**3. Compensation.****3.1 Annual Base Salary**. As compensation for Executive’s performance of his duties hereunder,the Company shall pay to Executive an initial base annual salary of One Hundred Fifty ThousandDollars ($150,000), starting on the Start Date (“Annual Base Salary”), payable in accordance withthe normal payroll practices of Company, less required deductions for state and federal withholdingtax, social security and all other employment taxes and payroll deductions.**3.2 Annual Bonus**. The Executive shall be eligible to receive an annual cash bonus in anamount up to 40% of his Annual Base Salary (the “Annual Bonus”) beginning in fiscal 2011. Theactual amount of the Annual Bonus will be determined by the Board based on Executive’s achievingCompany and personal goals established and mutually agreed upon between the Executive and the Boardof Directors. Both the goals for the Company and the Executive shall be agreed to by Executive andthe Board of Directors as follows: (i) for the remainder of fiscal year 2010, on or beforeNovember 15, 2010; and (ii) for fiscal year 2011, on or before January 31, 2011; and (iii) for eachfiscal year thereafter, on or before January 31 for that particular year. In addition, the Boardof Directors and the Executive hereby agree that the objectives for the other officers or employeeswill be determined on the same dates as set forth above. If awarded, the Annual Bonus will be paidon or before March 15 of the year following the year in which the Annual Bonus was earned.**3.3 Salary Increase and Special Bonus**. Immediately upon the date that (i) the Company closesa debt or equity financing in which the gross proceeds to the Company equals or exceeds $ 3million; or (ii) completes a corporate partnership transaction that includes gross proceeds to theCompany of at least $3 million to support the Company’s general and administrative expenses (each a“Qualified Transaction”), the Executive’s Annual Base Salary shall be increased to Three Hundredand Fifteen Thousand Dollars ($315,000). In addition, upon the closing of a Qualified Transaction,the Company will pay Executive a bonus equal to the product of (i) $165,000 times (ii) the numberof days between the Start Date and the closing of a Qualified Transaction dividend by 365 days (the“Special Bonus”).**3.4 Equity Grants**. Subject to approval of the Board of Directors, the Executive shall beeligible to receive a stock option grant for 400,000 shares of common stock and 50,000 shares ofrestricted common stock in accordance with Transdel’s 2007 Incentive Stock and Awards Plan. Forthese initial grants of stock options and restricted common stock, they will vest as follows: 25%of the option shares and the restricted stock shall vest immediately upon the Start Date, with thebalance of the option shares and the restricted stock vesting in equal monthly installments overthe next 36 months beginning 30 days after the Start Date; provided, however, the Executive shallgain a vested interest in an additional 10% of the option shares and the restricted stock upon theclosing of a Qualified Transaction. The exercise price of the stock option will be the reportedclosing price of the Company’s common stock on the date of grant. The vesting of all options willfully accelerate upon an Involuntary Termination of Executive’s employment within twelve monthsfollowing a Change of Control (as such terms are defined in Executive’s Option Agreement).
 
 

 
**3.5 Additional Equity Grant**. Contingent upon the closing of a Contingent Financing with (i)any entity that is not listed in Exhibit A, attached hereto and incorporated herein by reference,or (ii) any entity that is introduced to the Company by Executive after the Start Date, the Companywill issue Executive an option to purchase 200,000 shares of common stock, with 25% of the optionshares vested on the date of grant and the balance vesting in equal monthly installments over thenext 36 months. The exercise price of this option will be the reported closing price of theCompany’s common stock on the date of grant, which will take place following the publicannouncement of such Qualified Transaction.**3.6 Future Equity Grants**. In addition, in connection with setting the Executive’s annualcompensation, the Board will agree to examine the Executive’s overall annual compensation packageand issue an appropriate stock option grant or other equity award based on the Company’s comparatorgroup.**4. Health and Welfare Benefit Plans**. The Company will provide to Executive and his familythroughout the term of this Agreement health, dental and vision and other benefits on the same orsubstantially similar terms as those provided to Executive and the other executive officers of theCompany during the first six months of Executive’s employment with the Company.**5. Customary Benefits**. Executive shall be entitled to all customary and usual fringe benefitsand shall be entitled to participate in all savings and retirement plans, practices, policies andprograms generally applicable to employees of the Company that are in effect during the EmploymentTerm, subject to the terms and conditions of Company’s benefitplan documents, as applicable.**6. Business Expenses**. Executive shall be entitled to receive prompt reimbursement for allreasonable, out of- pocket business expenses incurred in the performance of his duties on behalf ofCompany (including, but not limited to, cell phone, computer and internet expenses). In addition,Executive shall be entitled to receive prompt reimbursement for all reasonable travel and lodgingexpenses related to providing services at the Company’s headquarters, with all business expenseplans (i.e., how many flights back and forth per month) and amounts to be pre-approved by theBoard.**7. Vacation**. Executive shall be entitled to paid vacation, personal and sick days eachcalendar year, in accordance with the Company’s plans, policies and programs then in effect.Initially Executive will be granted four (4) weeks of paid vacation, with the Executive’s vacationfor 2010 pro-rated based on the period of his service during 2010.**8. Relocation Expenses**. Contingent upon the closing of a Qualified Transaction, the Companyagrees to reimburse Executive for up to $30,000 in relocation expenses associated with Executive’srelocation to San Diego County; provided, however, that Executive shall promptly repay the Companyfor any reimbursement payments made by the Company to Executive should Executive terminate hisemployment from the Company for other than Good Reason (as such term is defined in Executive’sOption Agreement) within 12 months of the Start Date.
 
 

 
**9. Indemnification**. In connection with the execution of the Agreement, the Company will alsoenter into a customary indemnification agreement with Executive.**10. Severance Benefits**. Executive and the Board recognize the fact that the Company at thetime of this Agreement, does not have the financial capacity to offer a full typical ChiefExecutive Officer severance package. However, upon the closing of a Qualified Transaction, aseverance package of at least one year’s pay and continued company paid healthcare expenses willautomatically be instituted.**11. Section 409A of the U.S. Internal Revenue Code**. The Company and Executive intend in goodfaith that this Agreement comply with the applicable requirements of Section 409A of the InternalRevenue Code of 1986 and that this Agreement be construed, interpreted and administered inaccordance with such intent.**12. Dispute Resolution**. In the event of any dispute or claim relating to or arising out ofExecutive’s employment relationship with Company, this agreement, or the termination of Executive’semployment with Company for any reason (including, but not limited to, any claims of breach ofcontract, defamation, wrongful termination or age, sex, sexual orientation, race, color, nationalorigin, ancestry, marital status, religious creed, physical or mental disability or medicalcondition or other discrimination, retaliation or harassment), Executive and Company agree that alldisputes shall be fully resolved by confidential, binding arbitration conducted by a single neutralarbitrator in San Diego, California through the American Arbitration Association (“AAA”) pursuantto the AAA’s Employment Arbitration Rules, which are available at the AAA’s website at www.adr.orgor by requesting a copy from the President of the Company. The arbitrator shall permit adequatediscovery and is empowered to award all remedies otherwise available in a court of competentjurisdiction and any judgment rendered by the arbitrator may be entered by any court of competentjurisdiction. The arbitrator shall issue an award in writing and state the essential findings andconclusions on which the award is based. To the fullest extent permitted by applicable law, bysigning this letter, Executive and Company both waive the rights to have any disputes or claimstried before a judge or jury.**13. General Provisions**.**13.1 Successors and Assigns**. This Agreement shall be binding upon and inure to the benefit ofthe parties hereto and their heirs, personal representatives and successors, including anysuccessor of the company by reason of any dissolution, merger, consolidation, sale of assets orother reorganization of the Company.**13.2 Waiver**. The rights and remedies of the parties to this Agreement are cumulative and notalternative. Neither the failure nor any delay by any party in exercising any right, power orprivilege under this Agreement or the documents referred to in this Agreement will operate as awaiver of such right, power or privilege; and no single or partial exercise of any such right,power or privilege will preclude any other or further exercise of such right, power or privilege orthe exercise of any other right, power or privilege. To the maximum extent permitted by applicablelaw, (i) no claim or right arising out of this Agreement or the documents referred to in thisAgreement can be discharged by one party, in whole or in part, by a waiver orrenunciation of the claim or right unless in writing signed by the other party; (ii) no waiver thatmay be given by a party will be applicable except in the specific instance for which it is given;and (iii) no notice to or demand on one party will be deemed to be a waiver of any obligation ofsuch party or of the right of the party giving such notice or demand to take further action withoutnotice or demand as provided in this Agreement or the documents referred to in this Agreement.
 
 

 
**13.3 Validity**. The invalidity or unenforceability of any provision or provisions of thisAgreement shall not affect the validity or enforceability of any other provision of this Agreement,which shall remain in full force and effect.**13.4 Headings**. The headings set forth in this Agreement are for convenience only and shall notbe used in interpreting this Agreement.**13.5 Governing Law**. This Agreement will be governed by and construed in accordance with thelaws of the United States and the State of California, without reference to its conflicts of lawsprinciples.**13.6 Counterparts**. This Agreement may be executed in one or more counterparts, all of whichwhen fully executed and delivered by all parties hereto and taken together shall constitute asingle agreement, binding against each of the parties.**13.7 Survival**. Sections 8, 9, 10, 11 and, 12 of this Agreement shall survive Executive’semployment by Company.**13.8 Notices**. All notices, consents, waivers and other communications under this Agreementshall be in writing and will be deemed to have been duly given when (i) delivered by hand (withwritten confirmation of receipt); (ii) sent by facsimile (with written confirmation of receipt); or(iii) when received by the addressee, if sent by a nationally recognized overnight deliveryservice, returnIf to Executive:John Bonfiglio