Exhibit No. 10.01
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT ("Agreement") made and entered into this
20th day of April, 2007, to be effective as of the 1st day of March, 2007 (the
"Effective Date"), by and between TONGA CAPITAL CORPORATION, a Colorado
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 Company wishes to secure the services of the Executive
subject to the contractual terms and conditions set forth herein; and
WHEREAS, the Executive is willing to enter into this Agreement upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to accept such employment with the Company, all upon the
terms and conditions set forth herein.
2. Term of Employment. Subject to the terms and conditions of this
Agreement, the Executive shall be employed for a term commencing on the
Effective Date and ending on the second (2nd) anniversary of the Effective Date
(the "Term") unless sooner terminated as provided for herein. The Term shall
renew automatically for additional one (1) year terms, unless either party gives
written notice no less than ninety (90) days prior to the expiration of the Term
that it does not intend to extend the Term.
3. Duties and Responsibilities.
A. Capacity. During the Term, the Executive shall serve in the
capacity of President and Chief Executive Officer subject to the supervision of
the Board of Directors of the Company (the "Board").
B. Full-Time Duties. During the Term, and excluding any periods of
disability, vacation or sick leave to which the Executive is entitled, the
Executive shall devote substantially all of his business time, attention and
energies to the business of the Company. During the Term, it shall not be a
violation of this Agreement for the Executive to (i) serve on corporate, civic
or charitable boards or committees, (ii) deliver lectures or fulfill speaking
engagements and (iii) manage personal investments, so long as such activities do
not materially interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
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C. Standard of Performance. The Executive will perform his duties
under this Agreement with fidelity and loyalty, to the best of his ability,
experience and talent and in a manner consistent with his duties and
responsibilities.
4. Compensation.
A. Base Salary. During the first six months of the Term, the
Executive shall receive no base salary. Following the first six months of the
Term, the Company shall pay the Executive a salary (the "Base Salary") of
$8,333.33 per month, prorated for partial months of employment. The Base Salary
shall be payable in accordance with the general payroll practices of the Company
in effect from time to time. Notwithstanding the foregoing, upon the Company's
closing of additional financing in the aggregate amount of at least $3 million,
but in no event later than December 31, 2007, the Board shall increase the
Executive's Base Salary to a level determined in good faith after consultation
with the Executive to be a market-level of compensation for a chief executive
officers of similarly situated companies. During the remainder of the Term, the
Base Salary shall be reviewed at least annually by the Board after consultation
with the Executive and may from time to time be increased (but not decreased) as
solely determined by the Board. Effective as of the date of any such increase,
the Base Salary as so increased shall be considered the new Base Salary for all
purposes of this Agreement and may not thereafter be reduced. Any increase in
Base Salary shall not limit or reduce any other obligation of the Company to the
Executive under this Agreement.
B. Annual Performance Bonus. The Executive shall be eligible for
annual discretionary bonus awards payable in cash or common stock of the
Company, as so determined solely by the Board, based on performance objectives
determined annually by the Board.
C. Long-Term Incentives. Upon the execution of this Agreement, the
Company agrees to issue the Executive the initial option award set forth on the
term sheet attached hereto as Exhibit A. Following the initial option award, the
Executive shall be eligible for grants of stock options, restricted stock and/or
other long-term incentives in the discretion of the Board on the same basis as
other similarly situated senior executives of the Company. In addition, in the
event the Company pursues additional rounds of equity financing during the Term,
the Executive shall be offered the option to purchase, at the price offered in
such financing, a sufficient additional equity interest such that if the
Executive exercises this purchase option, the Executive will maintain his
proportionate ownership interest in the Company.
D. Benefits.
(1) If and to the extent that the Company maintains employee
benefit plans (including, but not limited to, pension, profit-sharing,
disability, accident, medical, life insurance, and hospitalization
plans) (it being understood that the Company may but shall not be
obligated to do so), the Executive shall be entitled to participate
therein in accordance with the Company's regular practices with
respect to similarly situated senior executives. The Company will have
the right to amend or terminate any such benefit plans it may choose
to establish.
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(2) The Executive shall be entitled to prompt reimbursement from
the Company for reasonable out-of-pocket expenses incurred by him in
the course of the performance of his duties hereunder, upon the
submission of appropriate documentation in accordance with the
practices, policies and procedures applicable to other senior
executives of the Company. In addition, no later than June 30, 2007,
Executive shall be entitled to reimbursement for his attorneys' fees
incurred in connection with the review and preparation of this
Agreement and related matters in connection with his initial
employment, up to a maximum of $15,000.
(3) The Executive shall be entitled to such vacation, holidays
and other paid or unpaid leaves of absence as are consistent with the
Company's normal policies available to other senior executives of the
Company or as are otherwise approved by the Board.
5. Termination of Employment.
Notwithstanding the provisions of Section 2 hereof, the Executive's
employment hereunder shall terminate under any of the following conditions:
A. Death. The Executive's employment under this Agreement shall
terminate automatically upon his death.
B. Total Disability. The Company shall have the right to terminate
this Agreement if the Executive becomes Totally Disabled. For purposes of this
Agreement, "Totally Disabled" means that the Executive is not working and is
currently unable to perform the substantial and material duties of his position
hereunder as a result of sickness, accident or bodily injury for a period of
three months. Prior to a determination that Executive is Totally Disabled, but
after Executive has exhausted all sick leave and vacation benefits provided by
the Company, Executive shall continue to receive his Base Salary, offset by any
disability benefits he may be eligible to receive.
C. Termination by Company for Cause. The Executive's employment
hereunder may be terminated for Cause upon written notice by the Company. For
purposes of this Agreement, "Cause" shall mean:
(1) conviction of the Executive by a court of competent
jurisdiction of any felony or a crime involving moral
turpitude;
(2) the Executive's willful and intentional failure or willful
and intentional refusal to follow reasonable and lawful
instructions of the Board;
(3) the Executive's material breach or default in the
performance of his obligations under this Agreement; or
(4) the Executive's act of misappropriation, embezzlement,
intentional fraud or similar conduct involving the Company.
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Executive may not be terminated for Cause pursuant to subsections (2) and (3)
above unless Executive is given written notice of the circumstances constituting
"Cause" and a reasonable period to cure such circumstances, which period shall
be no less than thirty (30) days.
D. Termination for Good Reason. The Executive's employment hereunder
may be terminated by the Executive for Good Reason on written notice by
Executive to the Company. For purposes of this Agreement, "Good Reason" means
the occurrence of any of the following circumstances without the Executive's
consent:
(1) a material reduction in the Executive's salary or benefits
excluding the substitution of substantially equivalent
compensation and benefits provided that a reduction in the
level of compensation payable to a substantial portion of
the company's employees or to substantially all the
Company's officers as part of a unilateral cost-cutting
program of the Company will not be taken into account for
acceleration or vesting;
(2) a material diminution of the Executive's duties, authority
or responsibilities as in effect immediately prior to such
diminution;
(3) the relocation of the Executive' principal work location to
a location more than 50 miles from its current location; or
(4) the failure of a successor to assume and perform under this
Agreement.
6. Payments Upon Termination.
A. Upon termination of Executive's employment hereunder for any
reason as so provided for in Section 5 hereof, the Company shall be obligated to
pay and the Executive shall be entitled to receive, within ten (10) days of
termination, Base Salary which has accrued for services performed to the date of
termination and which has not yet been paid. In addition, the Executive shall be
entitled to any vested benefits to which he is entitled under the terms of any
applicable Executive benefit plan or program, vested restricted stock plan and
stock option plan of the Company, and, to the extent applicable, short-term or
long-term disability plan or program with respect to any disability, or any life
insurance policies and the benefits provided by such plan, program or policies,
or applicable law as duly adopted from time to time by the Board.
B. Upon termination of Executive's employment by the Company without
Cause or by the Executive for Good Reason, the Company shall be obligated to pay
and the Executive shall be entitled to receive:
(1) all of the amounts and benefits described in Section 6.A.
hereof; and
(2) a lump sum payment, within 10 days of termination, equal to
twelve (12) months of the Executive's Base Salary; and
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(3) continued participation in all Executive welfare benefit
programs of the Company for the remainder of the Term or, if longer,
until the first anniversary of the Executive's termination of
employment, as if there had been no termination of employment.
Payments under Section 6.B., with the exception of amounts due
pursuant to Section 6.B(1), are conditioned on the execution by the Executive of
a release of all employment-related claims; provided, however, that such release
shall be contingent upon the Company's satisfaction of all terms and conditions
of this Section.
C. Upon termination of the Executive's employment upon the death of
Executive pursuant to Section 5.A., the Company shall be obligated to pay, and
the Executive shall be entitled to receive:
(1) all of the amounts and vested benefits described in Section
6.A.;
(2) any death benefit payable under a plan or policy provided by
the Company; and
(3) continued participation by the Executive's dependents in the
welfare benefit programs of the Company for the remainder of the Term
or, if longer, until the first anniversary of the Executive's
termination of employment, as if there had been no termination of
employment.
D. Upon termination of the Executive's employment upon the
Disability of the Executive pursuant to Section 5.B., the Company shall be
obligated to pay, and the Executive shall be entitled to receive:
(1) all of the amounts and vested benefits described in Section
6.A.;
(2) the Base Salary, at the rate in effect immediately prior to
the date of his termination of employment due to Disability, for the
remainder of the Term, offset by any payments the Executive receives
under the Company's long-term disability plan and any supplements
thereto, whether funded or unfunded, which is adopted by the Company
for the Executive's benefit and not attributable to the Executive's
own contributions; and
(3) continued participation by the Executive and his dependents
in the welfare benefit programs of the Company for the remainder of
the Term or, if longer, until the first anniversary of the Executive's
termination of employment, as if there had been no termination of
employment.
Payments under Section 6.D., with the exception of amounts due
pursuant to Section 6.D(1), are conditioned on the execution by the Executive or
the Executive's representative of a release of all employment-related claims;
provided, however, that such release shall be contingent upon the Company's
satisfaction of all terms and conditions of this Section.
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E. Upon voluntary termination of employment by the Executive for any
reason whatsoever (other than for Good Reason as described in Section 6.B.) or
termination by the Company for Cause the Company shall have no further liability
under or in connection with this Agreement, except to provide the amounts set
forth in Section 6.A.
F. Upon voluntary or involuntary termination of employment of the
Executive for any reason whatsoever or expiration of the Term, the Executive
shall continue to be subject to the provisions of Section 7, hereof (it being
understood and agreed that such provisions shall survive any termination or
expiration of the Executive's employment hereunder for any reason whatsoever).
7. Confidentiality, Return of Property, and Covenant Not to Compete.
A. Confidential Information.
(1) Company Information. The Company agrees that it will provide
the Executive with Confidential Information, as defined below, that
will enable the Executive to optimize the performance of the
Executive's duties to the Company. In exchange, the Executive agrees
to use such Confidential Information solely for the Company's benefit.
The Company and the Executive agree and acknowledge that its provision
of such Confidential Information is not contingent on the Executive's
continued employment with the Company. Notwithstanding the preceding
sentence, upon the termination of the Executive's employment for any
reason, the Company shall have no obligation to provide the Executive
with its Confidential Information. "Confidential Information" means
any Company proprietary information, technical data, trade secrets or
know-how, including, but not limited to, research, product plans,
products services, customer lists and customers (including, but not
limited to, customers of the Company on whom the Executive called or
with whom the Executive became acquainted during the term of the
Executive's employment), markets, software, developments, inventions,
processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing finances or other
business information disclosed to the Executive by the Company either
directly or indirectly in writing, orally or by drawings or
observation of parts or equipment. Confidential Information does not
include any of the foregoing items which has become publicly known and
made generally available through no wrongful act of the Executive or
of others who were under confidentiality obligations as to the item or
items involved or improvements or new versions.
The Executive agrees at all times during the Term and thereafter,
to hold in strictest confidence, and not to use, except for the
exclusive benefit of the Company, or to disclose to any person or
entity without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company.
(2) Former Employer Information. The Executive agrees that he
will not, during his employment with the Company, improperly use or
disclose any proprietary information or trade secrets of any former
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employer or other person or entity and that the Executive will not
bring onto the premises of the Company any unpublished document or
proprietary information belonging to any such employer, person or
entity unless consented to in writing by such employer, person or
entity.
(3) Third Party Information. The Executive recognizes that the
Company has received and in the future will receive from third parties
their confidential or proprietary information subject to a duty on the
Company's part to maintain the confidentiality of such information and
to use it only for certain limited purposes. The Executive shall hold
all such confidential or proprietary information in the strictest
confidence and not disclose it to any person or entity or use it
except as necessary in carrying out the Executive's work for the
Company consistent with the Company's agreement with such third party.
B. Returning Company Documents. At the time of leaving the employ of
the Company, the Executive will deliver to the Company (and will not keep in the
Executive's possession) specifications, drawings blueprints, sketches,
materials, equipment, other documents or property, or reproductions of any
aforementioned items developed by the Executive pursuant to the Executive's
employment with the Company or otherwise belonging to the Company, its
successors or assigns.
C. Notification of New Employer. In the event that the Executive
leaves the employ of the Company, the Executive hereby grants consent to
notification by the Company to the Executive's new employer about the
Executive's rights and obligations under this Agreement.
D. Solicitation of Employees. The Executive agrees that for a period
of twenty-four (24) months immediately following the termination of the
Executive's relationship with the Company for any reason, the Executive shall
not either directly or indirectly solicit, induce or recruit any of the
Company's employees to leave their employment, or take away such employees, or
attempt to solicit, induce, recruit, encourage or take away employees of the
Company, either for himself or for any other person or entity.
E. Covenant Not to Compete.
(1) The Executive agrees that during the course of his employment
and for twenty-four (24) months following the termination of the
Executive's relationship with the Company for any reason, the
Executive will not compete, without the prior written consent of the
Company, as a partner, employee, consultant, officer, director,
manager, agent, associate, investor, or otherwise, directly or
indirectly, own, purchase, organize or take preparatory steps for the
organization of, build, design, finance, acquire, lease, operate,
manage, invest in, work or consult for or otherwise affiliate with any
business, in competition with the Company's bio-diesel business;
provided, however, that the beneficial ownership by Executive of up to
5% of the voting stock of any corporation subject to the periodic
reporting requirements of the Securities and Securities Exchange Act
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of 1934 shall not violate this Section 7. The foregoing covenant shall
cover the Executive's activities in every part of the Territory in
which the Executive may conduct business during the term of such
covenant as set forth above. "Territory" shall mean (i) all counties
in the State of Texas and (ii) all parishes in the State of Louisiana.
(2) The Executive acknowledges that he will derive significant
value from the Company's agreement in Section 7.A(1) to provide the
Executive with that Confidential Information to enable the Executive
to optimize the performance of the Executive's duties to the Company.
The Executive further acknowledges that his fulfillment of the
obligations contained in this Agreement, including, but not limited
to, the Executive's obligation neither to disclose nor to use the
Company's Confidential Information other than for the Company's
exclusive benefit and the Executive's obligation not to compete
contained in subsection (1) above, is necessary to protect the
Company's Confidential Information and, consequently, to preserve the
value and goodwill of the Company. The Executive further acknowledge
the time, geographic and scope limitations of the Executive's
obligations under subsection (1) above are reasonable, especially in
light of the Company's desire to protect its Confidential Information,
and that the Executive will not be precluded from gainful employment
if the Executive is obligated not to compete with the Company during
the period and within the Territory as described above.
(3) The covenants contained in subsection (1) above shall be
construed as a series of separate covenants, one for each city, county
and state of any geographic area in the Territory. Except for
geographic coverage, each such separate covenant shall be deemed
identical in terms to the covenant contained in subsection (1) above.
If, in any judicial proceeding, a court refuses to enforce any of such
separate covenants (or any part thereof), then such unenforceable
covenant (or such part) shall be eliminated from this Agreement to the
extent necessary to permit the remaining separate covenants (or
portions thereof) to be enforced. In the event the provisions of
subsection (1) above are deemed to exceed the time, geographic or
scope limitations permitted by Texas law, then such provisions shall
be reformed to the maximum time, geographic or scope limitations, as
the case may be, then permitted by such law.
F. Representations. The Executive agrees to execute any proper oath
or verify any proper document required to carry out the terms of this Agreement.
The Executive represents that his performance of all the terms of this Agreement
will not breach any agreement to keep in confidence proprietary information
acquired by the Executive in confidence or in trust prior to the Executive's
employment by the Company. The Executive has not entered into, and the Executive
agrees that he will not enter into, any oral or written agreement in conflict
herewith.
8. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement (other than any dispute or controversy arising from a
violation or alleged violation by the Executive of the provisions of Section 7)
shall be settled exclusively by final and binding arbitration in Houston, Texas,
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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.
9. Notices. All notices and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by registered or certified mail (return receipt
requested and with postage prepaid thereon) or by facsimile transmission to the
respective parties at the following addresses (or at such other address as
either party shall have previously furnished to the other in accordance with the
terms of this Section ):
if to the Company:
Tonga Capital Corporation
0000 Xxxxx Xxxxx Xxxx.,
Xxxxxx Xxxx, Xxxxx 00000
Attention: Chairman of the Board
if to the Executive:
Xxxxxx X. Xxxxx
00 Xxxxxxxx Xxxx
Xxxxx XX 00000
10. Amendment; Waiver. The terms and provisions of this Agreement may be
modified or amended only by a written instrument executed by each of the parties
hereto, and compliance with the terms and provisions hereof may be waived only
by a written instrument executed by each party entitled to the benefits thereof.
No failure or delay on the part of any party in exercising any right, power or
privilege granted hereunder shall constitute a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege granted hereunder.
11. Entire Agreement. This Agreement and all Exhibits attached hereto
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior written or oral agreements or
understandings between the parties relating thereto.
12. Severability. In the event that any term or provision of this
Agreement is found to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining terms and provisions hereof shall
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not be in any way affected or impaired thereby, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained therein.
13. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns
(it being understood and agreed that, except as expressly provided herein,
nothing contained in this Agreement is intended to confer upon any other person
or entity any rights, benefits or remedies of any kind or character whatsoever).
The Executive may not assign this Agreement without the prior written consent of
the Company. Except as otherwise provided in this Agreement, the Company may
assign this Agreement to any of its affiliates or to any successor (whether by
operation of law or otherwise) to all or substantially all of its business and
assets without the consent of the Executive. For purposes of this Agreement,
"affiliate" means any entity in which the Company owns shares or other measure
of ownership representing at least 40% of the voting power or equivalent measure
of control of such entity.
14. 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).
15. Headings. The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
16. 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.
[END OF PAGE]
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IN WITNESS THEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has signed this
Agreement as of the Effective Date.
TONGA CAPITAL CORPORATION
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx - Sole Director
EXECUTIVE
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
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Exhibit A
Term Sheet -- Initial Option Award
I. Options. Company will grant Executive an option to purchase 5,000,000
shares of Company common stock, based on the fair market value as of the grant
date, which shall be the date of execution of this Agreement.
A. Fair market value shall be $1.00 per share, the price set forth in the
private placement.
B. Vested and exercisable with respect to (i) 1,000,000 shares on the
grant date, (ii) an additional 1,000,000 shares on the first
anniversary of the Effective Date, (iii) an additional 1,000,000
shares on the date 18 months following the Effective Date, (iv) an
additional 1,000,000 shares on the second anniversary of the Effective
Date and (v) the final 1,000,000 shares on the third anniversary of
the Effective Date. Vesting and exercisability will be accelerated on
a Change in Control, a termination without Cause or a termination for
Good Reason.
C. Options will have a term of 5 years.
D. Company will register the shares subject to the option on Form S-8 or
such other form as may be available, and shall provide a cashless
exercise procedure.
II. Change in Control.
A. In the event of a Change in Control, Company will pay Executive a
gross-up payment to cover the excise tax, if any, imposed under
Section 4999 of the Internal Revenue Code in connection with excess
parachute payments as defined in Section 280G of the Internal Revenue
Code.
B. For purpose of the options, "Change in Control" means: (a) the
consummation of a merger or consolidation of the Company with or into
another entity or any other transaction, the stockholders of the
Company immediately prior to such merger, consolidation or other
transaction own or beneficially own immediately after such merger,
consolidation or other transaction 50% or more of the outstanding
securities of each of (i) the continuing or surviving entity and (ii)
any direct or indirect parent entity of such continuing or surviving
entity; (b) the sale, transfer or other disposition of all or
substantially all of the Company's assets to a Person which is not
owned or controlled by the Company or its stockholders immediately
prior to such sale, transfer or other disposition; (c) individuals
who, immediately following the effective date of this Agreement,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director thereafter whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board; or (d) any transaction as a result of
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which any Person is the "Beneficial Owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing at least 50% of the total voting power
represented by the Company's then outstanding voting securities. For
purposes of this definition of Change in Control, the term "Persons"
means, acting individually or as a group, an individual or a
corporation, limited liability company, partnership, joint venture,
trust, unincorporated organization, association, government agency or
political subdivision thereof or other entity.
II. Lock Up Agreement.
A. The Executive agrees not to sell, assign or otherwise dispose of any
of the options or the shares purchased under the options until the
second anniversary of the Effective Date; provided, however, that any
shares may be transferred by gift prior to such time, to family
members or charities.
B. The Executive agrees to execute an agreement with the Company in
similar form to which all other executives and directors and large
shareholders (in excess of 10%) will execute which provides that the
party shall give the Company written notice of intent to sell shares
or options, which notice shall contain the number of securities to be
sold, proposed price, and terms. The Company shall not unreasonable
withhold consent to sell or transfer, except that if the sale or
transfer would negatively impact a financing or pending registration
statement, the Company may delay permission to sell or transfer by a
period not to exceed 120 days from the date notice of intent to
transfer is given. No sale or transfer may be made without compliance
herewith, and appropriate stop transfer instructions shall be given to
transfer agent for Executive's shares and options.
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