Document:

exv10wxny

 

Exhibit 10(n)

[THIS AGREEMENT IS SUBJECT TO ARBITRATION]

EMPLOYMENT, CONFIDENTIALITY, AND NON-COMPETITION AGREEMENT

          This “Agreement” is between the “Company,” Interphase Corporation, and James W. Gragg,
“Executive.” The Company is organized under the laws of the State of Texas. Its principal place
of business is located at 2901 North Dallas Parkway, Suite 200, Plano, TX 75093.

Background Statement

          The Company enables rapid platform design and integration for the global voice and data
communications markets through custom and off-the-shelf communications equipment, embedded software
development suites, and systems integration and consulting services for telecom and enterprise
networks. Executive desires to be employed or continue to be employed by the Company. The Company
desires to employ Executive, provided that as an express, prior condition of such employment,
Executive enters into this Agreement with the Company.

          This Agreement sets forth the terms of Executive’s employment. The parties agree that this
Agreement is supported by valuable consideration, that mutual promises and obligations have been
undertaken by the parties to it, and that the agreement is entered into voluntarily by the parties.

Statement of Agreement

	1.	 	Duties. Executive shall devote Executive’s best efforts to the business of the Company.
Executive shall perform such duties and responsibilities customary to the position of Vice
President of Operations & Fulfillment, including those described on Exhibit A to this
Agreement. Executive shall also perform those duties assigned by the Company from time to
time.

	2.	 	Terms. The “initial term” of employment under this Agreement shall terminate six (6) months
after the date of this Agreement. The initial term of this Agreement shall automatically
renew for successive six (6) month periods, referred to as “successor terms,” unless either
party gives thirty (30) days written notice of its intention not to renew prior to the
expiration of the initial or any successor term or Executive is terminated for cause.

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	3.	 	Terminable Only For Cause. This Agreement may be terminated by the Company prior to the
expiration of the initial term or any successor term as follows:

	 	(a)	 	Due to the death of Executive;
	 
	 	(b)	 	Due to a physical or mental disability which prevents Executive from performing
the essential functions of his full duties for a period of ninety (90) consecutive days
during the term of this Agreement, as determined in good faith by a physician
reasonably acceptable to the Company; or,
	 
	 	(c)	 	For Cause, which is (i) fraud, misappropriation, embezzlement, dishonesty, or
other act of material misconduct against the Company or any affiliate of the Company;
(ii) failure to perform specific and lawful directives of Executive’s superiors; (iii)
violation of any rules or regulations of any governmental or regulatory body, which is
materially injurious to the financial condition of the Company; (iv) conviction of or
plea of guilty or nolo contendere to a felony; (v) violation of the provisions of 8, 9,
10, 11, 13, or 16; or, (vi) substantial failure to perform the duties and
responsibilities of Executive under this Agreement.

In the event of termination under this paragraph, Executive shall be entitled only to
Executive’s base salary earned through the date of termination. No accrued but unpaid
bonuses or commissions shall be due to Executive.

	4.	 	Termination Without Cause or Nonrenewal. In the event the Company gives Executive thirty
days written notice of its intention not renew a term of this Agreement, or if Executive is
terminated without cause after the expiration of the initial term, the Executive shall receive
an amount equal to six-months severance pay based on the Executive’s base salary at the time
of termination, payable in bi-monthly or bi-weekly installments as dictated by the regular pay
dates of the Company. No accrued but unpaid bonuses or commissions shall be due to Executive
under this Paragraph. No other severance payment or benefits shall be due Executive other
than those provided for under this Agreement. Notwithstanding anything stated herein to the
contrary, in the event Executive becomes employed during the period in which the Executive is
eligible to receive post-employment payments under this Paragraph, any amounts received by
Executive in the form of compensation, salary, or other payments shall be offset or shall
reduce any amounts or liability owed by the Company to the Executive under this Paragraph.

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	5.	 	Compensation. Employer shall pay and provide benefits to Executive according to the
provisions of Executive’s compensation plan described in the attached Exhibit B.
Executive’s compensation plan shall be reviewed on a periodic basis. The Company reserves
the right, and Executive hereby authorizes Company, to make deductions from Executive’s pay
or bonuses to satisfy any outstanding obligations of Executive to the Company. The Company
may offset against the final payment of wages or bonuses owed to Executive any amounts due
the Company from Executive.

	6.	 	Changes in Position, Location, or Compensation. If the Company transfers, promotes, or
reassigns Executive to another position or geographic area, or both parties agree to a change
in compensation or benefits during a term of this Agreement or upon the renewal of a term of
this Agreement, an updated employment agreement may be substituted by agreement of the parties
but is not required. Mutually-agreeable changes in compensation or benefits shall be effected
by amendment to and incorporation of a modified Exhibit B, initialed by the parties or their
authorized representative. All provisions, promises, terms or conditions not modified by an
amendment of Exhibits A — C shall remain in effect and shall not be deemed revoked or
modified beyond the changes set forth in one or more amended Exhibits.

	7.	 	Executive Representation/Warranty. Executive represents that Executive is not a party to any
agreement with a third party, or limited by a court order, containing a non-competition
provision or other restriction which would preclude Executive’s employment with Company or any
of the services which Executive will provide on the Company’s behalf.

	8.	 	Duty of Loyalty. Executive acknowledges the common law duties of reasonable care, loyalty,
and honesty which arise out of the principal/agent relationship of the parties. While
employed and thereafter for whatever term the law may impose, Executive shall not engage in
any activity to the detriment of the Company. By way of illustration and not as a limitation,
Executive shall not discuss with any customer or potential customer of the Company any plans
by Executive or any other Executives of the Company to leave the employment of the Company and
compete with the Company.

	9.	 	Company Documents. Executive agrees and acknowledges that Executive holds as the Company’s
property all memoranda, books, papers, letters, and other data, including duplicates, relating
to the Company’s business and affairs (“Company Documents”). This includes Company Documents
created or used by Executive or otherwise coming into Executive’s possession in connection
with the performance of Executive’s job duties. All Company Documents in the possession,
custody, or control of Executive shall be returned to the Company at the time of termination
of employment.

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Confidential Information and Non-Competition

	10.	 	In exchange for the mutual promises and obligations contained in this Agreement, and
contemporaneous with its execution or soon thereafter, Employer promises to deliver to
Executive or permit Executive to acquire, be exposed to, and/or have access to material, data,
and information of the Company and/or its customers or clients that is confidential,
proprietary and/or a trade secret (“Confidential Information”). At all times, both during and
after the termination of employment, the Executive shall keep and retain in confidence and
shall not disclose, except as required in the course of the Executive’s employment with the
Company, to any person, firm or corporation, or use for the Executive’s own purposes, any
Confidential Information. For the purposes of this paragraph, such information shall include,
but is not limited to:

	 	1.	 	The Company’s standard operating procedures, processes, formulae, know-how,
scientific, technical, or product information, whether patentable or not, which is of
value to the Company and not generally known by the Company’s competitors;
	 
	 	2.	 	All confidential information obtained from third parties and customers
concerning their products, business, or equipment specifications;
	 
	 	3.	 	Confidential business information of the Company, including, but not limited
to, marketing and business plans, strategies, projections, business opportunities,
client identities or lists, sales and cost information, internal financial statements
or reports, profit, loss, or margin information, customer price information; and,
	 
	 	4.	 	Other information designated by the Company or deemed by law to be confidential
information.

	11.	 	Non-Competition. In consideration of the mutual promises contained in this Agreement,
the sufficiency of which is acknowledged by the parties, Executive agrees that during the term
of his employment and for a period of twelve (12) calendar months after termination of
employment from the Company (whether voluntary or involuntary), Executive shall not, directly
or indirectly, either as principal, agent, manager, employee, partner, shareholder, director,
officer, consultant or otherwise:

	 	1.	 	Become associated or affiliated with, employed by, or financially interested in
any business operation which competes in the business currently engaged in by Company.
(The phrase “business currently engaged in by the Company” includes, but is not limited
to, the type of activities in which the Company was engaged during Executive’s tenure,
such as designs and delivers high performance connectivity adapters for computer and
telecommunication networks.)

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	 	2.	 	Solicit or attempt to solicit the business or patronage of any person, firm,
corporation, partnership, association, department of government or other entity with
whom the Company has had any contact during a period of twelve (12) calendar months
preceding the date of this Agreement (“Customers”), or otherwise induce such Customers
to reduce, terminate, restrict or otherwise alter business relationships with the
Company in any fashion; or,
	 
	 	3.	 	In any way solicit or attempt to solicit the business or patronage of any
Customers.
	 
	 	4.	 	The parties intend the above restrictions on competition to be completely
severable and independent, and any invalidity or unenforceability of any one or more
such restrictions shall not render invalid or unenforceable any one or more
restrictions.

	12.	 	Limitations on Scope. In recognition of the broad geographic scope of the Company’s business
and the ease of competing with the Company in any part of the United States, the restrictions
on competition set forth herein are intended to cover the following geographic areas:

	 	1.	 	The geographic territory identified on the attached Exhibit C;
	 
	 	2.	 	The cities containing a facility or operation owned or managed by the Company;
and,
	 
	 	3.	 	A fifty (50) mile radius outside the boundary limits of each such city.

The parties intend the above geographical areas to be completely severable and independent,
and any invalidity or unenforceability of this Agreement with respect to any one area shall
not render this Agreement unenforceable as applied to any one or more of the other areas.

	13.	 	Non-Solicitation of Employees. During employment and for a period of twelve (12) months
after termination, Executive agrees not to hire, employ, solicit, divert, recruit, or attempt
to induce, directly or indirectly, any existing or future employee of the Company to leave
their position with the Company or to become associated with a competing business.

Remedies for Breach

	14.	 	Company’s Right to Obtain an Injunction. Executive acknowledges that the Company will have
no adequate means of protecting its rights under Paragraphs 10, 11, 12, or 13 of this
Agreement other than be securing an injunction (a court order prohibiting the Executive from
violating the Agreement). Accordingly, the Executive agrees that the Company is entitled to
enforce this Agreement by obtaining a temporary, preliminary, and permanent injunction and any
other appropriate equitable relief. Executive acknowledges that the Company’s recovery of
damages will not be an adequate means to redress a breach of this Agreement. Nothing

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contained in this paragraph, however, shall prohibit the Company from pursuing any remedies
in addition to injunctive relief, including recovery of damages. Executive expressly
acknowledges that the Company has sole discretion regarding whether to seek a remedy for
breaches of Paragraphs 10, 11, 12, or 13 in a court of competent jurisdiction or by
arbitration procedures outlined in paragraph 15.

	15.	 	Arbitration. Executive and the Company agree that any unresolved dispute or controversy
involving a claim for monetary damages and/or declaratory or injunctive relief arising under
or in connection with this Agreement shall be settled exclusively by arbitration, conducted
before a single arbitrator in Dallas, Texas, according to the rules of the American
Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in
any court having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Notwithstanding the foregoing, nothing in this Paragraph is intended to
subject a claim by either party arising under Paragraphs 10, 11, 12, or 13 to mandatory
arbitration. Any claim arising under Paragraphs 10, 11, 12, or 13 shall be litigated in the
courts of the relevant jurisdiction and venue.

Inventions and Discoveries

	16.	 	Discoveries, Inventions, & Copyrights. Executive shall disclose promptly to the Company any
and all conceptions and ideas for inventions, improvements, and valuable discoveries, whether
patentable or not, which are conceived or made by the Executive, solely or jointly, during
Executive’s term of employment and which pertain to the business activities of the Company.
Executive hereby assigns and agrees to assign all his interest therein to the Company or to
its nominee. Whenever requested to do so by the Company, Executive shall execute any and all
applications, assignments, or other instruments which the Company shall deem necessary to
apply for and obtain Letters of Patent of the United States or any foreign country or to
otherwise protect the Company’s interest therein.

General Provisions

	17.	 	Condition to Seeking Subsequent Employment. Executive agrees to show a copy of this
Agreement to any Competitor with whom Executive interviews during the Executive’s employment
with the Company or with whom the Executive interviews within twelve (12) months following the
effective date of the termination of the Executive’s employment with the Company.

	18.	 	Attorneys’ Fees. If any party shall obtain a final judgment of a court of competent
jurisdiction, subject to no further appeal, pursuant to which any other party shall be
determined to have breached its obligations hereunder or made any misrepresentations, such
prevailing party shall be entitled to recover, in addition to any award of damages, reasonable
attorneys’ fees, costs, and expenses incurred by such party in obtaining such judgment.

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	19.	 	Non-Disparagement and Confidentiality. Except as may be required by law or as consented to
in writing by an authorized officer or agent of the Company, Executive agrees not to make any
statements whatsoever, directly or indirectly, written or oral, which could reasonably become
public, which could be interpreted as embarrassing, disparaging, prejudicial, or in any way
detrimental or inimical to the interests of the Company. Furthermore, Executive agrees to
hold confidential and not to disclose, make public, or to communicate orally or in writing to
any person or entity (other than Executive’s significant other and immediate family), directly
or indirectly, the terms of this Agreement or any matters set forth herein, except only: (a)
as may be compelled by court orders; (b) as may be necessary to enforce the terms of this
Agreement; (c) to legal, accounting, and financial advisors; (d) as may be necessary in
connection with the application for or obtaining loans or credit; (e) as may be necessary to
comply with applicable laws and government regulations; or, (f) as may be necessary or
desirable in obtaining future employment.

	20.	 	Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the
Company, its subsidiaries, affiliates, successors, and assigns.

	21.	 	Nonwaiver. Any waiver by the Company of a breach of any provision of this Agreement must be
in writing and signed by the Company to be effective. Any waiver by the Company of a breach
of any provision of this Agreement shall not operate or be construed as a waiver by the
Company of any different or subsequent breach of this Agreement by Executive.

	22.	 	Applicable Law. This Agreement shall be construed in accordance with and governed by the
laws of the State of Texas, without giving effect to the conflict of laws provisions thereof.

	23.	 	Forum Selection Clause. Any and all causes of action for equitable relief relating to the
enforcement of this Agreement and not otherwise subject to the mandatory arbitration
provisions of Paragraph 15 may, in the Employer’s sole discretion, be brought in the
United States District Court for the Northern District of Texas or the Dallas County District
of the Texas State Courts. The parties agree that the provisions of this paragraph benefit
both Employer and Executive. Any and all causes of action by and between Employer and
Executive can be quickly and efficiently resolved in the agreed-upon forum, which will not
unduly burden either Employer or Executive, and which will substantially aid Employer and
Executive in providing the opportunity for uniform treatment with respect to any issues
relating to the covenants contained in this Agreement.

	24.	 	Entire Agreement. This Agreement represents the entire agreement between the Company and the
Executive with respect to the subject matter hereof, supersedes all prior agreements dealing
with the same subject matter, and may not be changed except in a writing signed by the party
against whom enforcement of the Agreement, as so changed, is sought.

	25.	 	Severability. The invalidity of any term or provision of this Agreement, including any term
or provision of paragraphs 10, 11, 12, or 13 shall not invalidate or otherwise affect any
other

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term or provision of this Agreement.

	26.	 	This agreement shall be effective November 1, 2004.

	 	 	 	 	 	 	 
	 	 	Interphase Corporation	 	 
	 
	 	 	 	 	 	 
	 	 	By: /s/ Gregory
B. Kalush    	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Gregory B. Kalush	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	Its: President and Chief Executive Officer

	 	 	 	 	 
	 

	 	Executive	 	 
	 
	 	 	 	 
	 

	 	/s/ James W.
Gragg         	 	 
	 

	 	 	 	 
	 

	 	James W. Gragg	 	 

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Exhibit A

Job Description

	 	 	 
	Job Title: Vice President, Operations & Fulfillment

	 	Department: Manufacturing
	Reports To: CEO

	 	FLSA Status: Exempt
	Prepared By: D. Shute

	 	Approved By: CEO & HR
	Prepared Date: 10/29/04

	 	Approved Date: 10/29/04

SUMMARY

Responsible for directing and controlling multiple manufacturing and operational functions,
including, Material Planning, Quality Assurance, Incoming Inspection, Inventory Control, Surface
Mount Board Assembly, Rework/touchup of assemblies, Mechanical Assembly, Production Test, Final
Inspection, and Shipping and Receiving. Responsibility also includes the leadership of the Customer
Fulfillment, Documentation Control, Return Material (RMA), and Manufacturing and Test Engineering
Departments. Also chartered with ensuring the overall internal and external customer experience at
Interphase is as close to best-in-class as possible in the areas for which this position is
responsible.

	 	 	 	 	 
	 	 	 
	 	ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other duties may be assigned.
Management reserves the right to change these duties at any time.	 
	 	 
	 	 	 
	 	1.

	 	Ensures Interphase manufactures an extremely high quality product to customer and/or company
specifications, and that the product is delivered on time and in the manner in which the
customer and/or company expects.	 
	 	 
	 	 	 
	 	2.

	 	Responsible for creating and maintaining a best-in-class manufacturing organization
consisting of quality people, processes, programs, and products.	 
	 	 
	 	 	 
	 	3.

	 	Responsible for ensuring the company satisfactorily maintains its ISO:9000 and TL9000 quality
certifications.	 
	 	 
	 	 	 
	 	4.

	 	Ensure effective communication, coordination, processes, and procedures between all
cross-functional areas in Operations & Fulfillment, particularly between order management,
contracts, configurations, production planning, and document control.	 
	 	 
	 	 	 
	 	5.

	 	Sets the long-term vision and mission of the organization, identifying short-term and
long-term objectives, and developing strategies and tactics to link those objectives to
corporate goals. Conveys initiatives, goals and values throughout the organization, and
ensure management team does as well.	 
	 	 
	 	 	 
	 	6.

	 	Ensures key departmental metrics are established and performance to goals are tracked and
reported on.	 
	 	 
	 	 	 
	 	7.

	 	Responsible for participating in
the company’s annual planning process, including
	 

 

 

	 	 	 	 	 
	 	 

	 	 strategic
decision making on future direction of company, developing functional operational plan,
establishing budgets, etc.	 
	 	 
	 	 	 
	 	8.

	 	Personally manages the Engineering Departments associated with manufacturing including
Manufacturing Engineering, Test Engineering and Component Engineering.	 
	 	 
	 	 	 
	 	9.

	 	Assists Production Planning with determination of manufacturing schedules, capacity analysis
and inventory requirements. Involves detailed management of purchasing and inventory based on
input from Executive Master Schedules, Sales Outlooks, OEM forecasts and historical material
requirements.	 
	 	 
	 	 	 
	 	10.

	 	Ensures adequate training of managers and other manufacturing employees in related processes
to accepted industry standards and applicable laws.	 
	 	 
	 	 	 
	 	11.

	 	Provides tactical initiatives and solutions to the manufacturing processes to ensure the
ability to manufacture the advanced technology of LAN, SAN and WAN products.	 
	 	 
	 	 	 
	 	12.

	 	Maintains concise communications with the executive team to provide timely status and
important issues for their review and recommendations.	 
	 	 
	 	 	 
	 	13.

	 	Participates in contract reviews, customer audits, as well as ISO audits, providing
management responsibility representation and manufacturing process review.	 
	 	 
	 	 	 
	 	14.

	 	Leads the investigation and resolution efforts whenever product issues are determined to
exist with a customer.	 
	 	 	 

SUPERVISORY RESPONSIBILITIES

Manages several subordinate managers and staff including the Director of Customer Fulfillment, Sr.
Manager of Manufacturing, Manager of Quality Assurance, and the Test Engineering team. Also, matrix
manages the Manager of Purchasing. Is responsible for the overall direction, coordination, and
evaluation of these units. Carries out supervisory responsibilities in accordance with the
organization’s policies and applicable laws. Responsibilities include interviewing, hiring, and
training employees; planning, assigning, and directing work; appraising performance; rewarding and
disciplining employees; addressing complaints and resolving problems.

	 	 	 	 	 
	 	 	 
	 	QUALIFICATIONS To perform this job successfully, an individual must be able to perform each
essential duty satisfactorily. The requirements listed below are representative of the knowledge,
skill, and/or ability required. Reasonable accommodations may be made to enable individuals with
disabilities to perform the essential functions.  	 
	 	 
	 	 	 
	 	EDUCATION and/or EXPERIENCE	 
	 	 
	 	 	 
	 	Bachelor’s degree or higher in engineering or business, or equivalent, with 15 or more years
experience in the electronic manufacturing industry, or equivalent combination of education and
experience.	 
	 	 
	 	 	 
	 	OTHER SKILLS AND ABILITIES	 
	 	 
	 	 	 
	 	Knowledge of general business and accounting practices related to budgets, costing	 

 

 

	 	 	 	 	 
	 	and inventory
management. Excellent interpersonal skills (written and verbal communication), ability to
effectively lead teams of people toward common goals even under difficult circumstances, and the
ability to motivate others. Strong negotiation and conflict resolution skills necessary. Ability
to effectively conduct presentations to the rest of the company, our customers, and our Board of
Directors. May be requested to participate in industry forums or associations on behalf of the
company.	 
	 	 
	 	 	 
	 	OTHER QUALIFICATIONS	 
	 	 
	 	 	 
	 	Very computer literate. Proficient with the Microsoft Suite of products to create Excel
spreadsheets and PowerPoint presentations, as well as do email and Word documents. Must be able
to conduct effective cost-benefit analyses on capital expenditure requests, automation
enhancements, department initiatives, etc.	 
	 	 
	 	 	 
	 	REASONING ABILITY	 
	 	 
	 	 	 
	 	Must demonstrate the ability to analyze and solve problems related to people and manufacturing
processes.	 
	 	 	 

PHYSICAL DEMANDS The physical demands described here are representative of those that must be met
by an employee to successfully perform the essential functions of this job. Reasonable
accommodations may be made to enable individuals with disabilities to perform the essential
functions.

While performing the duties of this job, the employee is regularly required to talk or hear. The
employee frequently is required to walk; sit; use hands to finger, handle, or feel; and reach with
hands and arms. The employee is occasionally required to stand. The employee must occasionally
lift and/or move up to 25 pounds. Specific vision abilities required by this job include color
vision, close vision, and ability to adjust focus.

WORK ENVIRONMENT The work environment characteristics described here are representative of those
an employee encounters while performing the essential functions of this job. Reasonable
accommodations may be made to enable individuals with disabilities to perform the essential
functions.

This position does require occasional travel, both national and international. Employee must
possess, or be qualified to obtain, a valid passport.

The noise level in the work environment is usually moderate—manufacturing and normal office
environment.

Initials
/s/ GBK

/s/ JWG

Exhibit A

 

 

Exhibit B

Compensation

Base Salary. $5769.24 per pay period ($150,000/year on an annual basis), of which there are
26 in each calendar year, less deductions as may be required by law or authorized by
Executive.

Performance Bonus. Executive shall be eligible for an annual bonus for FY2005 of $30,000
based upon the Corporation’s existing Executive Bonus Plan. This bonus will be tied to
Executive Incentive Targets (MBOs) for 2005. The bonus will be awarded based on achievement
of specific corporate objectives, as determined by the Company.

Stock Options. The Corporation shall, according to the Company’s Long-Term Stock Incentive
Plan, grant to Executive options to purchase 10,000 shares of common stock of the Company.
Executive’s right, title, and interest to any stock options conferred under the Employment
Agreement shall be controlled and governed by terms and conditions of the Company’s
Long-Term Stock Incentive Plan. The per share option price will be determined as of the
close of NASDAQ trading on Executive’s first day of promotion to the Executive level.

Severance Pay. 6 months package, subject to terms and conditions. Please refer to section
4, “Termination Without Cause or Nonrenewal”, on page 2 of the Employment Agreement.

Vacation and Leave. Executive shall be entitled to four (4) weeks of vacation per year,
accrued monthly, and six (6) sick days per year, and any other paid leave benefits provided
for in the Company’s Policy Guide.

Office Furnishings. The Company agrees to provide, and has already provided, office space
and furnishings to Executive commensurate with the Company’s decor and culture.

Executive Benefit Plans. Executive shall be eligible to participate in any profit sharing,
retirement, medical benefit, or disability benefit plan maintained by the Company, if any,
according to the terms and conditions of those plans.

Initials:/s/ GBK

/s/ JWG

Exhibit B

 

 

Exhibit C

Designated Cities — Per Paragraph 11a of Employment, Confidentiality,

and Non-Compete Agreement.

The Continental United States

Initials:
/s/ GBK

/s/ JWG

Exhibit Cexv10wxoy

 

Exhibit 10
(o)

(THIS AGREEMENT IS SUBJECT TO ARBITRATION)

EMPLOYMENT,
CONFIDENTIALITY, AND NON-COMPETITION AGREEMENT

     This
“Agreement” is between the “Company,” Interphase
Corporation, and Prasad Kallur, “Executive.”
The Company is organized under the laws of the State of Texas. Its principal place
of business is located at 2901 North Dallas Parkway, Suite 200,
Plano, TX 75093.

Background Statement

     The Company enables rapid platform design and integration for the global voice and data
communications markets through custom and off-the-shelf communications equipment, embedded software
development suites, and systems integration and consulting services for telecom and enterprise
networks. Executive desires to be employed or continue to be employed by the Company. The Company
desires to employ Executive, provided that as an express, prior condition of such employment,
Executive enters into this Agreement with the Company.

     This Agreement sets forth the terms of Executive’s employment. The parties agree that this
Agreement is supported by valuable consideration, that mutual promises and obligations have been
undertaken by the parties to it, and that the agreement is entered into voluntarily by the parties.

Statement of Agreement

	1.	 	Duties. Executive shall devote Executive’s best efforts to the business of the
Company. Executive shall perform such duties and responsibilities
customary to the position of Vice
President of Strategic Marketing, including those described on
Exhibit A to this Agreement.
Executive shall also perform those duties assigned by the Company from time to time.

	2.	 	Terms. The “initial term” of employment under this Agreement shall terminate six (6)
months after the date of this Agreement. The initial term of this Agreement shall automatically
renew for successive six (6) month periods, referred to as “successor terms,” unless either party
gives thirty (30) days written notice of its intention not to renew prior to the expiration of the
initial or any successor term or Executive is terminated for cause.

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	3.	 	Terminable Only For Cause. This Agreement may be terminated by the Company prior to
the expiration of the initial term or any successor term as follows:

	 	(a)	 	Due to the death of Executive;
	 
	 	(b)	 	Due to a physical or mental disability which prevents Executive from performing the
essential functions of his full duties for a period of ninety (90) consecutive days during the term
of this Agreement, as determined in good faith by a physician reasonably acceptable to the Company;
or,
	 
	 	(c)	 	For Cause, which is (i) fraud, misappropriation, embezzlement, dishonesty, or other act
of material misconduct against the Company or any affiliate of the Company; (ii) failure to perform
specific and lawful directives of Executive’s superiors; (iii) violation of any rules or regulations
of any governmental or regulatory body, which is materially injurious to the financial condition of
the Company; (iv) conviction of or plea of guilty or nolo contendere to a felony; (v) violation of
the provisions of 8, 9, 10, 11,13, or 16; or, (vi) substantial failure to perform the duties and
responsibilities of Executive under this Agreement.
	 
	 	In the event of termination under this paragraph, Executive shall be entitled only to Executive’s
base salary earned through the date of termination. No accrued but unpaid bonuses or commissions
shall be due to Executive.

	4.	 	Termination Without Cause or Nonrenewal. In the event the Company gives Executive thirty
days written notice of its intention not renew a term of this Agreement, or if Executive is
terminated without cause after the expiration of the initial term, the Executive shall receive an
amount equal to six-months severance pay based on the Executive’s base salary at the time of
termination, payable in bi-monthly or bi-weekly installments as dictated by the regular pay dates
of the Company. No accrued but unpaid bonuses or commissions shall be due to Executive under this
Paragraph. No other severance payment or benefits shall be due Executive other than those provided
for under this Agreement. Notwithstanding anything stated herein to the contrary, in the event
Executive becomes employed during the period in which the Executive is eligible to receive
post-employment payments under this Paragraph, any amounts received by Executive in the form of
compensation, salary, or other payments shall be offset or shall reduce any amounts or liability
owed by the Company to the Executive under this Paragraph.

Page 2

 

	5.	 	Compensation. Employer shall pay and provide benefits to Executive according to the
provisions of Executive’s compensation plan described in the
attached Exhibit B. Executive’s
compensation plan shall be reviewed on a periodic basis. The Company reserves the right, and
Executive hereby authorizes Company. to make deductions front Executive’s pay or bonuses to satisfy
any outstanding obligations of Executive to the Company. The Company may offset against the final
payment of wages or bonuses owed to Executive any amounts due the Company from Executive.
	 
	6.	 	Changes in Position, Location, or Compensation. If the Company transfers,
promotes, or reassigns Executive to another position, or geographic area, or both parties
agree to a change in compensation or benefits during a term of this Agreement or upon the renewal
of a term of this Agreement, an updated employment agreement may be substituted by agreement of the
parties but is not required. Mutually-agreeable changes in compensation or benefits shall be
effected by amendment to and incorporation of a modified
Exhibit B, initialed by the parties or
their authorized representative. All provisions, promises, terms or conditions not modified by an
amendment of Exhibits

 A—C shall remain in effect and shall not be deemed revoked or modified beyond
the changes set forth in one or more amended Exhibits.
	 
	7.	 	Executive Representation/Warranty. Executive represents that Executive is not a party to
any agreement with a third party, or limited by a court order, containing a non-competition
provision or other restriction which would preclude Executive’s employment with Company or any of
the services which Executive will provide on the Company’s behalf.
	 
	8.	 	Duty of Loyalty. Executive acknowledges the common law duties of reasonable care,
loyalty, and honesty which arise out of the principal/agent relationship of the parties. While
employed and thereafter for whatever term the law may impose, Executive shall not engage in any
activity to the detriment of the Company. By way of illustration and not as a limitation,
Executive shall not discuss with any customer or potential customer of the Company any plans by
Executive or any other Executives of the Company to leave the employment of the Company and compete
with the Company.
	 
	9.	 	Company Documents. Executive agrees and acknowledges that Executive holds as the
Company’s property all memoranda, books, papers, letters, and other data, including duplicates,
relating to the Company’s business and affairs (“Company Documents”). This includes Company
Documents created or used by Executive or otherwise coming into Executive’s possession in
connection with the performance of Executive’s job duties. All Company Documents in the possession,
custody, or control of Executive shall be returned to the Company at the time of termination of
employment.

Page 3

 

Confidential
Information and Non-Competition

	10.	 	In exchange for the mutual promises and obligations contained
in this Agreement, and
contemporaneous with its execution or soon thereafter, Employer promises to deliver to Executive or
permit Executive to acquire, be exposed to, and/or have access to material, data, and information
of the Company and/or its customers or clients that is confidential, proprietary and/or a trade
secret (“Confidential Information”). At all times, both during and after the termination of
employment, the Executive shall keep and retain in confidence and shall not disclose, except as
required in the course of the Executive’s employment with the Company, to any person, firm or
corporation, or use for the Executive’s own purposes, any
Confidential Information. For the
purposes of this paragraph, such information shall include, but is not limited to:

	 	1.	 	The Company’s standard operating procedures, processes, formulae, know-how, scientific,
technical, or product information, whether patentable or not, which is of value to the Company and
not generally known by the Company’s competitors;
	 
	 	2.	 	All confidential information obtained from third parties and customers concerning their
products, business, or equipment specifications;
	 
	 	3.	 	Confidential business information of the Company, including, but not limited to,
marketing and business plans, strategies, projections, business opportunities, client identities or
lists, sales and cost information, internal financial statements or reports, profit, loss, or
margin information, customer price information; and,
	 
	 	4.	 	Other information designated by the Company or deemed by law to be confidential
information.

	11.	 	Non-Competition. In consideration of the mutual promises contained in this Agreement,
the sufficiency of which is acknowledged by the parties, Executive agrees that during the term of
his employment and for a period of twelve (12) calendar months after termination of employment from
the Company (whether voluntary or involuntary), Executive shall not, directly or indirectly, either
as principal, agent, manager, employee, partner, shareholder, director, officer, consultant or
otherwise:

	 	1.	 	Become associated or affiliated with, employed by, or financially interested in any
business operation which competes in the business currently engaged in by Company. (The phrase
“business currently engaged in by the Company” includes, but is not limited to, the type of
activities in which the Company was engaged during Executive’s tenure, such as designs and delivers
high performance connectivity adapters for computer and telecommunication networks.)

Page 4

 

	 	2.	 	Solicit or attempt to solicit the business or patronage of any person, firm,
corporation, partnership, association, department of government or other entity with whom the
Company has had any contact during a period of twelve (12) calendar months preceding the date of
this Agreement (“Customers”), or otherwise induce such Customers to reduce, terminate, restrict or
otherwise alter business relationships with the Company in any fashion; or,
	 
	 	3.	 	In any way solicit or attempt to solicit the business or patronage of any Customers.
	 
	 	4.	 	The parties intend the above restrictions on competition to be completely severable and
independent, and any invalidity or unenforceability of any one or
more such restrictions shall not render invalid or unenforceable any
one or more restrictions.

	12.	 	Limitations on Scope. In recognition of the broad geographic scope of the Company’s
business and the ease of competing with the Company in any part of the United States, the
restrictions on competition set forth herein are intended to cover the following geographic areas:

	 	1.	 	The geographic territory identified on the attached
Exhibit C;
	 
	 	2.	 	The cities containing a facility or operation owned or managed by the Company; and,
	 
	 	3.	 	A fifty (50) mile radius outside the boundary limits of each such city.
	 
	 	The parties intend the above geographical areas to be completely severable and independent, and any
invalidity or unenforceability of this Agreement with respect to any one area shall not render this
Agreement unenforceable as applied to any one or more of the other areas.

	13.	 	Non-Solicitation of Employees. During employment and for a period of twelve (12) months
after termination, Executive agrees not to hire, employ, solicit, divert, recruit, or attempt to
induce, directly or indirectly, any existing or future employee of the Company to leave their
position with the Company or to become associated with a competing business.

Remedies for Breach

	14.	 	Company’s Right to Obtain an Injunction. Executive acknowledges that the Company will
have no adequate means of protecting its rights under Paragraphs 10, 11, 12, or 13 of this
Agreement other than be securing an injunction (a court order prohibiting the Executive from
violating the Agreement). Accordingly, the Executive agrees that the Company is entitled to enforce
this Agreement by obtaining a temporary, preliminary, and permanent injunction and any other
appropriate equitable relief. Executive acknowledges that the Company’s recovery of damages will
not be an adequate means to redress a breach of this Agreement. Nothing

Page 5

 

	 	 	contained in this paragraph, however, shall prohibit the Company from pursuing any remedies in
addition to injunctive relief, including recovery of damages. Executive expressly acknowledges that
the Company has sole discretion regarding whether to seek a remedy for breaches of Paragraphs 10,
11, 12, or 13 in a court of competent jurisdiction or by arbitration procedures outlined in
paragraph 15.

	 
	15.	 	Arbitration. Executive and the Company agree that any unresolved dispute or controversy
involving a claim for monetary damages and/or declaratory or injunctive relief arising under or in
connection with this Agreement shall be settled exclusively by arbitration, conducted before a
single arbitrator in Dallas, Texas, according to the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.
The direct expense of any arbitration proceeding shall be borne by the Company. Notwithstanding the
foregoing, nothing in this Paragraph is intended to subject a claim by either party arising under
Paragraphs 10, 11, 12, or 13 to mandatory arbitration. Any claim arising under Paragraphs 10, 11,
12, or 13 shall be litigated in the courts of the relevant jurisdiction and venue.

Inventions and Discoveries

	16.	 	Discoveries, Inventions, & Copyrights. Executive shall disclose promptly to the Company
any and all conceptions and ideas for inventions, improvements, and valuable discoveries, whether
patentable or not, which are conceived or made by the Executive, solely or jointly, during
Executive’s term of employment and which pertain to the business activities of the Company.
Executive hereby assigns and agrees to assign all his interest therein to the Company or to its
nominee. Whenever requested to do so by the Company, Executive shall execute any and all
applications, assignments, or other instruments which the Company shall deem necessary to apply for
and obtain Letters of Patent of the United States or any foreign country or to otherwise protect
the Company’s interest therein.
	 
	 	 	General Provisions
	 
	17.	 	Condition to Seeking Subsequent Employment. Executive agrees to show a copy of this Agreement
to any Competitor with whom Executive interviews during the Executive’s employment with the Company
or with whom the Executive interviews within twelve (12) months following the effective date of the
termination of the Executive’s employment with the Company.
	 
	18.	 	Attorneys’ Fees. If any party shall obtain a final judgment of a court of competent
jurisdiction, subject to no further appeal, pursuant to which any other party shall be determined
to have breached its obligations hereunder or made any misrepresentations, such prevailing party
shall be entitled to recover, in addition to any award of damages, reasonable attorneys’ fees,
costs, and expenses incurred by such party in obtaining such judgment.

Page 6

 

	19.	 	Non-Disparagement and Confidentiality. Except as may be required by law or as consented
to in writing by an authorized officer or agent of the Company. Executive agrees not to make any
statements whatsoever, directly or indirectly, written or oral, which could reasonably become
public, which could be interpreted as embarrassing, disparaging, prejudicial, or in any way
detrimental or inimical to the interests of the Company. Furthermore, Executive agrees to hold
confidential and not to disclose, make public, or to communicate orally or in writing to any person
or entity (other than Executive’s significant other and immediate family), directly or indirectly,
the terms of this Agreement or any matters set forth herein, except only: (a) as may be compelled
by court orders; (b) as may be necessary to enforce the terms of this Agreement; (c) to legal,
accounting, and financial advisors; (d) as may be necessary in connection with the application for
or obtaining loans or credit; (e) as may be necessary to comply with applicable laws and government
regulations; or, (e) as may be necessary or desirable in obtaining future employment.
	 
	20.	 	Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the Company, its subsidiaries, affiliates, successors, and assigns.
	 
	21.	 	Nonwaiver. Any waiver by the Company of a breach of any provision of this Agreement must
be in writing and signed by the Company to be effective. Any waiver by the Company of a breach of
any provision of this Agreement shall not operate or be construed as a waiver by the Company of any
different or subsequent breach of this Agreement by Executive.
	 
	22.	 	Applicable Law. This Agreement shall be construed in accordance with and governed by the
laws of the State of Texas, without giving effect to the conflict of
laws provisions thereof.
	 
	23.	 	Forum Selection Clause. Any and all causes of action for equitable relief relating to
the enforcement of this Agreement and not otherwise subject to the mandatory arbitration provisions
of Paragraph 15 may, in the Employer’s sole discretion, be brought in the United States District
Court for the Northern District of Texas or the Dallas County
District of the Texas State Courts.
The parties agree that the provisions of this paragraph benefit both
Employer and Executive. Any
and all causes of action by and between Employer and Executive can be quickly and efficiently
resolved in the agreed-upon forum, which will not unduly burden either Employer or Executive, and
which will substantially aid Employer and Executive in providing the opportunity for uniform
treatment with respect to any issues relating to the covenants contained in this Agreement.
	 
	24.	 	Entire Agreement. This Agreement represents the entire agreement between the Company and
the Executive with respect to the subject matter hereof, supersedes all prior agreements dealing
with the same subject matter, and may not be changed except in a writing signed by the party
against whom enforcement of the Agreement, as so changed, is sought.
	 
	25.	 	Severability. The invalidity of any term or provision of this Agreement, including any
term or provision of paragraphs 10, 11, 12, or 13 shall not invalidate or otherwise affect any
other

Page 7

 

	 	 	term or provision of this Agreement.
	 
	26.	 	This agreement shall be effective May 23, 2005.

	 	 	 	 	 	 	 
	 	 	Interphase Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregory B. Kalush	 	 
	 

	 	 	 	 

Gregory B. Kalush
	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Executive	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Prasad Kallur	 	 
	 	 	 	 	 
	 	 	Prasad Kallur	 	 

Page 8

 

Exhibit A

Job Description

	 	 	 
	Job Title: Vice President, Strategic Marketing

	 	Department: Marketing
	Reports To: CEO & President 
	 	FLSA Status: Exempt
	Prepared By: D. Shute

	 	Approved By: CEO & HR
	Prepared Date: 4/27/05

	 	Approved Date:

SUMMARY

Responsible for leading the Strategic Marketing, Product Management, Technical Writing, and
Marketing Communications functions by performing the following duties personally or through
subordinate managers. Chartered with ensuring the overall internal and external customer experience
at Interphase is as close to best-in-class as possible in the in the areas for which this position is
responsible.

ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other duties may be assigned.
Management reserves the right to change these duties at any time.

	1.	 	Leads Strategic Marketing.
	 
	•	 	Significantly contributes to setting the short-term and long-term vision and mission of
the organization, identifying objectives and developing strategies and tactics to link
those objectives to corporate goals.
	 
	•	 	Personally ensures Interphase Executive team is aware of
current and leading-edge
market & customer trends in a timely fashion, and participates in business
development analysis and decision-making.
	 
	•	 	Triangulates customer trends and market trends for
recommendations for corporate
strategy.
	 
	•	 	Reviews and recommends alternative markets and segments.
	 
	•	 	Determines where the current products could compete
	 
	•	 	Understands what it takes to displace competition in the
current and alternative markets.
	 
	2.	 	Product Line Management
	 
	•	 	Reviews Product Application in Existing Network Elements
	 
	•	 	As technology evolves what can Interphase do to extend the lifecycle?
	 
	•	 	Are there regulatory issues that may extend the lifecycle?
	 
	•	 	Are there marketing communications avenues with certain channels that will extend the life?

 

 

	•	 	Manages Product Positioning for Current Product Lines.
	 
	•	 	Analyze market trends for current products, including the
following: Where current customers are using the products, the pricing elasticity of the current products, the features required to
extend the product lifecycle, the packaging required to create
mid-life kickers of the product, the options to extend the product lifecycle, future technology trends and their impact, and competitive positioning.
	 
	•	 	Recommends Actions to Increase the Lifecycle or Revenue,
including pricing, bundling, partners, channels, and marketing communications strategies.
	 
	3.	 	Manages Marketing Communications & Administration.
	 
	•	 	Responsible for all marketing activities associated with
sales support and product/company promotion.
	 
	•	 	Focuses on existing product lines to determine the roadmap for the product line.
	 
	•	 	Determines how Interphase can extend the line as well as computing the lifecycle.
	 
	•	 	Provides measurement against competition and market share.
	 
	•	 	Oversees RFI/RFQ/RFP response and contract management for the product line.
	 
	4.	 	In conjunction with Sales and Finance, develops competitive pricing strategies.
	 
	5.	 	Responsible for ensuring the company satisfactorily maintains
its ISO:9000 and TL9000 quality certifications. Reviews
and analyses of activities, costs, operations, and
forecast data to determine department progress toward stated goals and objectives.
	 
	6.	 	Confers with Chief Executive Officer to review achievements and discuss required changes in goals or objectives
resulting from current status and conditions.
	 
	7.	 	Establishes and implements promotional and advertising programs.
	 
	8.	 	Responsible for creating and maintaining a best-in-class marketing organization consisting of
quality people, processes, programs, and products.
	 
	9.	 	Ensures effective communication, coordination, processes, and procedures between all
cross-functional areas in the company, particularly between Marketing, Sales, and Engineering.
	 
	10.	 	Conveys initiatives, goals and values throughout the organization, and ensure management team
does as well.
	 
	11.	 	Ensures key departmental metrics are established and performance to goals are tracked and
reported on.
	 
	12.	 	Responsible for participating in the company’s annual
planning process, including strategic decision making on future
direction of company, developing functional operational plan,
establishing budgets, etc.

 

 

	13.	 	Significantly assists with development and maintenance of the company’s Product Roadmap.
	 
	14.	 	Ensures adequate training of managers and other marketing
employees in related processes to accepted industry standards and applicable laws.
	 
	15.	 	Provides tactical initiatives and solutions to the manufacturing processes to ensure
the ability to manufacture the advanced technology of LAN, SAN and WAN products.
	 
	16.	 	Maintains concise communications with the executive team to provide timely status and important
issues for their review and recommendations.
	 
	17.	 	Participates in contract reviews, customer audits, as well as ISO audits, providing
management responsibility representation and manufacturing process review.

SUPERVISORY
RESPONSIBILITIES

Manages several subordinate managers and staff including the director
of Marketing Communications, Sr. Product Manager, Manager of
Technical Writing, and Marketing Communications
Associate. Is responsible for the overall leadership, direction, coordination, motivation, and evaluation of
these units. Carries out supervisory responsibilities in accordance
with the organization’s policies and applicable laws.
Responsibilities include interviewing, hiring, and training
employees; planning, assigning, and directing work; appraising
performance; rewarding and disciplining employees; addressing complaints and
managers and resolving problems.

QUALIFICATIONS To perform this job successfully, an individual must be able to perform each
essential duty satisfactorily. The requirements listed below are representative of the knowledge,
skill, and/or ability required. Reasonable
accommodations may be made to enable individuals with disabilities to
perform the essential functions.

EDUCATION
and/or EXPERIENCE

Bachelor’s Degree required. Preferably an MBA with a major in
Marketing or Economics; or a minimum of ten years related experience
and/or training; or equivalent combination of
education and experience.

 

 

LANGUAGE
SKILLS

Ability to read, analyze, and interpret
common scientific and technical journals, financial
reports, and legal documents. Ability to write Marketing Requirements Specifications and Customer
Requirements Specifications. Ability to respond to common inquiries or complaints from customers,
regulatory agencies, or members of the business
community. Ability to write speeches and whitepapers/articles for
publication that conform to prescribed style and
format. Ability to effectively present information to  various internal and
external audiences.

OTHER
SKILLS AND ABILITIES

Knowledge of general business and accounting practices related to
budgets, costing and inventory management. Excellent interpersonal
skills (written and verbal communication), ability to effective lead
teams of people toward common goals even under difficult
circumstances, and the ability to motivate others. Strong negotiation and
conflict resolution skills necessary. Ability to effectively conduct presentations to customers,
technical industry groups, analysts, the media, the rest of the company, and our Board of
Directors. May be requested to participate in industry forums or associations on behalf of the
company.

MATHEMATICAL
SKILLS

Ability to calculate key business measurements such as ROI and CAGR, and to
conduct simple analysis using such tasks as frequency distribution,
analysis of variance, correlation techniques, sampling theory, and
factor analysis. Ability to present numerical data
in a graphical format to enhance simple visual interpretation by a
variety of audiences.

REASONING
ABILITY 

Ability to define problems, collect data, establish facts, draw valid conclusions. Ability to
interpret an extensive variety of technical instructions in mathematical or diagram form and deal
with several abstract and concrete variables.

OTHER
QUALIFICATIONS

Must be able to handle multiple tasks concurrently, prioritizing as
necessary. Must have good communication skills (reading, writing
speaking, and presentation),understanding of
business and marketing-related concepts,analytical skills, creative
thinking skills, skills in tactfully
addressing various tasks, and ability to occasionally work under pressure or in a
deadline-oriented environment. Must be very computer literate. Proficient with the
Microsoft Suite of products to create PowerPoint presentations, Word documents,
Excel spreadsheets,
and do email. Must be able to conduct effective cost-benefit analyses on capital expenditure requests, automation enhancements,
department initiatives, etc.

 

 

PHYSICAL
DEMANDS

The physical demands described here are representative of those that must be met by an
employee to successfully perform the essential functions of this job. Reasonable accommodations may
be made to enable individuals with disabilities to perform the essential functions.

While performing the duties of this job, the employee is regularly required to talk or hear. The
employee frequently is required to walk; sit; use hands to finger, handle, or feel; and reach with
hands and arms. The employee is occasionally required to stand. The employee must occasionally lift
and/or move up to 25 pounds. Specific vision abilities required by this job include color vision,
close vision, and ability to adjust focus.

WORK
ENVIRONMENT

The work environment characteristics described here are
representative of those an the employee encounters while performing
the essential functions of this job. Reasonable
accommodations may be made to enable individual with disabilities to perform the essential functions.

This
position does require regular and significant travel, both national and international. Employee must possess, or be qualified to obtain, a valid passport.

	 	 	 	 	 	 	 
	 

	 		 	 	 	 
	 

	 	Initials	 	/s/ PRK	 	 
	 

	 	 	 	 

	 	 
	 

	 		 	/s/ GBK	 	 
	 

	 	 	 	 

	 	 

Exhibit A

 

 

Exhibit B

Compensation

Base
salary. $6,730.77 per pay period ($175,000/year on an annual basis), of which there are 26 in
each calendar year, less deductions as may be required by law or
authorized by Executive.

Key Talent Bonus. Executive shall
 be eligible for an annual bonus for FY2005 of $40,000 based upon the Corporation’s
existing Executive Bonus Plan. This bonus will be tied to Executive
Incentive Targets (MEOs) for 2005. The bonus will be awarded based on
achievement of specific corporate objectives, as determined by the Company, and is subject to change annually by the Bord of
Directors.

Equity. The Corporation shall,
according to the company’s Long-Term Stock Incentive Plan and with the approval of the CEO
 and Board of Directors, gant to Executive 18,000 shares of restricted stock of
the Company. Executive’ right, title, and interest to any stock conferred under the Employment
 Agreement shall be controlled and governed by terms and conditions
of the Company’s Long-Term Stock Incentive Plan. The per share
price will be determined as of the close of NASDAQ trading on
Executive’s first day of employment.

Relocation
Bonus. $50,000 lump sum
(grossed up for taxes), sign-on bonus to cover relocation expenses, payable 1st pay period after start date. Executive is free to
choose how these funds are spent, and no receipts are required. If Executive leaves within 1 year,
bonus will be payable back to the company 100%. If Executive leaves after 1 year, but prior to 2
years, bonus will be payable back to the company on a monthly pro-rated basis. If company
terminates Executive, repayment will not be required.

Temporary Living Expenses. Executive will be provided
with a furnished, one-bedroom corporate apartment near the Plano office and a rental car, both paid for by the Company,
up to a maximum of 90 days from commencement of employment. In addition, reimbursement for
airfare between Dallas and San Diego to visit family, and for spouse’s visit to
Dallas for house-hunting purposes during the 90 day relocation period
will be paid for by the Company up to a maximum of $10,000 in
compliance with the company’s
standard Travel & Entertainment Policy.

Executive Benefit Plans. 
Based on the plans in force at the time, and subject to change at
any time, the Executive will be provided with a comprehensive and competitive benefits package
including medical, dental, vision, life, AD&D, STD, LTD, etc., all effective on hire date. Executive
will be 401k eligible with matching contribution after 60 days of employment. The Executive shall
be eligible to participate in any benefit plan maintained by the
Company, according to the terms and conditions of those plans. For
the 2005 Plan Year, 50% of the premiums charged to non-Executive
employees will be paid by company for the Executive and
their eligible dependents for medical, dental, vision, and life insurance.

	 	 	 	 	 	 	 
	 

	 		 	 	 	 
	 

	 	Initials	 	/s/ PRK	 	 
	 

	 	 	 	 

	 	 
	 

	 		 	/s/ GBK	 	 
	 

	 	 	 	 

	 	 

 

 

Executive and their eligible dependents for medical, dental, vision, and life insurance.
Effective January 1, 2006, the Executive will pay same as all other Executive and non-Executive employees for health premiums

Severance Pay. 6 months package, subject to terms and conditions. Please refer to section 4,
“Termination Without Cause or Nonrenewal”, on page 2 of the Employment Agreement.

Executive
Disability Plan. The Executive is eligible to apply for the Company’s Executive
Disability Plan. If approved by the carrier for coverage, the premiums will be paid for by the
Company.

Vacation and Leave. Executive stall be entitled to three (3) weeks of vacation per year, accrued
monthly, and six (6) sick days per year, and any other paid leave benefits provided for in the
Company’s Policy Guide.

Cell
Phone & Computer. Executive will be furnished with a laptop and cell phone/PDA for business
purposes.

Office
Furnishings. The Company agrees to provide office space and furnishings to Executive
commensurate with the Company’s decor and culture.

	 	 	 	 	 	 	 
	 

	 		 	 	 	 
	 

	 	Initials	 	/s/ PRK	 	 
	 

	 	 	 	 

	 	 
	 

	 		 	/s/ GBK	 	 
	 

	 	 	 	 

	 	 

Exhibit B

 

 

Exhibit C

	 	 	 	 
	 

	 	Designated
Cities —	Per Paragraph 11a of
Employment, Confidentiality, and Non-Compete Agreement.

The Continental United States

	 	 	 	 	 	 	 
	 

	 		 	 	 	 
	 

	 	Initials	 	/s/ PRK	 	 
	 

	 	 	 	 

	 	 
	 

	 		 	/s/ GBK	 	 
	 

	 	 	 	 

	 	 

Exhibit C

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