Description of Chairman of the Board Fee, Base Salary, and 2006 Management Bonus Program Amendment for Applied Innovation Inc.

Summary

This document outlines compensation terms for Applied Innovation Inc.'s Chairman of the Board and President/CEO. Gerard B. Moersdorf, Jr., as Chairman, will receive a $25,000 annual fee, paid quarterly. William H. Largent, President and CEO, will have his base salary increased to $180,000 retroactive to February 1, 2006. Mr. Largent is also eligible for a cash bonus in 2006, ranging from 32.5% to 80% of his base salary, based on the company's revenue and adjusted operating income targets. He must be employed on December 31, 2006, to receive the bonus.

EX-10.1 2 l20372aexv10w1.htm EX-10.1 DESCRIPTION OF CHAIRMAN OF THE BOARD FEE EX-10.1 DESCRIPTION OF CHAIRMAN OF THE BOARD FEE

Exhibit 10.1

Description of Chairman of the Board Fee, Base Salary,
and the Material Terms of the Amendment to Applied Innovation Inc.’s
2006 Management Bonus Program

Chairman of the Board of Directors Fee


Name		Fee

Gerard B. Moersdorf, Jr.		$25,000 per year, payable quarterly

2006 Base Salary Increase


Name		Base Salary

William H. Largent		$180,000⁽¹⁾
President and Chief Executive Officer


(1)		The increase in Mr. Largent’s salary is retroactive to February 1, 2006.

2006 Bonus Calculations

Under the Company’s 2006 Management Bonus Program (the “Program”), William H. Largent has the opportunity to earn cash bonuses based upon the achievement of certain revenue and adjusted operating income targets. Upon the achievement of the threshold revenue and adjusted operating income targets, Mr. Largent will receive a bonus between 32.5% and 80% of his base salary in accordance with the chart below:


	Payout as a Percentage of Base Salary
	Threshold			Target			Maximum
William H. Largent		32.5	%		50	%		80	%

For purposes of the Program, adjusted operating income is defined as operating income exclusive of stock option and restricted stock expenses. Mr. Largent must be employed by the Company on December 31, 2006 to be eligible to receive any bonus under the Program.