COBRA) UNTIL THE EARLIER
OF 1) DECEMBER 31, 2006, OR 2) SUCH TIME AS EXECUTIVE'S COVERAGE FOR MEDICAL AND
INSURANCE BENEFITS AT A SUBSEQUENT EMPLOYER BECOME FULLY EFFECTIVE AS TO
EXECUTIVE AND HIS CURRENTLY INSURED DEPENDENTS.
(C)
COMPANY EQUITY. ON THE EMPLOYMENT
RESIGNATION DATE, THE COMPANY SHALL ISSUE TO EXECUTIVE 2,500,000 SHARES OF THE
COMPANY'S COMMON STOCK, SUBJECT TO THE REPRESENTATIONS SET FORTH IN SECTION 3.
THE COMMON STOCK WILL BE ISSUED AS A PRIVATE PLACEMENT PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER FEDERAL OR STATE SECURITIES LAWS, AND WILL BE DEEMED
RESTRICTED SECURITIES SUBJECT TO RESTRICTIONS ON TRANSFER PURSUANT TO APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.
(D)
ADDITIONAL PAYMENT. IN LIEU OF ADDITIONAL
AMOUNTS UNDER THE EMPLOYMENT AGREEMENT, THE COMPANY SHALL PAY EXECUTIVE $60,000,
LESS REQUIRED WITHHOLDINGS, IN A SINGLE LUMP-SUM PAYMENT ON THE EMPLOYMENT
RESIGNATION DATE.
(E)
ACCRUED VACATION. ON THE EMPLOYMENT
RESIGNATION DATE, THE COMPANY SHALL PAY EXECUTIVE FOR ALL ACCRUED VACATION DAYS,
WHICH CALCULATION SHALL BE DETERMINED BY THE POLICIES THE COMPANY HAS IN PLACE
FOR SUCH PAYMENTS AS OF THE EFFECTIVE DATE.
(F)
EXPENSES. THE COMPANY AGREES TO REIMBURSE
EXECUTIVE WITHIN 15 DAYS OF THE EMPLOYMENT RESIGNATION DATE FOR ALL ORDINARY AND
NECESSARY EXPENSES INCURRED BY EXECUTIVE ON BEHALF OF THE COMPANY IN THE NORMAL
COURSE OF PERFORMING HIS DUTIES, PROVIDED THAT EXECUTIVE PROVIDES REASONABLE
DOCUMENTATION TO THE COMPANY OF SUCH EXPENSES CONSISTENT WITH THE COMPANY'S
STANDARD EXPENSE REIMBURSEMENT POLICIES.
3.
REPRESENTATIONS OF EXECUTIVE REGARDING
INVESTOR STATUS. IN CONSIDERATION FOR COMPANY GRANTING TO EXECUTIVE SHARES OF
THE COMPANY'S COMMON STOCK PURSUANT TO SECTION 2(C), EXECUTIVE MAKES THE
FOLLOWING REPRESENTATIONS:
(A)
INVESTMENT PURPOSE. THE COMPANY'S COMMON
STOCK IS BEING ACQUIRED FOR INVESTMENT ONLY AND FOR THE EXECUTIVE'S OWN ACCOUNT
AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, THE DISTRIBUTION
THEREOF, NOR WITH ANY PRESENT INTENTION OF DISTRIBUTING OR SELLING ANY OF THE
COMPANY COMMON STOCK.
(B)
RELATIONSHIP; ACCESS TO INFORMATION. AS A
CURRENT OFFICER AND FORMER DIRECTOR OF THE COMPANY, EXECUTIVE HAS AN EXISTING
BUSINESS RELATIONSHIP WITH THE COMPANY. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD
AN OPPORTUNITY TO DISCUSS THE COMPANY'S BUSINESS, MANAGEMENT AND FINANCIAL
AFFAIRS WITH ITS MANAGEMENT. EXECUTIVE HAS RECEIVED AND REVIEWED INFORMATION
ABOUT THE COMPANY WHICH IS PERTINENT TO MAKING AN INFORMED INVESTMENT DECISION
AND HAS HAD THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE ANSWERS FROM, THE
COMPANY AND MANAGEMENT REGARDING THE TERMS AND CONDITIONS OF THE GRANT OF
COMPANY COMMON STOCK. IN ADDITION, EXECUTIVE ACKNOWLEDGES THAT HE HAS THE
CAPACITY TO PROTECT HIS OWN INTERESTS WITH RESPECT TO THE GRANT OF COMPANY
COMMON STOCK.
(C)
RELIANCE ON EXEMPTIONS. THE EXECUTIVE
UNDERSTANDS THAT THE COMPANY COMMON STOCK IS BEING OFFERED AND SOLD TO HIM IN
RELIANCE UPON SPECIFIC EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF UNITED
STATES FEDERAL AND STATE SECURITIES LAWS AND THAT THE COMPANY IS
2
RELYING UPON THE TRUTH AND ACCURACY OF, AND THE EXECUTIVE'S COMPLIANCE WITH, THE
REPRESENTATIONS, WARRANTIES, AGREEMENTS, ACKNOWLEDGMENTS AND UNDERSTANDINGS OF
SUCH EXECUTIVE SET FORTH HEREIN IN ORDER TO DETERMINE THE