SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT (the "Agreement") is made and
entered into effective as of October 16, 2007 (the "Separation Date"), by and
between Momentum Biofuels, Inc., a Colorado corporation formerly known as Tonga
Capital Corporation (the "Company") and Xxxxxx X. Xxxxx (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Executive and the Company are parties to that
certain Executive Employment Agreement dated as of April 15, 2007 (the
"Employment Agreement"); and
WHEREAS, the parties mutually desire to arrange for a
separation from the Company and its affiliates and subsidiaries under certain
terms; and
WHEREAS, in consideration of the mutual promises contained
herein, the parties hereto are willing to enter into this Agreement upon the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises, the terms
and provisions set forth herein, the mutual benefits to be gained by the
performance thereof and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Termination of Employment. Effective as of the Separation Date, the
Executive is removed from his position as President and Chief Executive Officer
of the Company. The parties agree that the termination of the Executive's
employment is a termination for the convenience of the Company, and is made
without Cause pursuant to the Employment Agreement.
2. Separation Benefits. The Company agrees to pay or provide, and the
Executive agrees to accept, the benefits set forth in this Section 2 in
consideration for the Executive's service through the Separation Date and the
additional consideration provided by the Executive pursuant to this Agreement.
A. Payment of Expenses. Within 5 days following the Separation Date,
the Company will pay to the Executive $72,095.49, which includes (1)
$57,095.49 ($55,923.40 Principal, $1,172.09 interest), in settlement of
that certain promissory note executed on July 19, 2007 in favor of the
Executive, and (2) $15,000 in reimbursement of attorneys' fees paid by the
Executive in connection with the preparation of his initial employment
agreement.
B. Vesting of Option. The parties agree that the option to purchase
5,000,000 shares of the Company's common stock ("Common Stock"), as set
forth on Exhibit A to the Employment Agreement (the "Option"), is currently
exercisable with respect to 1,000,000 shares of Common Stock. As of the
Separation Date, the Company agrees that the Option will become exercisable
with respect to an additional 500,000 shares of Common Stock, such that the
Option will be exercisable with respect to a total of 1,500,000 shares of
Common Stock. The Option will remain exercisable until April 15, 2012. The
parties agree that a separate agreement amending and restating and
documenting the complete terms of the Option will be executed
contemporaneously herewith in substantially the form attached hereto as
Attachment A.
C. Removal of Lock-Up Restrictions. Effective as of the Separation
Date, the Company agrees to waive the lock-up restrictions described in
Exhibit A to the Employment Agreement with respect to any and all shares of
Common Stock which the Executive has or may acquire in the future.
D. Registration of Outstanding Shares. The Company agrees to cause all
shares of Common Stock currently held by the Executive to be registered on
form SB-2 along with the shares sold in the Company's private placement
completed on September 4, 2007.
3. Mutual Release of Claims.
A. In consideration of the covenants from the Company to the Executive
set forth herein, the receipt and sufficiency of which is hereby
acknowledged, Executive, on his behalf and on behalf of his heirs,
devisees, legatees, executors, administrators, personal and legal
representatives, assigns and successors in interest, hereby IRREVOCABLY,
UNCONDITIONALLY AND GENERALLY RELEASES, ACQUITS, AND FOREVER DISCHARGES, to
the fullest extent permitted by law, Company and each of Company's
divisions, subsidiaries, successors and assigns, agents, or any of them,
from any and all charges, complaints, claims, damages, actions, causes of
action, suits, rights, demands, grievances, costs, losses, debts, and
expenses (including attorneys' fees and costs incurred), of any nature
whatsoever arising prior to the Separation Date; provided, however, that
nothing contained herein shall operate to release any obligations of
Company, its successors or assigns (x) arising under any claims to amounts
or benefits described in this Agreement or (y) to defend and indemnify
Executive to the maximum extent that directors and officers of corporations
are required to be indemnified under Colorado law or the Company's
Certificate of Incorporation and Bylaws for all costs of litigation and any
judgment or settlement amount paid.
B. In consideration of the covenants from the Executive to Company set
forth herein, the receipt and sufficiency of which is hereby acknowledged,
the Company, its assigns and successors in interest, hereby IRREVOCABLY,
UNCONDITIONALLY AND GENERALLY RELEASES, ACQUITS, AND FOREVER DISCHARGES, to
the fullest extent permitted by law, the Executive, his heirs, devisees,
legatees, executors, administrators, personal and legal representatives, or
any of them, from any and all charges, complaints, claims, damages,
actions, causes of action, suits, rights, demands, grievances, costs,
losses, debts, and expenses (including attorneys' fees and costs incurred),
of any nature whatsoever arising prior to the Separation Date.
4. Restrictive Covenants. The Company agrees that the covenants set forth
in Section 7.E. of the Employment Agreement are no longer applicable and to
waive any claim it may have in the future to enforce such section. The Executive
acknowledges that the remaining covenants set forth in Section 7 of the
Employment Agreement are operative and remain in effect in accordance with their
terms.
5. Mutual Nondisparagement; Press Release. The Executive and the Company
and its officers and directors agree to refrain from any criticisms or
disparaging comments, orally or in writing, about each other or in any way
relating to the Executive's employment or separation from employment; provided,
however, that nothing in this Agreement shall apply to or restrict in any way
the communication of information by the Company or the Executive to any state or
federal law enforcement agency or require notice to the Company or the Executive
thereof, and neither the Executive nor the Company will be in breach of the
covenant contained above solely by reason of testimony which is compelled by
process of law. The parties agree that any press release regarding the
Executive's separation will be reviewed and approved by both parties prior to
distribution.
6. Indemnification; D&O Insurance. The Company shall indemnify and hold the
Executive harmless against judgments, fines, amounts paid in settlement, and
reasonable expenses (including attorneys fees) incurred by the Executive in
connection with the defense of any action or proceeding in which he is a party
by reason of his position as an officer or director of the Company or any
affiliated company or entity, so long as the Executive acted in good faith and
in a manner the Executive reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, Employee had no reasonable cause to believe his conduct was
unlawful; provided, however, that such indemnity shall be consistent with
Colorado law and with the provisions contained as of the date of this Agreement
within the Company's bylaws and charter, or the affiliated company or entity's
bylaws or charter, addressing the indemnification of its directors, officers and
authorized representatives for actions of the nature described herein. Until the
date 6 years following the Separation Date, the Company agrees to maintain
reasonable directors and officers liability insurance covering claims incurred
in respect of the period during which the Executive was a director or officer of
the Company.
7. Nonassignability. Neither this Agreement nor any right or interest
hereunder shall be subject, in any manner, to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, whether voluntary or
involuntary, by operation of law or otherwise, any attempt at such shall be
void; provided, that any such benefit shall not in any way be subject to the
debts, contract, liabilities, engagements or torts of the Executive, nor shall
it be subject to attachment or legal process for or against the Executive.
8. Entire Agreement; Modification. This Agreement sets forth the entire
agreement and understanding of the parties concerning the subject matter hereof,
and supersedes all prior agreements, arrangements and understandings relative to
that subject matter including, without limitation, the Employment Agreement. No
term or provision hereof may be modified or extinguished, in whole or in part,
except by a writing which is dated and signed by the parties to this Agreement.
No waiver of any of the provisions or conditions of this Agreement or of any of
the rights, powers or privileges of a party will be effective or binding unless
in writing and signed by the party claimed to have given or consented to such
waiver. No representation, promise or inducement has been made to or relied upon
by or on behalf of either party concerning the subject matter hereof which is
not set forth in this Agreement.
9. Waiver. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be an estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel.
10. Notices. All notices or communications hereunder shall be in writing,
addressed as follows:
To the Company:
Momentum Biofuels, Inc.
Attn: Chairman of the Board
0000 X. Xxxxx Xxxx., Xxxxx 000
Xxxxxx Xxxx, XX 00000
To the Executive:
Xxxxxx X. Xxxxx
00 Xxxxxxxx Xxxx
Xxxxx, Xxxxx 00000
All such notices shall be conclusively deemed to be received and shall be
effective; (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy
or facsimile transmission, upon confirmation of receipt by the sender of such
transmission, or (iii) if sent by registered or certified mail, on the fifth day
after the day on which such notice is mailed.
11. Source of Payments. All cash payments provided in this Agreement will
be paid from the general funds of the Company. The Executive's status with
respect to amounts owed under this Agreement will be that of a general unsecured
creditor of the Company.
12. Taxes. The Executive shall be entitled to receive tax gross-up
payments, to the extent required pursuant to the terms of Exhibit A to the
Employment Agreement, which is expressly incorporated herein. Such payments, if
required, will be made no later than the end of the taxable year in which the
Executive remits the underlying taxes. This Agreement is intended to comply with
Section 409A of the Code (to the extent applicable) and the Company agrees to
interpret, apply and administer this Agreement in the least restrictive manner
necessary to comply with such requirements and without resulting in any
diminution in the value of payments or benefits to the Executive.
13. Severability. If any provision of this Agreement is held to be invalid,
illegal or unenforceable, in whole or part, such invalidity will not affect any
otherwise valid provision, and all other valid provisions will remain in full
force and effect.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, and all of which
together will constitute one document.
15. Titles. The titles and headings preceding the text of the paragraphs
and subparagraphs of this Agreement have been inserted solely for convenience of
reference and do not constitute a part of this Agreement or affect its meaning,
interpretation or effect.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas (except that no effect shall be
given to any conflicts of law principles thereof that would require the
application of the laws of another jurisdiction).
17. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by final and binding
arbitration in Houston, Texas, in accordance with the Employment Arbitration
Rules of the American Arbitration Association ("AAA"). The arbitrator shall be
selected by mutual agreement of the parties, if possible. If the parties fail to
reach agreement upon appointment of an arbitrator within thirty days following
receipt by one party of the other party's notice of desire to arbitrate, the
arbitrator shall be selected from a panel or panels of persons submitted by the
AAA. The selection process shall be that which is set forth in the AAA
Employment Arbitration Rules then prevailing, except that, if the parties fail
to select an arbitrator from one or more panels, AAA shall not have the power to
make an appointment but shall continue to submit additional panels until an
arbitrator has been selected. This agreement to arbitrate shall not preclude the
parties from engaging in voluntary, non-binding settlement efforts including
mediation.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date and year first above written.
MOMENTUM BIOFUELS, INC.
By:________________________
Name:
Title:
EXECUTIVE
____________________________
Xxxxxx X. Xxxxx
ATTACHMENT A
FORM OF AMENDED AND RESTATED OPTION AGREEMENT
