Note 5 – Termination of Employment Agreement

The Company and its former Chief Executive Officer, Richard F. Rutkowski, entered into an agreement in December 2014 terminating a prior employment agreement. Under this agreement, Mr. Rutkowski will be paid his annual salary of $359,000 through December 31, 2016 as well as a bonus of $60,000 in 2015, provided employee benefits through December 2015, and received accelerated vesting on 15,625 stock options with an exercise price of $4.88 per share and 14,219 stock options with an exercise price of $9.90 per share which terminate in March 2015.

The following weighted-average assumptions were utilized in the calculation of the fair value of the modified stock options:

Expected life	0.25 years
Weighted average volatility	68	%
Forfeiture rate	46	%
Weighted average risk-free interest rate	0.04	%
Expected dividend rate	-

The liability incurred under this agreement totaled $943,000 which was recognized in general and administrative expense in 2014 and included the $50,000 fair value of the stock option provisions. At December 31, 2014, the remaining liability totaled $842,000 with $470,000 due in 2015 and $372,000 due in 2016.