement, statement, or promise not contained in this Agreement shall
be valid or binding. Any modification of this Agreement will be effective only
if it is in writing signed by the party to be charged.


9.3               Partial Invalidity.  If any
provision in this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remaining provisions shall nevertheless
continue in full force and effect without being impaired or invalidated in any
manner.


9.4               Law Governing Agreement.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Minnesota.


9.5               Arbitration.  Any
controversy or claim arising out of or relating to this Agreement, or breach
thereof, except claims which may be handled in small claims court, shall be
settled by arbitration in accordance with the rules of the American Arbitration
Association, and judgment on the award rendered may be entered in any court
having jurisdiction.


 


This Agreement is effective as of the 1st day of January,
2004, in the City of South St. Paul, County of Dakota, State of Minnesota.


 


	
  For the Company

  	
   

  	
  Executive

  
	
   

  	
   

  	
   

  
	
  /s/ Robert L. Nelson

  	
   

  	
  /s/ Mark B. Thomas

  	
   

  
	
  Robert L. Nelson, Chairman of the

  	
   

  	
  Mark B. Thomas

  
	
  Board of Directors, BRS, Inc.

  	
   

  	
   

  



 


EXHIBIT A


 


NON-DISCRETIONARY
BONUS


 


Subject
to the provisions contained in the Agreement and herein, Executive is eligible
for an annual Non-Discretionary Bonus for each fiscal year during the term of
this Agreement.  The items utilized in
each fiscal year to determine the size of a Non-Discretionary Bonus, if any,
are listed in column 1 of the chart below. 
The Non-Discretionary Bonus is based on the achievement of more than 80%
of projected items listed in column 1. 
Column 2 indicates the fiscal year projections for fiscal year
2004.  With respect to fiscal year 2005,
and to the extent necessary, fiscal year 2006, the projected annual results
shall be as agreed to by Management and the Board in good faith no later than
60 days after the commencement of such fiscal year.  Non-Discretionary Bonus percentages to be applied in calculating
the bonus each fiscal year are set forth in columns 6 though 11 of the chart
below for each line item category. 
Fiscal year projections for each of the line items, such as the
projections appearing in column 2 for fiscal year 2004 as an example, and
actual figures for each of the items will be calculated in accordance with the
Company’s financial statements prepared by the Company’s accountants in
accordance with the Generally Accepted Accounting Principles (“GAAP”).


 

















 


The
Non-Discretionary Bonus is calculated on a line by line basis.  A Non-Discretionary Bonus could be received
for any or all of the line items A through J. 
As an example, column 2 sets forth projections for fiscal year 2004 for
each of the items in column 1.  Thus,
if, in fiscal year 2004, the Company achieves 80% (reference column 6 for the
line item A, Total Sales) or less of the projection for Total Sales of
$8,386,818 (reference column 2 for line item A, Total Sales), Executive will
not receive a Non-Discretionary bonus for the Total Sales item for fiscal year
2004.  If the Company achieves 90% of
the projection for Total Sales (reference column 7 for the line item A, Total
Sales), he will receive a Non-Discretionary Bonus of 1.3% of Base Salary for
achievement with respect to line item A. 
Similarly, looking further down column 1, if the Company achieves 90% of
the projected Sport Sales of $1,662.940 (reference column 2 for line item B,
Sport Sales), he will receive a Non-Discretionary Bonus of 1.3% of Base Salary
for the achievement with respect to that line item.  [With respect to each line item in column 1, only one of the
columns 6 through 11 will apply; i.e., if Total Sales are 120% of projection,
the Non-Discretionary Bonus associated with that item is 5.6% and not 5.6% +
3.8% (Total Sales for 110% of projection), etc.]


 


The
Non-Discretionary Bonus may consist of awards across different columns for
different line items.  For instance, the
Company may achieve 90% of projection of Total Sales in a given fiscal year,
and thus the Executive would be paid 1.3% of his Base Salary for achievement
with regard to that line item.  In that
same fiscal year, the Company may also achieve, for instance, 110% of
projection for Other GA Sales, 110% of the projection for Total Operating
Expenses, and 100% of projection for Pre-Tax Net Income.  The Executive would thus for that fiscal
year receive a total Non-Discretionary bonus of 23.8% of Base Salary for his
achievements for the line items A) Total Sales, D) Other GA Sales, J) Total
Operating Expenses and I) Pre-Tax Net Income (1.3% for Total Sales plus 5.6%
for other GA Sales plus 9.4% for Total Operating Expenses plus 7.5% for Pre-Tax
Net Income).  In any event, the total
Non-Discretionary Bonus will not exceed 75% of Base Salary then in effect for
that fiscal year.


 


Any performance results falling between percentages
of projection  (such as an achievement
of between 90% and 100% of projection for the line item A, Total Sales) would
be calculated on a pro rata basis between the two ranges.  For example, an achievement of 92% of
projection for line item A, Total Sales, would fall between columns 7 and 8 of
the chart below, and the Executive would receive the adjusted percentage, or
1.54% of Base Salary as follows:  (1)
1.3% (% of Base if 90% of projection met) plus (2) .24% (the pro rata
increase for the incremental percentage over 90%) (1.2% (the difference between
columns 7 and 8) times the difference between the percentage achieved (92) and
(90) divided by 10).


 


Non-Discretionary
Bonus Allocation


 


	
  Columns

  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  9

  	
   

  	
  10

  	
   

  	
  11

  	
   

  
	
  Items

  	
   

  	
  Projected

  2004

  	
   

  	
  Percent of

  Sales

  	
   

  	
  Increase

  over prior

  year

  projection

  	
   

  	
  Percent

  Increase

  	
   

  	
  % of Base if

  80% of

  Projection

  	
   

  	
  % of Base if

  90% of

  Projection

  	
   

  	
  % of Base if

  100% of

  Projection

  	
   

  	
  % of Base if

  110% of

  Projection

  	
   

  	
  % of Base if

  120% of

  Projection

  	
   

  	
  % of Base if

  130% of

  Projection

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A Total Sales

  	
   

  	
  $

  	
  8,386,818

  	
   

  	
  100.0

  	
  %

  	
  $

  	
  1,817,007

  	
   

  	
  27.7

  	
  %

  	
  0.0

  	
  %

  	
  1.3

  	
  %

  	
  2.5

  	
  %

  	
  3.8

  	
  %

  	
  5.6

  	
  %

  	
  7.5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B 
  Sport Sales

  	
   

  	
  1,662,940

  	
   

  	
  19.8

  	
  %

  	
  307,220

  	
   

  	
  22.7

  	
  %

  	
  0.0

  	
  %

  	
  1.3

  	
  %

  	
  2.5

  	
  %

  	
  3.8

  	
  %

  	
  5.6

  	
  %

  	
  7.5

  	
  %

  
	
  C Cirrus Sales

  	
   

  	
  4,620,933

  	
   

  	
  55.1

  	
  %

  	
  460,727

  	
   

  	
  11.1

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  
	
  D Other GA Sales

  	
   

  	
  748,200

  	
   

  	
  8.9

  	
  %

  	
  635,560

  	
   

  	
  564.2

  	
  %

  	
  0.0

  	
  %

  	
  1.9

  	
  %

  	
  3.8

  	
  %

  	
  5.6

  	
  %

  	
  8.4

  	
  %

  	
  11.3

  	
  %

  
	
  E Other Experimental Sales

  	
   

  	
  321,000

  	
   

  	
  3.8

  	
  %

  	
  321,000

  	
   

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  1.3

  	
  %

  	
  2.5

  	
  %

  	
  3.8

  	
  %

  	
  5.6

  	
  %

  	
  7.5

  	
  %

  
	
  F 
  Repairs and Repacks

  	
   

  	
  93,000

  	
   

  	
  1.1

  	
  %

  	
  26,187

  	
   

  	
  39.2

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  
	
  G Parts

  	
   

  	
  820,829

  	
   

  	
  9.8

  	
  %

  	
  40,257

  	
   

  	
  5.2

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  
	
  H Other Revenues

  	
   

  	
  119,915

  	
   

  	
  1.4

  	
  %

  	
  26,055

  	
   

  	
  27.8

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  	
  0.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I Pre-Tax Net Income (before non-cash
  stock and warrant)

  	
   

  	
  1,041,843

  	
   

  	
  12.4

  	
  %

  	
  111,477

  	
   

  	
  12.0

  	
  %

  	
  0.0

  	
  %

  	
  *3.7

  	
  %

  	
  *7.5

  	
  %

  	
  *11.2

  	
  %

  	
  *16.9

  	
  %

  	
  *22.4

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  % of Base

  if 120% of

  Projection

  	
   

  	
  %  of Base

  if 110% of

  Projections

  	
   

  	
  %  of Base

  if 100% of

  Projection

  	
   

  	
  %  of Base

  if 90% of

  Projection

  	
   

  	
  %  of Base

  if 80% of

  Projection

  	
   

  	
  %  of Base

  if 70% of

  Projection

  	
   

  
	
  J Total Operating Expenses

  	
   

  	
  2,051,844

  	
   

  	
  24.5

  	
  %

  	
  433,107

  	
   

  	
  26.8

  	
  %

  	
  0.0

  	
  %

  	
  **3.0

  	
  %

  	
  **6.2

  	
  %

  	
  **9.3

  	
  %

  	
  **14.2

  	
  %

  	
  **18.8

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total% of Base Salary

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0.0

  	
  %

  	
  12.5

  	
  %

  	
  25.0

  	
  %

  	
  37.5

  	
  %

  	
  56.3

  	
  %

  	
  75.0

  	
  %

  
																								



 












*The
calculation of a Non-Discretionary Bonus for achievement with respect to line
item I, Pre- Tax Net Income is determined as follows:


 


(1)   First determine the percentage that the
actual Pre-Tax Net Income for the fiscal year is of the actual Total Sales of
the fiscal year.


 

















 


(2)   Next compare the actual percentage
calculated in (1) above to the projected percentage of sales, which for fiscal
2004 is set forth in column 3 for line item I.


 


For
example, if for fiscal year 2004, actual Pre-Tax Net Income equals 12.4% of
actual Total Sales (100% of the fiscal year 2004 projection as set forth in
column 3 for line item I), then a bonus award of 7.5% of Base Salary would be
paid for achievement with respect to that line item (see Column 8 for line item
I).  As another example, if for fiscal
year 2004, Pre-Tax Net Income equals 11.2% of Total Sales (90% of the fiscal
year 2004 Projection as set forth in column 3 for line item I), then a bonus
award of 3.8% of Base Salary would be paid with respect to that line item (see
Column 7 for line item I).


 


**The
goal with regarding to line item J, Total Operating Expenses, is to decrease
Total Operating Expenses as a percentage of Total Sales.  Thus, the percentages used for determining
the Non-Discretionary Bonus with respect to line item J are separately
reflected immediately above line item J in columns 6 through 11.  The calculation of the bonus is actually made
as follows:


 


(1)   First determine the percentage that the
actual Total Operating Expense for the fiscal year is of the actual Total Sales
of the fiscal year.


 


(2)   Next compare the actual percentage
calculated in (1) above to the projected percentage of sales which for fiscal
year 2004 is set forth in column 3 for line item J.


 


For
example, if for fiscal year 2004, the actual Total Operating Expenses equal
24.5% of actual Total Sales (which equals 100% of the fiscal year 2004
projection as set forth in column 3 for line item J ), then a bonus award of
6.3% of Base Salary would be paid for achievement with respect to line item J
(see Column 8 for line item J).  As
another example, if for fiscal year 2004, the Total Operating Expenses equal
22.1% of Total Sales, which amounts to a 10% reduction in the projected
percentage Total Operating Expenses of Total Sales (or 90% of the fiscal Year
2004 projection as set forth in column 3 for line item J), then a bonus award
of 9.4% of Base Salary would be paid (see Column 9 for line item J).