Document:

United State Securities and Exchange Commission Edgar Filing

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of November 3, 2008, is by and between KOWABUNGA!, INC., a Nevada corporation (“Company”) and RICHARD K. HOWE, an individual residing 33 Chenal Circle, Little Rock, AR  72223 (“Executive”).

WHEREAS, Company desires to employ Executive, and Executive desires to accept such employment, pursuant to the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, as well as for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.

Employment.  Company hereby employs Executive, and Executive accepts such employment, in accordance with the terms and conditions hereinafter set forth. Executive shall report daily to Company’s principal offices at 15550 Lightwave Drive, 3rd Floor, Clearwater, Florida 33760 (the “Location”), or at other offices or locations as may subsequently be designated by Company.  Executive shall relocate his permanent residence to the Tampa Bay area by the summer of 2009, to reside within daily commuting distance from Company’s Location.  Executive’s commencing employment is contingent upon a background and credit check satisfactory to Company in its sole and absolute discretion, and Executive hereby gives his consent for any and all such checks.

2.

Duties.  As of November 17, 2008 (the “Start Date”) until such time as the Board of Directors of Company (the “Board”) may, in its sole and absolute discretion, otherwise decide, Executive shall be employed as Chief Executive Officer of Company (“CEO”) and, while he serves as CEO, a management Director on Company’s Board, subject to such travel as the rendering of services hereunder may require, and Executive shall perform and discharge well and faithfully the duties which may be assigned to him from time to time by the Board in connection with the conduct of Company’s businesses (the “Business”). Executive shall report directly to, be initially appointed a member of, and be subject to the management oversight and direction of, the Board.  The duties of Executive shall be those that are customarily performed by a chief executive officer of the same or similar title at a public company, together with such additional, supplemental or alternative duties as may from time to time be required provided such additional duties are reasonably related to the scope of employment of Executive and his title.  Executive shall be subject to reelection to, or removal from, the Board by Company’s shareholders to the same extent as any other director.  Executive shall serve as a director only for as long as he is 

the CEO and shall immediately resign from the Board should he cease being the CEO for any reason whatsoever.

3.

Extent of Services.  During the Term (as defined in Section 5), Executive shall expend 100% of Executive’s available working time and best efforts exclusively on Company matters and the Business, expending such time as is required to perform Executive’s duties for Company to the highest standards, and shall not be engaged (whether during normal business hours or otherwise) in any other business or professional activity, except as provided in Section 8 of this Agreement.  Executive shall at all times faithfully, industriously, and to the best of Executive’s ability, experience, and talent, perform all duties that may be required of and from Executive pursuant to the express terms of this Agreement. Executive shall devote all of Executive’s time, attention, knowledge, and skill solely and exclusively to the Business and interests of Company, and Company shall be entitled to all benefits, emoluments, profits, or other issues arising from or incident to any and all work, services, and advice of Executive. Executive shall travel on Company business as often and to the extent required or appropriate for Executive’s position and the needs of the Business.  

4.

Compensation.  

(a)

Salary.  For all services rendered by Executive under this Agreement, Company shall pay Executive for the period from the Start Date through Term of this Agreement, as hereinafter defined, an annual base salary in an amount equal to three hundred ninety-five thousand dollars ($395,000) (“Salary”).  Executive shall be paid in accordance with the customary payroll practices of Company, subject to such deductions and withholdings as may be required by law or agreed to by Executive. Any raises, bonuses or additional amounts paid to Executive during the Term (as hereinafter defined) shall be solely within the discretion of the Board and shall not to any extent increase the amount payable to Executive by Company pursuant to Section 6(e) of this Agreement.

(b)

Bonus.  Executive shall be eligible for a discretionary annual bonus of up to 75% of Salary commencing in 2009, as determined by Company’s Compensation Committee using 85% to 110% attainment criteria (“Bonus”). Under no circumstances is any Bonus to any extent guaranteed or assured.  In order to receive the Bonus Executive must have put into place with the Compensation Committee’s approval a similar bonus plan for all his direct reports using the same criteria as used for Executive’s Bonus and differing only in salary and percentages. 

(c)

Stock Options.  Upon Executive’s executing and delivering this Agreement, (which date shall be the “Execution Date”) and actually commencing work at the Location, Executive shall be entitled to receive an option grant under Company’s 2005 Long Term Incentive Plan (“LTIP”) to purchase the 2,367,623 shares of Company’s common stock, $.001 par 

value per share.  Of this amount, 2,029,391 shares (the “Vesting Options”) shall vest one-third per year for each year of Executive’s employment with all such shares vested upon the third anniversary of Starting Date.  The additional 338,232 shares (the “Conditional Options”) shall immediately vest upon Company’s market capitalization, based upon its common stock price as quoted on the AMEX or any other national exchange on which such shares are then listed, priced on the day after the respective quarterly earnings call, remaining above $150 million for the period between any two quarterly earnings calls prior to the fifth anniversary of Executive’s Starting Date while the Executive is employed, subject to the terms and conditions of the LTIP.  The term of the Vesting Options and the Conditional Options shall be five (5) years, not to exceed the expiration of the LTIP.  The date of grant of all such options shall be the Execution Date and the exercise price shall equal the greater of the Fair Market Value of Company’s stock as defined in the LTIP or $0.25 per share. Should there be a change in control of Company prior to all the Executive’s options having vested and the Executive is thereafter terminated without “For Cause” (as hereinafter defined), or Executive’s salary or bonus is diminished or Executive’s duties and responsibilities, or operational authority are materially diminished, during the one year period following a Change in Control (a “Change of Control Event”), then the Vesting Options and the Conditional Options shall be deemed to vest in full and become immediately exercisable. Should the Executive not be terminated without “For Cause” following a Change of Control Event, then any and all options granted hereunder shall vest in accordance with the terms and conditions of such options except that the Conditional Options contingency shall be deemed to have been satisfied.

(d)

Bonus Option Election.  At his option, Executive may elect to receive any earned and payable bonus in the form of additional stock options priced at the greater of $0.25 or current FMV on the date of election with the number of shares determined according to the following formula:  2 x Amount  of Bonus divided by the greater of $0.25 or current FMV on the date of election, provided that the Board may cancel or limit this election if, in the judgment of the Board, insufficient shares are available under the LTIP or other restrictions on Company which make such issuance of additional stock options prohibited, impractical or unreasonably expensive to Company. Any and all options granted hereunder as a result of Executive’s election shall be deemed to vest in full and become immediately exercisable.

(e)

Benefits.  During the term of his employment, Executive shall be generally entitled to participate at the highest Company paid level in benefit plans or programs which are generally made available to employees of Company, subject to all of the rules, regulations, terms and conditions applicable thereto.  Executive shall be entitled to fifteen (15) paid-time-off days per year, to be used per Company policy, and up to 

seven (7) paid holidays and two (2) “floater” holidays per year, all pro-rated or limited to remaining holidays during the first year of employment.  No benefit plans or programs are guaranteed; any and all such plans may be terminated at any time for any reason with or without notice.  Company shall have the right at any time to put into place arrangements pursuant to which some or all of Executive’s compensation and/or benefits set forth above shall be provided to Executive by or through other companies affiliated with Company (rather than directly by Company), and Executive shall fully cooperate with such arrangements and shall promptly sign such documents and take all such other actions as shall be deemed necessary by the legal counsel for Company in order to facilitate such arrangements.

(f)

Relocation Assistance.  Company will pay to Executive $2,000 per month as a temporary Florida housing allowance until Executive sells his home in Little Rock, AR, not to exceed twenty-four (24) months.  Company will reimburse (a) the reasonable and customary real estate commission not to exceed 6% of the sale price, and closing costs, legal fees and transfer taxes not to exceed $5,000 in the aggregate, which Executive actually pays upon the closing of the sale of his current residence, and (b) the reasonable and customary costs of relocation from Little Rock, AR area to the Tampa, FL area based on the average of three competitive bids.  If Executive voluntarily resigns from Company within the first twelve (12) months of employment, Executive shall reimburse Company for the full commission and relocation amounts hereby paid to him.

(g)

Business Expense Reimbursement.  Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement, including, without limitation, expenses for travel, entertainment and similar items directly related to his duties and responsibilities (“Business Expenses”). Company may, at Company’s sole option, provide Executive with a Company corporate credit card to be used by Executive strictly to pay for ordinary and usual Business Expenses and Company agrees to pay the monthly credit card bills for all approved charges. Executive shall charge absolutely no personal expenses to such credit card and all “points” or other benefits resulting from card usage shall belong to Company. Company will reimburse Executive for all reasonable out-of-pocket Business Expenses incurred by the Executive upon presentation by Executive, from time to time, of accounts of such expenditures (appropriately itemized and approved consistent with the Company’s policy).

5.

Term.  The term of this Agreement (the “Term”) shall commence on the Start Date and shall continue until the earlier of (a) December 31, 2011 or (b) the employment of Executive is terminated in accordance with Section 6 of this Agreement.  The Term of this Agreement may be extended upon the mutual agreement of Company and Executive.  Six (6) months prior to the end of the 

original or any extended Term, Company and Executive shall each then inform the other whether it or he is willing to further extend the Term.

6.

Termination of Employment.

(a)

Death or Disability of Executive.  The employment of Executive under this Agreement shall terminate upon his death or, at the option of Company, if Executive shall have failed to fully perform, or be unable to fully perform his duties hereunder as a result of his disability or illness, for any cumulative and not necessarily consecutive sixty (60) days during any 360 day period. Upon termination pursuant to this subsection, Executive shall only be entitled to be paid Salary earned or accrued through the date of termination, and no severance payment shall be due or payable to Executive in such event.  For purposes of this Agreement, (a) Executive’s failure to fully perform shall be determined by Company in its reasonable discretion at the occurrence of such specified period; and (b) Executive’s inability to fully perform his duties by reason of disability or illness shall as determined by Company based upon the advice of a reputable licensed physician in the Tampa/Clearwater metropolitan area mutually acceptable to Executive and Company, which consent shall not be unreasonably withheld, conditioned or delayed.  Executive shall promptly present himself to, and shall fully cooperate with, such physician for examination and for any and all related medical tests.

(b)

Termination “For Cause”.  Company shall have the right to terminate the employment of Executive under this Agreement “For Cause” (as such term is defined below) at any time without further liability or obligations to Executive, excepting only that Executive shall be entitled to be paid for accrued Salary, Bonus and expense reimbursements earned or accrued through the date of termination, and absolutely no severance payment shall be due or payable to Executive in such event. For purposes of this Agreement, “For Cause” shall refer to any of the following events as determined in the judgment of the Board: (1) Executive’s gross neglect of or negligence in the performance of his duties, including, but not limited to, materially unsatisfactory performance, failure to materially achieve his approved goals and objectives, breach of his duties to Company, demonstrable disloyalty, malfeasance or misfeasance as a officer of Company, or any knowing acts or knowing failures to act which result in damages to Company or its reputation; (2) Executive’s failure or refusal to follow reasonable instructions given to him by the Board; (3) Executive’s violation of any provision of Company’s Articles of Incorporation, Bylaws, or of any other stated policies, standards, or regulations; (4) Executive being charged or indicted in regard to any criminal offense, other than a misdemeanor not involving moral turpitude or a minor traffic violation, or sued in civil litigation which in any way materially relates to, or calls into question Executive’s integrity, honesty or fitness, or which interferes with his ability, to perform his duties; (5) Executive’s violation or breach of any 

material term, covenant or condition contained in this Agreement, which is not cured within 60 days after written notice thereof is received by Executive, if such violation or breach is capable of being cured; (6) Executive failure to disclose to Company any material matters concerning Executive’s background, qualifications, credentials and character which bring into question Executive’s fitness or ability to serve in the position for which he is hired; or (7)  the U.S. Securities and Exchange Commission (the “SEC”) issues an order prohibiting Executive from acting as an officer of Company.

(c)

Termination for Good Reason.  Executive shall have the right to terminate his employment with Good Reason.  “Good Reason” means (i) the failure of Company to pay any material payment due Executive under Section 4 hereof; (ii) a Change of Control Event has occurred; (iii) Company’s material breach of this Agreement, which is not cured within 60 days after written notice thereof is received by Company; (iv) the removal of the Executive from the Board by the Directors without cause; (v) while CEO in good standing pursuant to the Agreement, and for any period during the Term, the shareholders of Company fail to elect, fail to re-elect or remove Executive as a Company director or (vi) involuntary Relocation of the Executive more than 50 miles from the Location following a Change of Control.  Executive may otherwise voluntarily resign and terminate his employment at any time without Good Reason or any entitlement to Severance, as hereinafter defined, provided that under all circumstances he gives not less than ninety (90) days prior written notice to Company, time being of the essence, regarding which Company may waive or shorten any portion of such resignation notice period in Company’s sole and absolute discretion.

(d)

Accrued Salary.  In the event that Company or Executive terminates this Agreement for any reason whatsoever, Executive shall be paid (less all applicable deductions) all earned and accrued Salary and expense reimbursements earned or accrued for services rendered up to the date of termination. Executive shall also be entitled to receive a pro-rata bonus based upon the Bonus he would subsequently have earned for the year in which Executive’s employment was terminated, if any, paid on the original date such bonus would have been payable.

(e)

Severance Payment; Limitation of Liability.  Except in the case of termination pursuant to Section 6(a) (Death or Disability of Executive) or Section 6(b) (Termination “For Cause”), in the event that Company terminates this Agreement prior to the end of the Term, or Executive terminates for Good Reason, Executive shall be paid, on Company’s usual payroll dates, a severance amount (“Severance”) equal to the lesser of (a) the Salary and Bonus, if any Bonus attainment criteria are satisfied post-termination, less all applicable deductions, that would have become due and owing to Executive on such payroll date through the one (1) year 

anniversary of the date of Executive’s termination of employment (the “Severance Period”), as if Executive’s employment with Company had not been terminated prior thereto or (b) if at any time during the Severance Period Executive shall obtain any other compensation for his labor or services, Severance which otherwise would have been payable to Executive but for such other compensation, shall be reduced so that only the net positive difference, if any, between the cumulative Salary amount which Company would have paid and the total compensation received or receivable as a result of Executive’s labor or services shall be paid to Executive.  During the Severance Period, Executive shall notify Company in writing of all such other compensation not later than the date such compensation commences to be earned or accrued.  In no event shall Company’s liability to Executive exceed the amount of Severance payable under this Agreement, whether such claims is based in law or in equity nor shall Company be liable to Executive or any third party claiming from, through or concerning, Executive for any damages, whether indirect, special, incidental, or consequential damages, including lost profits, in excess of Severance.  

7.             Non-Competition, Non-Solicitation and Non-Disparagement.

(a)

Executive acknowledges that the services to be performed by him under this Agreement are of a special, unique, unusual, extraordinary and intellectual character, and the provisions of this Section 7 are reasonable and necessary to protect the Business.

(b)

In consideration of the foregoing acknowledgments by Executive, and in consideration of the compensation and benefits to be paid or provided to Executive by Company, Executive covenants that he will not, during the term of this Agreement and for a period of one (1) year thereafter, directly or indirectly:

(1)

except in the course of his employment hereunder, and except as permitted by Section 8 hereof, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, any business whose products or services materially compete with the products or services of Company or any Company Affiliate; 

(2)

whether for Executive’s own account or for the account of any other person, solicit business of the same or similar type of business then being carried on by Company or any Company Affiliate, from any person or entity known by Executive to be a customer of Company or any Company Affiliate, whether or not Executive had personal contact with such person or entity during and by reason of Executive’s employment with Company;

(3)

whether for Executive’s own account or the account of any other person (i) solicit, employ or otherwise engage as an employee, independent contractor or otherwise, any person who is or was an employee of Company or any Company Affiliate at any time during the  term of this Agreement or in any manner induce or attempt to induce any employee of Company or any Company Affiliate to terminate his employment with Company or Company Affiliate, or (ii) interfere with Company’s or any Company Affiliate relationship with any person or entity, including any person or entity who at any time during the term of this Agreement was an employee, contractor, supplier or customer of Company or any Company Affiliate; or

(c)

If any covenant of this Section 7 is held to be unreasonable, arbitrary or against public policy, such covenant shall be considered to be divisible with respect to scope, time and geographic area, and such lesser scope, time or geographic area, or all of them, as a court of competent jurisdiction may determine to be reasonable, not arbitrary and not against public policy, shall be effective, binding and enforceable against Executive.

(d)

Executive acknowledges and agrees that should Executive transfer between or among Company and any of its affiliated companies including, without limitation, any parent, subsidiary or other corporately related entity that directly or indirectly controls, or is under common control with, or is controlled by, such specified entity (a “Company Affiliate”) wherever situated, or otherwise become employed by any Company Affiliate, or should he be promoted or reassigned to functions other than the duties set forth in this Agreement, or should Executive’s compensation and benefit package change (either higher or lower), the terms of this Section 7 shall continue to apply with full force.  As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of the management or policies (whether through ownership of securities or partnership or other ownership interests, by contract, or otherwise).

(e)

Executive agrees and acknowledges that Company does not have an adequate remedy at law for the breach or threatened breach by Executive of this Section 7 and agrees that Company may, in addition to the other remedies which may be available to it under this Agreement, file suit in equity to enjoin Executive from such breach or threatened breach.

(f)

Notwithstanding the foregoing, except in the case of termination pursuant to Section 6(a) (Death or Disability of Executive) or Section 6(b) (Termination “For Cause”), in the event that (i) Company terminates this Agreement prior to the end of the Term, or Executive terminates for Good 

Reason and (ii)  Company has not paid to Executive the Severance payable pursuant to Section 6(e) (Severance Payment; Limitation of Liability), which is not cured and made current within 30 days after written notice thereof is received by Company, then and in lieu of Severance Executive may instead elect, in written notice given to Company, to waive any Severance which may otherwise be due and owing to Executive pursuant to Section 6(e) above in exchange for the restrictions of Section 7(b)(1) being deemed null and void and unenforceable against Executive, and Company shall not attempt to enforce the same following Executive’s election.

8.             Certain Representations.  Executive acknowledges that as a publicly traded company functioning under the Sarbanes-Oxley Act, Company and its subsidiaries are subject to close scrutiny regarding their activities, internal financial controls, and public comments and disclosures. To appropriately protect Company and its subsidiaries, Executive expressly acknowledges and agrees as follows:

(a)

Executive’s employment by Company shall be full-time employment.  Except as expressly  provided herein, during the period of such employment by Company, Executive shall not have, provide or perform any work, advice, assistance, services, consultation, analysis, input, participation, or interest whatsoever (including but not limited to any financial interest, direct or indirect, legal or beneficial) in or for the benefit of any corporation, partnership, joint venture, limited liability company, sole proprietorship, or any other entity whatsoever, whether for-profit or non-profit and regardless of whether or not such entity competes against the Business; provided, however, that the provisions of this Section 8 shall not be construed as preventing Executive from engaging in a reasonable level of charitable activities or from investing his personal assets in passive real estate investments or in publicly traded stocks.  Any stock investment shall be limited to securities listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934 of enterprises which do not compete with Company or any Company Affiliate or the Business.  Executive may not purchase or otherwise acquire more than one percent (1%) of any class of securities of any such public enterprise and may not participate in the activities of such enterprise or provide any work, services or assistance on the part of Executive in the operation or the affairs of the enterprises in which such investments are made and in which his participation shall be limited solely to that of a passive investor.  All such volunteer activities and investments shall not interfere with the performance of Executive’s work and duties for Company, as determined by the Board in its sole and absolute discretion. 

(b)

During Executive’s employment and at any time following any termination of Executive’s employment by Company for any reason and 

under any circumstances whatsoever, except as otherwise required by law or compelled by a court of competent jurisdiction, Executive shall not:

(1)

make any public or private disclosures regarding Company, any Company Affiliate or any Company Related Party, including material non-public information, except disclosures of such information as may be appropriate and approved for disclosure, or has been previously publicly disclosed by Company from time to time in press releases or in filings with the SEC, pursuant to all applicable laws, rules and regulations applicable to Company, any Company Affiliate, any Company Related Party or Executive in his position, including, but not limited to, all Company policies and procedures and US Securities laws and pronouncements of the Securities and Exchange Commission (collectively with the broadest interpretation, “Laws”), and, regarding any new disclosures to be made by Executive, only after consultation with Company’s general counsel, senior executive staff and/or the Board as appropriate; and

(2)

make any statements, engage in any conduct, or create, author, issue, publish or disseminate any communication including, without limitation, to Company’s clients, prospective clients, employees, affiliates, network members, publishers, customers and vendors) that could be constructed by a reasonable person to be derogatory, disparaging, embarrassing, or negative as to Company, any Company Affiliate, or any of their respective shareholders, officers, directors, employees, attorneys, representatives or agents (collectively, a “Company Related Party”) or which to any extent damages or interferes with the business and affairs of any Company Related Party, or impairs the good will, business or personal reputation or good name of any of them.  This prohibition shall apply to all communication or conduct of any type, whether oral or written, without regard to the particular medium or media in which such communication or conduct occurs.

(c)

Executive further represents, warrants and covenants that:

(1)

Executive is not subject to any contract, non-compete agreement, decree or injunction which prohibits or restricts his performance of the duties set forth herein with Company, the continued operation of the Business or the expansion thereof to other geographical areas, customers and suppliers or lines of business; and

(2)

no claims or lawsuits are pending at the time of this Agreement against Executive or any corporation or other entity wherein he was previously or is an officer or director.

(3)

Executive is fully eligible to serve as the top executive of a US public company and fully in compliance, and hereafter shall fully comply, with all Laws.  

(d)

If during the period of his employment by Company, Executive violates this Section 8 or any of the representations, warranties and covenants made by Executive in this Section 8 prove to be false, then following discovery of the violation or falsehood, Executive shall immediately pay and turn over to Company any and all software, software programs, other work product, copyrights, domain names, contract rights, accounts receivable, cash, stock, options, warrants, membership interests, other interests, salary, bonuses, royalties, commissions, fees and any and all other assets, consideration and compensation of any nature whatsoever which has been obtained by Executive or any of his immediate family members or affiliates (directly or indirectly, legally or beneficially) in regard to such violation.

9.

Nondisclosure of Proprietary Information.  Executive shall not, either during or at any time after his employment with Company, disclose to anyone outside Company or use other than for the purpose of the Business, any Proprietary Information (as defined below) or any information received in confidence by Company from any third party. For purposes of this Agreement, “Proprietary Information” is information and data, whether in oral, written, graphic, or machine-readable form relating to Company’s or any Company Affiliate’s past, present and future businesses, including, but not limited to, computer programs, routines, source code, object code, data, information, documentation, know-how, technology, designs, procedures, formulas, discoveries, inventions, trade secrets, improvements, concepts, ideas, product plans, research and development, personnel information, financial information, customer lists and marketing programs and including, without limitation, all documents marked as confidential or proprietary and/or containing such information, which Company or any Company Affiliate has acquired or developed and which has not been made publicly available by Company.  In additional, Executive shall execute and deliver Company’s standard terms and conditions of employment agreement required of all employees and shall be equally bound by the terms, conditions and requirements thereof.

10.

Return of Company Property.  Promptly following the termination of Executive’s employment with Company or upon the earlier request of Company, Executive shall deliver to Company all property and materials belonging to Company, including, but not limited to, all materials containing or relating to any Proprietary Information in any written or tangible form that Executive may have in his possession or control, the originals of notes, sketches, drawings, specifications, memoranda, correspondence, files, documents, records, data, inventions, notebooks, computers, telephonic or other electronic equipment, laptop docking stations, PDAs, routers, printers, facsimile machines, monitors, portable computer storage devices and media keys and all passwords or pass 

codes, however described and without limitation and without making or keeping any copies thereof then in Executive’s possession or under Executive’s control, whether prepared by Executive or by others.

11.

Ownership of Work Product.  Executive hereby assigns to Company his entire right, title and interest in all “Developments”.  “Developments” means any and all intellectual property, including but not limited to any idea, invention, design of a useful article (whether the design is ornamental or otherwise), computer program including source code and object code and related documentation, and any other work of authorship, or audio/visual work, written, made or conceived solely or jointly by Executive during Executive’s employment with Company, whether or not patentable, subject to copyright or susceptible to other forms of protection that relate to the actual or anticipated businesses or research or development of Company; suggested by or result from any task assigned to Executive or work performed by Executive for or on behalf of Company; or created on or off Company’s premises or during or outside of Executive’s normal work hours. Executive acknowledges that the copyrights in Developments created by him in the scope of his employment belong to Company by operation of the law, or may belong to a customer of Company pursuant to a contract between Company and such customer. Developments shall be given the broadest and most expansive interpretation in favor of Company.  In connection with any of the Developments assigned above, Executive agrees to promptly disclose them to Company, and Executive agrees, on the request of Company, to promptly execute separate written assignments to Company and to do all things reasonably necessary to enable Company to secure patents, register copyrights or obtain any other forms of protection for Developments in the United States and in other countries. In the event Company is unable, after reasonable effort, to secure Executive’s signature on any letters patent, copyright or other analogous protection relating to a Development, whether because of Executive’s physical or mental incapacity or for any other reason whatsoever, Executive irrevocably designates and appoints Company and its duly authorized officers and agents as his agents and attorneys-in-fact to act for and in his behalf and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright or other analogous protection thereon, with the same legal force and effect as if executed by Executive. Company, Company Affiliates, their licensees, successors and assigns (direct or indirect), are not required to designate Executive as the inventor or author of any Development, when such Development is distributed publicly or otherwise. Executive waives and releases, to the extent permitted by law, all of his rights to such designation and any rights concerning future modifications of such Developments. 

12.

Possession of Other Materials.  Executive represents that he will not use in the performance of Executive’s responsibilities for Company, any materials or documents of a former employer which are not generally available to the public or which did not belong to Executive, unless Executive has obtained 

written authorization from the former employer or other owner for their possession and use and provided Company with a copy thereof

13.

Indemnification.  Executive agrees to indemnify, defend and hold harmless Company, all Company Affiliates and all Company Related Parties from and against all liabilities, obligations, losses, expenses, costs (including attorneys fees), claims, deficiencies and damages incurred or suffered by Company and all Company Affiliates and all Company Related Parties resulting from Executive’s breach of any agreement with a third party restricting competition, intellectual property, confidential information or disclosure, without any limitations or qualifications whatsoever, and as an express inducement to Company to enter into this Agreement, Executive waives any and all arguments, grounds, facts, circumstances, reasons, basis, and defenses whatsoever, whether based in law or in equity, regarding the full force and effect and legally binding nature of this agreement of Executive to indemnify and hold harmless Company and each Company Affiliate or Company Related Party, as aforesaid. This indemnification provision shall survive any termination of Executive’s employment relationship with Company.

14.

Assignment.  This Agreement may not be assigned by Executive under any circumstances. This Agreement may be assigned by Company, or to any successor of Company, so long as such assignee assumes all of Company’s obligations hereunder.

15.

Notices.  Any and all notices, requests, demands and other communications required or otherwise contemplated to be made under this Agreement shall be in writing and shall be provided by one or more of the following means and shall be deemed to have been duly given (a) if delivered personally, when received, (b) if transmitted by facsimile or email, on the date of transmission with receipt of a transmittal confirmation provided that a copy of such notice is also sent by first-class U.S. mail on the same day, (c) if by overnight mail, on the second (2nd) business day following the date of deposit with such overnight mail service, or such earlier delivery date as may be confirmed in writing to the sender by such service or (d) if by the USPS, by Certified Mail – Return Receipt Requested, on the fifth (5th) business day following the date of deposit with the USPA, or such earlier delivery date as may be confirmed in writing by such Return Receipt.  All such notices, requests, demands and other communications shall be addressed to the parties at the addresses below or to such other address or facsimile number as a party may have specified to the other party in writing delivered in accordance with this paragraph.

				
	 
	To Executive:

	Mr. Richard K. Howe

	 

	 

	 

	c/o Kowabunga! Inc.

	 

	 

	 

	15550 Lightwave Drive, 3rd Floor 

	 

	 

	 

	Clearwater, Florida 33760

	 

	 

	 

	Facsimile and Email addresses to be provided

	 

				

				
	 

	To Company:

	Kowabunga!, Inc. 

	 

	 

	 

	Attention: Secretary and General Counsel

	 

	 

	 

	15550 Lightwave Drive, 3rd Floor

	 

	 

	 

	Clearwater, Florida 33760

	 

	 

	 

	Facsimile: 727-342-0063  

	 

	 
	 
	vaughn.duff@kowabunga.com

	 

	 
	 
	 
	 

16.

Waiver of Breach.  Any waiver by Company or Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by the other party. Failure to insist upon strict compliance with any provision of this Agreement shall not be deemed a waiver of such provision or of any other provision in the Agreement.

17.

Choice of Law, Jury Waiver.  This Agreement shall be deemed to have been made in the State of Florida.  The validity, interpretation and performance of this Agreement, and any and all other matters relating to Executive’s employment and separation of employment from Company shall be governed by, and construed in accordance with the internal law of Florida, without giving effect to conflict of law principles. Both parties agree that any action, demand, claim or counterclaim (jointly “Action”) relating to (i) Executive’s employment and separation of his employment, and (ii) the terms and provisions of this Agreement or to its breach, shall be exclusively commenced in Florida in a court of competent jurisdiction. Both parties further acknowledge that venue shall exclusively lie in Florida and consent to the personal jurisdiction of any state or federal court located in Pinellas or Hillsborough Counties, Florida.

18.

Entire Agreement.  This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings, oral and written, among the parties to this Agreement with respect to the subject matter hereof.  The language of this Agreement shall be construed as a whole, according to its fair meaning, and not strictly for or against any party.  This Agreement may not be modified or otherwise amended except by a written instrument that expressly refers to this Agreement and is executed and delivered by the parties hereto. 

19.

Counterparts; Delivery.  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.  This Agreement may also be executed and delivered by facsimile signature and 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.

20.

Binding Effect.  This Agreement shall inure to the benefit of and be fully binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns.

21.

Severability.  If a court of competent jurisdiction determines that any of the provisions of this Agreement are illegal, excessively broad or otherwise unenforceable, then this Agreement shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any such illegal, overbroad or unenforceable provisions shall be deemed, without further action by any person or entity, to be modified and/or limited to the extent necessary to render the same valid and enforceable.  

22.

Additional Provisions.  Executive’s employment shall be publicly announced in a press release issued by Company not later than four days after Executive’s executing the Employment Agreement, which release shall be mutually acceptable to Company and Executive, such consent not to be unreasonably withheld, conditioned or delayed.

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the day and year first written above.

				
	EXECUTIVE: RICHARD K. HOWE

	 
	KOWABUNGA!, INC.

	 

	 

	 

	 

	 

	 

	/s/ RICHARD K. HOWE

	 

	By:

	/s/ STAN ANTONUK

	 Richard K. Howe, individually

	 

	 

	 Stan Antonuk 

	 
	 

	Title:

	 Chief Executive OfficerJune 26, 2000

Exhibit 10.1

LOAN AND STOCK PLEDGE AGREEMENT

THIS LOAN AND STOCK PLEDGE AGREEMENT (the "Agreement"), entered into as of January 16, 2008, by and between SUN AMERICAN BANCORP, a Delaware corporation (the "Borrower"), and SILVERTON BANK, N.A. (the "Lender").

On the date hereof the Borrower is borrowing up to the principal amount of Eight Million and 00/100 Dollars ($8,000,000.00) from the Lender (the "Loan"), which will be evidenced by the Note as defined herein below.  The Lender is willing to make the Loan to the Borrower on the terms and conditions described below.  The Borrower and Lender agree that the payment and performance of all obligations relating to the Loan will be secured through the pledge to the Lender of 99.9% of the issued and outstanding shares of capital stock owned or hereafter acquired by the Borrower (the "Stock") in SUN AMERICAN BANK, a Florida banking corporation, having its main office at 9293 Glades Road, Boca Raton, Florida 33434 (the “Bank”). Certain capitalized terms used in this Agreement are defined in Section 22 of this Agreement.

In consideration of the premises and the mutual agreements and representations in this Agreement, the Lender and the Borrower agree as follows:

1.

Security Interest.

(a)

The Borrower hereby unconditionally grants and assigns to the Lender and its successors and assigns a continuing security interest in and security title to the Stock. The Borrower hereby delivers to the Lender all of its right, title and interest in and to the Stock, together with certificates representing the Stock and stock powers endorsed in blank, as security for (i) all obligations of the Borrower to the Lender hereunder, and (ii) payment and performance of all obligations of the Borrower to the Lender under the Note, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due.  If the Borrower receives, for any reason whatsoever, any additional shares of the capital stock of the Bank, such shares shall thereupon constitute Stock to be held by the Lender under the terms of this Agreement and the Borrower shall immediately deliver such shares to the Lender, together with stock powers endorsed in blank by the Borrower.  Beneficial ownership of the Stock, including all voting, consensual and dividend rights, shall remain in the Borrower until the occurrence of a Default.

(b)

The Amount of the Loan shall not exceed twenty five percent (25%) of the Subsidiary’s Tangible Tier 1 Capital, which shall be measured quarterly.  If prior to repayment in full of the Loan, the amount of the Loan exceeds twenty five percent (25%) of the Subsidiary’s Tangible Tier 1 Capital, the Borrower shall either pay down the outstanding principal balance of the Loan or promptly deliver to the Lender on demand additional collateral of a type and value acceptable to the Lender (and the Lender's judgment in valuing same shall be conclusive) so that the sum of the value of such additional collateral plus the Stock is equal to or in excess of the aforementioned twenty five (25%).  The Borrower shall also execute any security documents the Lender may request to evidence and perfect the Lender's rights in such additional collateral.  If at any time such additional collateral is no longer required pursuant to this Section 1(b), the Lender shall release its security interest in such additional collateral upon the request of the Borrower.

2.

Representations and Warranties.  The Borrower represents and warrants to the Lender as follows:

(a)

The Borrower is a corporation duly organized, validly existing, and in good standing under the laws of the State of Florida and is qualified to do business in all jurisdictions where such qualification is necessary.  The Borrower is registered as a bank holding company with the Board of Governors of the Federal Reserve System and the Florida Department of Banking and Finance.  The chief executive office of the Borrower and the principal place of business of the Borrower where the records of the Borrower are kept is 9293 Glades Road, Boca Raton, Florida 33434 and the Borrower's U.S. employer identification number is 65-0325364.

(b)

The Bank is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.  The Borrower owns 100% of the Stock (consisting _____________ Shares of SUN AMERICAN BANK, a Florida banking corporation, represented by certificate Nos. ____ through ____) and there are no other outstanding shares of capital stock and no outstanding options, warrants or other rights, which can be converted into shares of capital stock of the Bank, and the Bank shall not issue any additional shares without the prior written consent of Lender.  The Bank has all requisite corporate power and authority and 

possesses all licenses, permits and authorizations necessary for it to own its properties and conduct its business as presently conducted.

(c)

Each financial statement of the Borrower or any Subsidiary which has been delivered to the Lender presents fairly the financial condition of the Borrower or such Subsidiary as of the date indicated therein and the results of its operations for the periods shown therein.  There has been no material adverse change, either existing or threatened, in the financial condition or operations of the Borrower or any Subsidiary since the date of such financial statement.

(d)

The Borrower has full power and authority to execute and perform the Financing Documents.  The execution, delivery, and performance by the Borrower of the Financing Documents (i) have been duly authorized by all requisite action by the Borrower, (ii) do not violate any provision of law, and (iii) do not result in a breach of or constitute a default under any agreement or other instrument to which the Borrower or any Subsidiary is a party or which the Borrower or any Subsidiary is bound.  Each of the Financing Documents constitutes the legal, valid, and binding obligation of the Borrower enforceable in accordance with its terms.

(e)

Except for the security interest created by this Agreement, the Borrower owns the Stock free and clear of all liens, charges, and encumbrances.  The Stock is duly issued, fully paid and non-assessable, and the Borrower has the unencumbered right to pledge the Stock.

(f)

There is no action, arbitration, or other proceeding at law or in equity, or by or before any court, agency, or arbitrator, nor is there any judgment, order, or other decree pending, anticipated, or threatened against the Borrower or any Subsidiary or against any of their properties or assets which might have a material adverse effect on the Borrower, any Subsidiary, or their respective properties or assets, or which might call into question the validity or enforceability of the Financing Documents, or which might involve the alleged violation by the Borrower or any Subsidiary of any law, rule or regulation.

(g)

No consent or other authorization or filing with or of any governmental authority or other public body on the part of the Borrower or any Subsidiary is required in connection with the Borrower's execution, delivery, or performance of the Financing Documents; or if required, all such prerequisites have been fully satisfied.

(h)

None of the transactions contemplated in this Agreement (including, without limitation, the use of the proceeds of the Loan) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, or any regulations issued pursuant thereto.

(i)

The following are attached as exhibits hereto: true, correct and complete copies of (i) the Borrower's and the Bank's Articles of Incorporation as in effect as of the date hereof; (ii) certificates of existence/evidence of active status for the Borrower and the Bank issued by the Florida Secretary of State; (iii) the bylaws of the Borrower in effect immediately prior to the adoption of the resolutions referred to below (and such bylaws have not been further altered or amended and have been in full force and effect at all times since the adoption of such resolutions through the date hereof); (iv) the bylaws of the Bank as of the date hereof; (v) resolutions (the "Resolutions") of the Board of Directors of the Borrower duly adopted as of even date herewith via an Action By Written Consent.  A quorum for the transaction of business has signed same and the Resolutions have been since adoption and are now in full force and effect and have not been modified in any respect.  There have been no further amendments or other documents affecting or altering the Borrower's or the Bank's articles of incorporation since the date of the certifications referred to above through the date hereof, and the Borrower and the Bank have remained in valid existence under the laws of the State of Florida since such dates.

3.

Affirmative Covenants.  The Borrower agrees that so long as the Note is outstanding or this Agreement is in effect:

(a)

The Borrower shall provide on a quarterly basis, as soon as practicable, and in any event within forty-five (45) days after the end of each quarter of Borrower’s fiscal year, (a) an internally generated financial statement of Borrower (consisting of profit and loss statement, balance sheet, cash flow statement and report on changes in stockholder’s equity), certified to the Lender by an authorized financial officer of the Borrower acceptable to the Lender, (b) a Covenant Compliance Certificate and (c) a copy of the quarterly call report and any other quarterly regulatory reports and filings as required by any Governmental Authority having 

2

supervisory authority over the Borrower or any Depository Institution Subsidiary for each Depository Institution Subsidiary for the most recent calendar quarter.  “Covenant Compliance Certificate” shall mean a certificate, in form and content satisfactory to the Lender, which shall (i) set forth the various financial covenants and ratios which the Borrower and the Depository Institution Subsidiaries are required to comply with during the term of this Agreement, (ii) contain calculations reflecting whether or not the Borrower or each Depository Institution Subsidiary, as the case may be, is in compliance with each such financial covenant or ratio requirement, (iii) contain a statement as to whether or not the Borrower is in default under the Loan Agreement or any of the other Loan Documents, and, if the Borrower is in default, such statement shall indicate the nature thereof as well as the steps which Borrower proposes to take in order to cure said default, and (iv) be certified to be true and correct by an authorized financial officer of the Borrower acceptable to the Lender.

(b)

Borrower shall provide as soon as practicable and in any event within ninety (90) days after the end of each fiscal year, year end audited financial statements of the Borrower (consisting of profit and loss statement, balance sheet, cash flow statement and report on changes in stockholders equity) that are examined and reviewed by a certified public accountant selected by Borrower and acceptable to Lender, together with the unqualified opinion of such accountant.

(c)

Borrower shall provide on an annual basis and no later than ninety (90) days after the end of each fiscal year, copies of the Subsidiary’s external and/or internal loan review.

(d)

Promptly upon transmission thereof, Borrower shall provide copies of all such financial statements, proxy statements, notices, and reports as it shall send to its stockholders and of all registration statements (with exhibits) and all reports which it is or may be required to file with the Securities and Exchange Commission or any governmental body or agency succeeding to the functions of such Commission.

(e)

Promptly upon receipt thereof, Borrower shall provide a copy of each other report submitted to the Borrower or any subsidiary by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower or any Subsidiary.

(f)

The Borrower and each Subsidiary shall punctually pay and discharge all taxes, assessments and other governmental charges or levies imposed upon it or upon its income or upon any of its property.

(g)

The Borrower and each Subsidiary shall comply in all material respects with all requirements of constitutions, statutes, rules, regulations, and orders and all orders and decrees of courts and arbitrators applicable to it or its properties.

(h)

The Borrower shall immediately notify the Lender of any change in management or the beneficial ownership of the Borrower's stock by any officer, director or 25% or greater shareholder of the Borrower.

(i)      

Upon Lender’s reasonable request, the Borrower will allow the Lender to inspect its Books, to perform a review of the loan portfolio of each Subsidiary as deemed necessary, and to review internal and external loan review reports. 

(j)

The Borrower will maintain Debt Service Coverage of at least 1.25x calculated as set forth in Paragraph 22(d) herein below.  This covenant shall be measured quarterly. 

(k)

Bank must maintain regulatory approval to provide dividends to Borrower necessary to adequately service the Loan.

3

(l)

Bank is to maintain a pass rating from all of its governing regulatory agencies.

(m)

In the event a trust preferred is issued, proceeds of the trust preferred are not expected to repay the principal of the Loan.

(n)

Upon the Lender's written request, the Borrower shall provide any financial information, and/or other information and/or documentation as reasonably requested by the Lender.

4.

Negative Covenants.  The Borrower agrees that so long as the Note is outstanding or this Agreement is in effect:

(a)

Borrower’s Tier 1 Captial Leverage Ratio shall be “Adequately Capitalized”, and shall be measured quarterly.

(b)

Borrower’s Tier 1 Risk Based Capital Ratio shall be “Adequately Capitalized”, and shall be measured quarterly.

(c)

Subsidiary’s Tier 1 Capital Leverage Ratio shall be maintained as “Well Capitalized”, and shall be measured quarterly.

(d)

Subsidiary’s Tier 1 Risk Based Capital Ratio shall be “Well Capitalized”, to be measured quarterly.

(e)

Subsidiary’s Non-Performing Assets (defined as loans 90+ days past due, loans in non-accrual status, restructured loan and OREO) shall be less than 2.25% of gross loans plus OREO, reducing to 1.25% by December 31, 2008, and further reducing to 1.00% by March 31, 2009 and thereafter until maturity.  This covenant shall be measured quarterly. 

(f)

The Borrower will notify the Lender immediately of all significant changes in executive management.

(g)      No dividend shall be paid by the Borrower if the Loan is in default or if the dividend would create a default without prior Lender approval.  

(h)

The Borrower shall not, directly or indirectly, become a guarantor of any obligation of, or an endorser of, or otherwise assume or become liable upon any notes, obligations, or other indebtedness of any other Person (other than a Subsidiary) except in connection with the depositing of checks in the normal and ordinary course of business.

(i)

The Borrower shall not create, incur, assume or suffer to exist any indebtedness or Liabilities (other than this facility) for borrowed money, any indebtedness evidenced by notes, debentures or similar obligations or any conditional sales or title retention agreements or capitalized leases, which in any single case, or in aggregate, exceed Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), without the prior written consent of the Lender.

(j)

The Borrower shall not permit any Subsidiary to issue, sell or otherwise dispose or part with control of any shares of any class of its stock (other than directors’ qualifying shares) except to the Borrower or a wholly-owned Subsidiary of the Borrower.

(k)

The Borrower shall not sell or otherwise dispose or part with control of any of the Stock or any other securities or indebtedness of any Subsidiary, and the Borrower shall not pledge or otherwise transfer or grant a security interest in any of the capital stock or other securities or of its Subsidiary.  

 

4

(l)

The Borrower shall not outside the ordinary course of business, and shall not permit the Bank’s Subsidiary to, pledge any assets to any other Person without the prior written consent of the Lender. 

(m)

The Borrower and Subsidiary must not be in a situation requiring a material formal enforcement action by its Regulators as it relates to the financial condition of the Borrower and/or the Subsidiary.

5.

Advances Under the Loan.  The Lender shall not be obligated to make any advance of the Loan to the Borrower unless in each instance, at the time of each advance:

(a)

All representations and warranties of the Borrower contained in this Agreement or the Note shall be true in all respects on and as of the date of each advance of the Loan.

(b)

The Borrower and each Subsidiary shall have performed in all material respects all their agreements and obligations required by the Financing Documents.

(c)

No adverse change shall have occurred in the Borrower's or any Subsidiary's condition (financial or otherwise), or in the business, properties, assets, liabilities, prospects, or management of the Borrower or any Subsidiary since the date of this Agreement.

(d)

No Default or event which, with the giving of notice or passage of time (or both), would constitute a Default under the terms of this Agreement shall have occurred.

(e)

All other matters incidental to the Loan shall be satisfactory to the Lender.

6.

Default.  A "Default" shall exist if any of the following occurs:

(a)

Failure of the Borrower punctually to make any payment of any amount payable, whether principal or interest or other amount, on any of the Liabilities, whether at maturity, or at a date fixed for any prepayment or partial prepayment, or by acceleration, or otherwise.

(b)

Any statement, representation, or warranty of the Borrower made in any of the Financing Documents or at any time furnished by or on behalf of the Borrower to the Lender shall be false or misleading in any material respect as of the date made.

(c)

Failure of the Borrower punctually and fully to comply with (i) any of the covenants in Section 4 of this Agreement or (ii) any of the other covenants set forth in this Agreement if such failure under this clause (ii) is not remedied within thirty (30) days after notice from the Lender to the Borrower.

(d)

The occurrence of a default under any other agreement to which the Borrower and the Lender are parties or under any other instrument executed by the Borrower in favor of the Lender.

(e)

If the Borrower or any Subsidiary becomes insolvent as defined in the Georgia Uniform Commercial Code or makes an assignment for the benefit of creditors; or if any action is brought by the Borrower or any Subsidiary seeking dissolution of the Borrower or such Subsidiary or liquidation of its assets or seeking the appointment of a trustee, interim trustee, receiver, or other custodian for any of its property; or if the Borrower or any Subsidiary commences a voluntary case under the Federal Bankruptcy Code; or if any reorganization or arrangement proceeding is instituted by the Borrower or any Subsidiary for the settlement, readjustment, composition or extension of any of its debts upon any terms; or if any action or petition is otherwise brought by the Borrower or any Subsidiary seeking similar relief or alleging that it is insolvent or unable to pay its debts as they mature.

(f)

Any action is brought against the Borrower or any Subsidiary seeking dissolution of the Borrower or such Subsidiary or liquidation of any of its assets or seeking the appointment of a trustee, interim trustee, receiver, or other custodian for any of its property, and such action is consented to or acquiesced in by the Borrower or such Subsidiary or is not dismissed within thirty (30) days of the date upon which it was instituted; or any proceeding under the Federal Bankruptcy Code is instituted against the Borrower or any Subsidiary and (i) an order for relief is 

5

entered in such proceeding or (ii) such proceeding is consented to or acquiesced in by the Borrower or such Subsidiary or is not dismissed within thirty (30) days of the date upon which it was instituted; or any reorganization or arrangement proceeding is instituted against the Borrower or any Subsidiary for the settlement, readjustment, composition, or extension of any of its debts upon any terms, and such proceeding is consented to or acquiesced in by the Borrower or such Subsidiary or is not dismissed within thirty (30) days of the date upon which it was instituted; or any action or petition is otherwise brought against the Borrower or any Subsidiary seeking similar relief or alleging that it is insolvent, unable to pay its debts as they mature, or generally not paying its debts as they become due, and such action or petition is consented to or acquiesced in by the Borrower or such Subsidiary or is not dismissed within thirty (30) days of the date upon which it was brought.

(g)

The Borrower or any Subsidiary is in default (or an event has occurred which, with the giving of notice or passage of time, or both, will cause the Borrower or any Subsidiary to be in default) on indebtedness to another Person, and the amount of such indebtedness exceeds Twenty Five Thousand and 00/100 Dollars ($25,000.00) or the acceleration of the maturity of such indebtedness would have a material adverse effect upon the Borrower or such Subsidiary.

(h)

Any other material adverse change occurs in the Borrower's financial condition or means or ability to pay the Liabilities.

(i)

 Any cease and desist or other order has been threatened, noticed, or entered against the Borrower or any Subsidiary by any bank or bank holding company regulatory agency or body, or the Borrower or any Subsidiary enters into any form of memorandum of understanding, plan of corrective action, or letter agreement with any such regulatory agency or body, or any other regulatory enforcement action is taken against the Borrower or any Subsidiary relating to the capitalization, management, or operation of the Borrower or any Subsidiary.

(j)

The Borrower or any Subsidiary is indicted or convicted or pleads guilty or nolo contendere to any charge that the Borrower or such Subsidiary has violated any drug, controlled substances, money laundering, currency reporting, racketeering, or racketeering-influenced-and-corrupt-organization statute or regulations other forfeiture statute.

(k)

The Borrower ceases to own one hundred percent (100%) of the issued and outstanding capital stock of the Bank.

(l)

The Borrower or Subsidiary are placed under any regulatory enforcement action.

7.

Remedies Upon Default.  Upon the occurrence of a Default, the Lender shall be entitled, without limitation, to exercise the following rights at any time and from time to time, which the Borrower hereby agrees to be commercially reasonable, provided however, Borrower shall have thirty (30) days to cure said Default upon written notice:

(a)

declare any of the Liabilities due and payable, whereupon they immediately will become due and payable (notwithstanding any provisions to the contrary, and without presentment, demand, notice or protest of any kind (all of which are expressly waived by the Borrower));

(b)

(i) receive all amounts payable in respect of the Collateral otherwise payable to the Borrower; (ii) settle all accounts, claims, and controversies relating to the Collateral; (iii) transfer all or any part of the Collateral into the Lender's or any nominee's name; and (iv) execute all agreements and other instruments; bring, defend and abandon all actions and other proceedings; and take all actions in relation to the Collateral as the Lender in its sole discretion may determine;

(c)

enforce the payment of the Stock and exercise all of the rights, powers and remedies of the Borrower thereunder, including the exercise of all voting rights and other ownership or consensual rights of the Stock (but the Lender is not hereby obligated to exercise such rights), and in connection therewith the Borrower hereby appoints the Lender to be the Borrower's true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote the Stock in any manner the Lender deems advisable for or against all matters submitted to a vote of shareholders, and such power-of-attorney is coupled with an interest and irrevocable;

6

(d)

sell, assign and deliver, or grant options to purchase, all or any part of or interest in the Collateral in one or more parcels, at any public or private sale at any exchange, any of the Lender's offices, or elsewhere, without demand of performance, advertisement, or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby expressly and irrevocably waived by the Borrower), for cash, on credit, or for other property, for immediate or future delivery without any assumption of credit risk, and for such price and on such terms as the Lender in its sole discretion may determine; the Borrower agrees that to the extent that notice of sale shall be required by law that at least five (5) business days' notice to the Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification; the Lender shall not be obligated to make any sale of Collateral regardless of notice of sale having been given; the Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and any such sale may, without further notice, be made at the time and place to which it was so adjourned; the Borrower hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Loan or otherwise; at any such sale, unless prohibited by applicable law, the Lender may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption; and the Lender shall not be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto;

(e)

appoint and dismiss managers or other agents for any of the purposes mentioned in the foregoing provisions of this Section 7, all as the Lender in its sole discretion may determine; and

(f)

generally, take all such other action as the Lender in its sole discretion may determine as incidental or conducive to any of the matters or powers mentioned in this Section 7 and which the Lender may or can do lawfully and use the name of the Borrower for such purposes and in any proceedings arising therefrom.

8.

Application of Proceeds.  The proceeds of the public or private sale or other disposition of any Collateral hereunder shall be applied to (i) the costs incurred in connection with the sale, expressly including, without limitation, any costs under Section 11(a) hereof; (ii) any unpaid interest which may have accrued on any obligations secured hereby; (iii) any unpaid principal on any obligations secured hereby; and (iv) damages incurred by the Lender by reason of any breach secured against hereby, in such order as the Lender may determine, and any remaining proceeds shall be paid over to the Borrower or others as by law provided.  If the proceeds of the sale or other disposition of the Stock are insufficient to pay all such amounts, the Borrower shall remain liable to the Lender for the deficiency.

9.

Additional Rights of Secured Parties.  In addition to its other rights and privileges under this Agreement, the Lender may exercise from time to time any and all other rights and remedies available to a secured party when a debtor is in default under a security agreement as provided in the Uniform Commercial Code of Georgia, or available to the Lender under any other applicable law or in equity, including without limitation the right to any deficiency remaining after disposition of the Collateral.  The Borrower shall pay all of the reasonable costs and expenses (including reasonable attorneys' fees) incurred by the Lender in enforcing its rights under this Agreement.

10.

Return of Stock to Borrower.  Upon payment in full of all principal and interest on the Note and full performance by the Borrower of all covenants and other obligations under this Agreement, the Lender shall return to the Borrower (i) all of the then remaining Stock and (ii) all rights received by the Lender as agent for the Borrower as a result of its possessory interest in the Stock.

11.

Disposition of Stock by Agent.  The Stock is not registered under the various federal or state securities laws and disposition thereof after default may be subject to prior regulatory approval and may be restricted to one or more private (instead of public) sales in view of the lack of such registration.  The Borrower acknowledges that upon such disposition, the Lender may approach only a restricted number of potential purchasers and that a sale under such circumstances may yield a lower price for the Stock than if the Stock were registered pursuant to federal and state securities laws and sold on the open market.  The Borrower, therefore, agrees that:

7

(a)

if the Lender shall, pursuant to the terms of this Agreement, sell or cause any of the Stock to be sold at a private sale, the Lender shall have the right to rely upon the advice and opinion of any national brokerage or investment firm having recognized expertise and experience in connection with shares of companies in the banking industry (but shall not be obligated to seek such advice and the failure to do so shall not be considered in determining the commercial reasonableness of the Lender's action) as to the best manner in which to expose the Stock for sale and as to the best price reasonably obtainable at the private sale thereof; and

(b)

such reliance shall be conclusive evidence that the Lender has handled such disposition in a commercially reasonable manner.

12.

Borrower's Obligations Absolute.  The obligations of the Borrower under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any other remedies against the Borrower or any other Person, nor against other security or liens available to the Lender or its successors, assigns or agents.  The Borrower hereby waives any right to require that an action be brought against any other Person or require that resort be had to any security or to any balance of any deposit account or credit on the books of the Lender in favor of any other Person prior to any exercise of rights or remedies hereunder, or to require resort to rights or remedies of the Lender in connection with the Loan.

13.

Notices.  Except as provided otherwise in this Agreement, all notices and other communications under this Agreement are to be in writing and are to be deemed to have been duly given and to be effective upon delivery to the party to whom they are directed.  If sent by U.S. mail, first class, certified, return receipt requested, postage prepaid, and addressed to the Lender or to the Borrower at their respective addressees set forth below, such communications are deemed to have been delivered on the second business day after being so posted.

If to the Lender:

SILVERTON BANK, N.A.

2410 Paces Ferry Road

600 Paces Summit

Atlanta, Georgia 30339-4098

Attn: Jeffrey S. Neale, Senior Vice President

If to the Borrower:

SUN AMERICAN BANCORP,

a Delaware corporation (Borrower)

9293 Glades Road, 

Boca Raton, Florida 33434

Attn: Robert Nichols, CEO

 

Either the Lender or the Borrower may, by written notice to the other, designate a different address for receiving notices under this Agreement; provided, however, that no such change of address will be effective until written notice thereof is actually received by the party to whom such change of address is sent.

14.

Binding Agreement.  The provisions of this Agreement shall be construed and interpreted, and all rights and obligations of the parties hereto determined, in accordance with the laws of the State of Georgia.  This Agreement, together with all documents referred to herein, constitutes the entire Agreement between the Borrower and the Lender with respect to the matters addressed herein and may not be modified except by a writing executed by the Lender and delivered by the Lender to the Borrower.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which, taken together, shall constitute one and the same instrument.

15.

Participations.  The Lender may at any time grant participations in or sell, assign, transfer or otherwise dispose of all or any portion of the indebtedness of the Borrower outstanding pursuant to the Financing Documents.  The Borrower hereby agrees that any holder of a participation in, and any assignee or transferee of, all or any portion of any amount owed by the Borrower under the Financing Documents (i) shall be entitled to the benefits of the provisions of this Agreement as the Lender hereunder and (ii) may exercise any and all rights of the banker's lien, set-off or counterclaim with respect to any and all amounts owed by the Borrower to such assignee, transferee or holder as fully as if such assignee, transferee or holder had made the Loan in the amount of the obligation in which it holds a participation or which is assigned or transferred to it. 

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Notwithstanding the foregoing, in the event Lender decides to participate the Loan, Lender shall only participate with non-Florida lenders. 

16.

Expenses.  All reports and other documents or information furnished to the Lender under this Agreement shall be supplied by the Borrower without cost to the Lender.  Further, the Borrower shall reimburse the Lender on demand for all out-of-pocket costs and expenses (including legal fees) incurred by the Lender in connection with the preparation, interpretation, operation, and enforcement of the Financing Documents or the protection or preservation of any right or claim of the Lender with respect to such agreements.  The Borrower will pay all taxes (if any) in connection with the Financing Documents.  The obligations of the Borrower under this section shall survive the payment of the Liabilities and the termination of this Agreement.

17.

Indemnification.  In addition to any other amounts payable by the Borrower under this Agreement, the Borrower shall pay and indemnify the Lender from and against all claims, liabilities, losses, costs, and expenses (including, without limitation, reasonable attorneys' fees and expenses) which the Lender may (other than as a result of the gross negligence or willful misconduct of the Lender) incur or be subject to as a consequence, directly or indirectly, of (i) any breach by the Borrower of any warranty, term or condition in, or the occurrence of any default under, any of the Financing Documents, including all fees or expenses resulting from the settlement or defense of any claims or liabilities arising as a result of any such breach or default, (ii) the Lender's making, holding, or administering the Loan or the Collateral, (iii) allegations of participation or interference by the Lender in the management, contractual relations or other affairs of the Borrower or any Subsidiary, (iv) allegations that the Lender has joint liability with the Borrower or any Subsidiary for any reason, and (v) any suit, investigation, or proceeding as to which the Lender or such participant is involved as a consequence, directly or indirectly, of its execution of any of the Financing Documents, or any other event or transaction contemplated by any of the foregoing.  The obligations of Borrower under this Section 17 shall survive the termination of this Agreement.

18.

Right to Set-Off.  Upon the occurrence of a Default hereunder, the Lender, without notice or demand of any kind, may hold and set off against such of the Liabilities (whether matured or unmatured) as the Lender may elect any balance or amount to the credit of the Borrower in any deposit, agency, reserve, holdback or other account of any nature whatsoever maintained by or on behalf of the Borrower with the Lender at any of its offices, regardless of whether such accounts are general or special and regardless of whether such accounts are individual or joint.  Any Person purchasing an interest in debt obligations under this Agreement held by the Lender may exercise all rights of offset with respect to such interest as fully as if such Person were a holder of debt obligations hereunder in the amount of such interest.

19.

Loan Fee.  As a condition to making the Loan pursuant to this Agreement, Borrower shall pay to Lender a loan fee in the amount of one eighth of one percent (1/8%) of the non-funded Loan proceeds which shall be assessed and monitored quarterly on a per-annum basis based on the average unused portion of the credit facility.  In addition, as a condition to the Lender's execution of this Agreement and making of the Loan to Borrower, Borrower shall pay all expenses and reasonable attorneys’ fees, and the expenses and fees of all other professionals and experts, incurred by Lender to date in connection with the review and approval of the Loan and execution of the Loan Documents.  

20.

Further Assurances.  If at any time the Lender upon advice of its counsel shall determine that any further document shall be required to effect this Agreement and the transactions and other agreements contemplated thereby, the Borrower shall, and shall cause its Subsidiary to, execute and deliver such document and otherwise carry out the purposes of this Agreement.

21.

Severability.  If any paragraph or part thereof shall for any reason be held or adjudged to be invalid, illegal, or unenforceable by any court of competent jurisdiction, such paragraph or part thereof shall be deemed separate, distinct, and independent, and the remainder of this Agreement shall remain in full force and effect and shall not be affected by such holding or adjudication.

22.

Binding Effect.  All rights of the Lender under the Financing Documents shall inure to the benefit of its transferees, successors and assigns.  All obligations of the Borrower under the Financing Documents shall bind its heirs, legal representatives, successors, and assigns.

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23.

Definitions.

(a)

"Bank Subsidiary" means each banking Subsidiary of Borrower, now or hereafter in existence, including but not limited to the Bank.

(b)

"Capital" means all capital or all components of capital, other than any allowance for loan and lease losses and net of any intangible assets, as defined from time to time by the primary federal regulator of the Borrower, the Bank, or the Subsidiary (as the case may be).

(c)

"Collateral" means and includes all property assigned or pledged to the Lender or in which the Lender has been granted security interest or to which the Lender has been granted security title, whether under any of the Financing Documents or any other agreement, instrument, or document, and the proceeds thereof.

(d)

“Debt Service Coverage” shall be calculated as the maximum dividend that may be paid by Bank to Borrower divided by the amounts due under the Loan.  The maximum dividend is that which is permissible under any applicable federal regulatory constraints, and which also allows Borrower to maintain Tier 1 Leverage and Tier 1 Risk Based Capital ratings of “Well Capitalized” (as defined by federal regulators). 

(e)

"Financing Documents" means and includes this Agreement, the Note, and all other associated loan and collateral documents including, without limitation, all guaranties, suretyship agreements, stock powers, security agreements, security deeds, subordination agreements, exhibits, schedules, attachments, financing statements, notices, consents, waivers, opinions, letters, reports, records, assignments, documents, instruments, information and other writings related thereto, or furnished by the Borrower to the Lender in connection therewith or in connection with any of the Collateral, and any amendments, extensions, renewals, modifications or substitutions thereof or therefor.

(f)

"Liabilities" means all indebtedness, liabilities, and obligations of the Borrower of any nature whatsoever which the Lender may now or hereafter have, own or hold, and which are now or hereafter owing to the Lender regardless of however and whenever created, arising or evidenced, whether now, heretofore or hereafter incurred, whether now, heretofore or hereafter due and payable, whether alone or together with another or others, whether direct or indirect, primary or secondary, absolute or contingent, or joint or several, and whether as principal, maker, endorser, guarantor, surety or otherwise, and also regardless of whether such Liabilities are from time to time reduced and thereafter increased or entirely extinguished and thereafter reincurred, including without limitation the Note and any amendments, extensions, renewals, modifications or substitutions thereof or therefor.

(g)

"Note" shall mean that certain Promissory Note With Revolving Feature dated as of January 16, 2008 in the maximum principal amount of Eight Million and 00/100 Dollars ($8,000,000.00) and any amendments, extensions, renewals, modifications, or substitutions thereof or therefor in effect at any particular time.

(h)

"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

(i)

"Subsidiary" means the Bank Subsidiary and each other corporation for which the Borrower has the power, directly or indirectly, to direct its management or policies or to vote 25% or more of any class of its voting securities.

(j)

"Tier 1 Risk Based Capital" means Tier 1 Risk Based Capital as defined by the capital maintenance regulations of the primary federal bank regulatory agency.

(k)

"Tier 1 Capital Leverage" means the Tier 1 Capital Leverage as defined by the capital maintenance regulations of the primary federal bank regulatory agency.  

(l)

All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in effect from time to time.

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IN WITNESS WHEREOF, the undersigned have hereunto set their hands and affixed their seals by and through their duly authorized officers, as of the day and year first above written.

						
	         

	BORROWER:

	 
	 

	 
	SUN AMERICAN BANCORP,

	 
	a Delaware corporation

	 
	 
	  

	 
	 
	 

	 
	By:  

	/s/ ROBERT NICHOLS

	 
	 
	Robert Nichols, CEO

[CORPORATE SEAL]

	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	Witness:

	/s/ CARMEN V. MAYHALL

	 
	 
	 

	Name:

	Carmen V. Mayhall

	 
	 
	 

	 
	 
	 
	 
	 

	Witness:

	/s/ CAROLE JETT

	 
	 
	 

	Name:

	Carole Jett

	 
	 
	 

  

I hereby certify that the representation and warranty contained in Section 2(i)(v) of this Agreement is true and correct.

			
	 
	By:  

	/s/ ROBERT NICHOLS

	 
	NAME:

TITLE:

	Robert Nichols

Secretary

(Signatures continue on following page)

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	LENDER::

	 
	 

	 
	SILVERTON BANK, N.A.

	 
	 
	 

	 
	By:  

	/s/

	 
	 
	Jeffrey S. Neale, Senior Vice President

	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	Witness:

	 
	 
	 
	 

	Name:

	 
	 
	 
	 

	 
	 
	 
	 
	 

	Witness:

	 
	 
	 
	 

	Name:

	 
	 
	 
	 

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