Document:

exhibit_10-35.htm

Exhibit 10.35

 

EMPLOYMENT AGREEMENT

 

THIS PERSONAL EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into this 21th day of October, 2013 by and between Infinity Augmented Reality Israel Ltd. (the “Company”) and Zanzuri Ortal I.D. No. 036467934 (the “Employee”) (each, a "Party" and collectively - the "Parties").

 

WHEREAS, the Company wishes to employ the Employee, and the Employee wishes to be employed by the Company, as of the Commencement Date (as such term is defined hereunder); and

 

WHEREAS, the Parties wish to state the terms and conditions of the Employee's employment by the Company, as set forth below;

 

NOW, THEREFORE, in consideration of the mutual premises, covenants and other agreements contained herein, the Parties hereby agree as follows:

 

General

 

	
1.

	
Position. The Employee shall serve in the position described in Schedule ‎1 attached hereto ("Schedule ‎‎1") (the "Position"). In such Position the Employee shall report regularly and shall be subject to the direction and control of the Company's management, and specifically under the direction of the person specified in Schedule ‎‎1 (the "Direct Manager"). The Employee shall act in accordance with the Company's regulations, guidelines, budgets, policies, procedures and general instructions, as shall be updated from time to time, and shall perform his duties diligently, conscientiously and in furtherance of the Company's best interests. The employee shall not use the tools, facilities and equipment of the Company for personal purposes, unless approved in advance by his Direct Manager. The Employee agrees and undertakes to inform the Company, immediately after becoming aware of any matter that may in any way raise a conflict of interest between the Employee and the Company.

 

	
2.

	
Full Time Employment. The Employee will be employed on a full-time basis. The Employee shall devote his entire business time and attention to the business of the Company and shall not undertake or accept any other paid or unpaid employment or occupation or engage in any other business activity, except with the prior written consent of the Company.

 

	
3.

	
Report. The Employee shall be required to comply with the Company guidelines (as amended from time to time) with respect to the report and registration of hours the Employee devoted to the Company during each day of employment hereunder.

 

Computer Monitoring; Company's Equipment

 

	
4.

	
Employee agrees and undertakes that all of Company's computer resources, including without limitation, electronic means, data and resources used by the Employee to fulfill his Position and are under Employees sole and direct control, are Company's exclusive property and were purposed to serve only Company's business. To remove any doubt, Employee will return to Company all electronic means and tools used by Employee in fulfilling his Position, including, without limitation, lap top, disk on key, email password, Skype password and/or otherwise.

 

	
5.

	
Employee agrees and undertakes to obey and act in accordance with Company's computer policy, as shall be updated from time to time, and specifically with proper use of computer resources, including, inter alia, monitoring, observing, controlling, blocking and etc.' of professional emails and Employee's working station.

 

	
6.

	
Employees acknowledges and agrees that his personal details provided in this Agreement and additional details he will deliver to Company from time to time (the "Details") were delivered in his own free will and acceptance. Employee agrees that the Details will use the Company for its activities and for the proper operation of the Company, including delivery of the Details to public bodies, as these are determined in Section 23 to the Protection of Privacy Law 5741-1981.

 

Confidentiality, Assignment of Inventions and Non-Competition

 

	
7.

	
Proprietary Information; Assignment of Inventions and Non-Competition. By executing this Agreement the Employee confirms and agrees to the provisions of the Company's Proprietary Information, Assignment of Inventions and Non-Competition Agreement attached as Schedule ‎‎7 hereto.

 

  

  

  

 

	
8.

	
Special Compensation for Non-Competition Obligation.

 

8.1.              The Employee acknowledges and agrees a special compensation as detailed in Schedule ‎‎1is paid as special supplementary monthly compensation in consideration for the Employee's confidentiality, non-competition and non-solicitation obligations as set forth in Schedule ‎‎7 hereto (the "Special Non-Competition Monthly Compensation").

 

 

8.2.              The Employee warrants and represents that the Special Non-Competition Monthly Compensation constitutes a real, appropriate and full consideration to any prejudice he may suffer due to his non-competition obligations, including but not limited to restriction of his freedom of employment.

 

Salary and Additional Compensation, Insurance;

 

	
9.

	
Salary. The Company shall pay to the Employee as compensation for the employment services an aggregate base salary in the gross monthly amount set forth in Schedule ‎‎1 (the "Base Salary").  In addition, the Company shall pay to the Employee an additional gross monthly amount, as set forth in Schedule ‎‎1 for all of the Employee's overtime hours, as they may be from time to time (the “Additional Compensation”; the Base Salary together with the Additional Compensation, the “Salary”).In addition, the Company shall pay the Employee for any and all daily travel costs to which he may be entitled under any applicable law or orders, to the extent any apply. Except as specifically set forth herein, the Salary includes any and all payments to which the Employee is entitled from the Company hereunder and under any applicable law, regulation or agreement, and Employee waives any claim or demand for any payment in excess thereof. The Employee's Salary and other terms of employment may be reviewed and updated by the Company's management from time to time, at the Company's sole discretion.  The Salary is to be paid to the Employee in accordance with the Company's normal and reasonable payroll practices, after deduction of applicable taxes and like payments.

 

	
10.

	
Manager's Insurance/Pension Fund.

 

10.1.            The Company will insure the Employee, retroactively as of the Commencement Date, under a "Manager's Insurance Policy" or a Pension Fund to be selected by the Employee (the "Policy"), with respect to an amount equal to 100% of the Salary, and shall remit to the Policy, as detailed in Schedule 1.

 

 

10.2.            The Company undertakes to transfer the severance pay ingredient to the Employee within a reasonable time after termination of the Employee’s employment with the Company, whether terminated by the Company or the Employee. Notwithstanding the above, in the event that the Employee’s employment is terminated with “Cause” as defined in Section ‎18 hereto or if the Employee fails to comply with any of his obligations to the Company, the Company will not be obligated to release to the Employee the severance pay.

 

 

10.3.            The Company’s contributions will be in lieu of 100% of the severance pay that the Employee will be entitled to in the event of termination of his employment, all in accordance with the provisions of section 14 of the Severance Pay Law, 5723-1963. The Employee’s signature on this Agreement represents the Employee’s agreement to the content of this Section. The Company waives in advance any right it may have in the future for the return of the Company’s Contributions, or any of them, unless:

 

10.3.1.            The Employee’s entitlement for severance pay has been deprived by a judgment, under the provisions of sections 16 or 17 of the Severance Pay Law, 5723-1963, and as long as it was so deprived; or

 

10.3.2.            The Employee has withdrawn monies from the Policy not in circumstances of death, disability or retirement at the age of 60 or more.

 

A copy of the Order and Confirmation Regarding Payments of Employers to Pension Funds and Insurance Funds instead of Severance Pay is attached as Schedule‎10 to this Agreement.

 

	
11.

	
Advanced Education Fund ("Keren Hishtalmut").

 

11.1.            The Company together with the Employee will as of the Commencement Date maintain a Further Education Fund (the "Education Fund"). Each month, and subject to Section ‎11.3 hereto, the Company shall contribute to the Education Fund an amount equal to the percentage detailed in Schedule ‎‎1 of the Salary and the Employee shall contribute to the Education Fund an amount equal to the percentage detailed in Schedule ‎‎1 of the Salary.

 

11.2.            All of the Employee's aforementioned contributions shall be transferred to the Education Fund by the Company by deducting such amounts from each monthly Salary payment.

 

  

  

  

 

11.3.            Notwithstanding anything to the contrary, neither Party shall contribute nor shall the Company deduct from each monthly Salary an amount greater than the maximum amount exempt from tax payment under applicable laws.

 

11.4.            The Company reserves the right not to release to the Employee the amounts contributed by the Company to the Education Fund in the event that Employee's termination was with "Cause," as defined in Section ‎‎18 hereto.

 

11.5.            For the avoidance of doubt, no amount remitted by the Company in respect of this Section ‎‎11.5 shall be considered as part of the Salary for purposes of any deduction therefrom or calculation of severance pay.

 

11.6.            It is hereby agreed that (a) the contributions to the Education Fund will be made from the Salary only and that no additional amount will be contributed for the Education Supplement, if and to the extent such Education Supplement is paid to the Employee; (b) the Education Supplement is a supplement for all intents and purposes and shall not be considered part of the Employee's Salary, including for the purpose of calculating the amount to which the Employee would be entitled as severance pay (if any); and (c) the Employee shall bear all personal taxes in connection with any election under this Section ‎11.

 

Additional Benefits

 

	
12.

	
Vacation. The Employee shall be entitled to the Annual Vacation Days as detailed in Schedule ‎‎1.

 

	
13.

	
Sick Leave; Recuperation Pay. The Employee shall be entitled to that number of paid sick leave per year as set forth in Schedule ‎‎1 and also to Recuperation Pay ("Dmei Havra'a") in accordance with to applicable law.

 

	
14.

	
Options. Subject to a resolution duly resolved by the Board of Directors of Infinity Augmented Reality, Inc., the parent company of the Company, (the "Parent Company"), the Parent Company shall grant the Employee an option to purchase such number shares of the Parent Company at a price per share and under terms and conditions as set forth in Schedule ‎‎1 (the "Option").  The Option shall be subject to the terms of (a)the Parent Company's applicable equity incentive plan and Israeli sub-plan, as such will be adopted by the Company and the Parent Company; and (b) an option agreement to be executed between the Parent Company and the Employee. The Employee acknowledges that Employee will be required to execute additional documents in compliance with the applicable tax laws and/or other applicable laws.

 

	
15.

	
Car Maintenance. The Company will reimburse the Employee for car maintenance and travel expenses incurred by the Employee up to an aggregate amount as detailed in Schedule ‎‎1 (the "Car Reimbursement"). Any payments that are made in connection with the Car Reimbursement shall not be regarded as part of the Salary, for any purpose or matter, and no social benefits or other payments shall be paid on its account.

 

Term and Termination of Employment

 

	
16.

	
Term. The Employee's employment by the Company under this Agreement shall commence on the date set forth in Schedule ‎1 (the "Commencement Date"), and shall continue until it is terminated pursuant to the terms set forth herein (the "Term").

 

	
17.

	
Termination at Will.

 

17.1.            Either Party may terminate the employment relationship hereunder at any time by giving the other Party a prior written notice as set forth in Schedule ‎‎1 (the "Notice Period"). During the Notice Period and unless otherwise determined by the Company in a written notice to the Employee pursuant to its right under Section ‎17.3 hereto: (a) the employment relationship hereunder shall remain in full force and effect, (b) the Employee shall be obligated to continue to discharge and perform all of his duties and obligations with Company, and (c) the Employee shall cooperate with the Company and assist the Company with the integration into the Company of the person who will assume the Employee's responsibilities. It is hereby clarified and agreed that if, during the Notice Period, Employee shall not attend the Company during normal working hours for any reason other than instruction by the Company, the Employee shall not be entitled to any payment (including Salary or any portion whereof) for such days of non-attendance.

 

17.2.            In the event that the Employee does not deliver to the Company the required prior notice, the Employee shall pay compensation to the Company of an amount equal to the Salary to which the Employee would have been entitled during the Notice Period. Such amount shall be deemed a debt of the Employee to the Company and the Company shall be entitled to deduct such amount from any monies due and payable to the Employee.

 

  

  

  

 

17.3.            Notwithstanding the aforesaid, the Company is entitled to terminate this Agreement and the employment relationship with immediate effect upon a written notice to Employee and payment to the Employee of a one-time amount equal to the Salary to which the Employee would have been entitled during the Notice Period, in lieu of such prior notice.

 

	
18.

	
Termination for Cause. The Company may immediately terminate the employment relationship for Cause, and such termination shall be effective as of the time of notice of the same. "Cause" means: (a) a material breach of this Agreement; (b) any willful failure to perform or willful failure to perform competently any of the Company's instructions or any of the Employee's fundamental functions or duties hereunder; (c) engagement in willful misconduct or acting in bad faith with respect to the Company, (d) any act of personal dishonesty or a breach of trust in connection with the Employee's responsibilities to the Company resulting in substantial personal enrichment of the Employee; (e) any breach by the Employee of the Proprietary Information, Assignment of Inventions and Non-Competition Agreement attached as Schedule ‎7 hereto; (f) conviction of a felony involving moral turpitude; or (g) any cause justifying termination or dismissal in circumstances in which the Company can deny the Employee severance payment under applicable law

 

Additional Provisions:

 

	
19.

	
No Conflict. During his employment by the Company, the Employee shall not receive any payment, compensation or benefit from any third party in connection, directly or indirectly, with his position or employment in the Company.

 

	
20.

	
Tax.  Israeli income tax and other applicable withholdings shall be deducted at source from the payments to the Employee according to any applicable law, including, but not limited to, National Security and Health Tax.

 

	
21.

	
Military Reserve Duty. In the event of the Employee shall be called to a military reserve duty (including a "one-day" military reserve duty), the Company shall pay the Employee the full Salary for those dates the Employee is called to military reserve duty, provided that the Employee supplies the Company with an appropriate certificate in order for the Company to receive the amounts due from the Israel National Insurance Institute.

 

	
22.

	
Presentation on LinkedIn and external business sources– the Employee hereby grants its consent and full agreement to keep and respect the Company's brand and reputation and to avoid presenting itself externally, on LinkedIn and on any other professional network/blog/portal, in any title/role/job description which is not accurate or does not match its internal title and set of responsibilities. To remove any doubt and due that the Company is a subsidiary of a public traded company, Employee hereby undertakes to receive Company's prior written consent as to public presentation of content that discuss, or may discuss, without limitation, Company's products, financial data, structural changes and etc.

 

Miscellaneous

 

	
23.

	
(a) The Parties agree that this Agreement constitutes, among others, notification in accordance with the Notice to Employees (Employment Terms) Law, 2002. (b) The laws of the State of Israel shall apply to this Agreement and the sole and exclusive place of jurisdiction in any matter arising out of or in connection with this Agreement shall be the Tel-Aviv Regional Labor Court. (c) The provisions of this Agreement are in lieu of the provisions of any collective bargaining agreement, and therefore, no collective bargaining agreement shall apply with respect to the relationship between the Parties hereto (subject to the applicable provisions of law). (d) No failure, delay of forbearance of either Party in exercising any power or right hereunder shall in any way restrict or diminish such Party's rights and powers under this Agreement, or operate as a waiver of any breach or nonperformance by either Party of any terms of conditions hereof. (e) In the event it shall be determined under any applicable law that a certain provision set forth in this Agreement is invalid or unenforceable, such determination shall not affect the remaining provisions of this Agreement unless the business purpose of this Agreement is substantially frustrated thereby. (f) The preface and schedules to this Agreement constitute an integral and indivisible part hereof. (g) Wherever appropriate herein, words used in the singular shall be considered to include the plural, and words used in the plural shall be considered to include the singular.  The masculine gender, where appearing in this Agreement, shall be deemed to include the feminine gender.  (h) This Agreement constitutes the entire understanding and agreement between the Parties hereto, supersedes any and all prior discussions, agreements and correspondence with regard to the subject matter hereof, and may not be amended, modified or supplemented in any respect, except by a consent by both Parties hereto. (i) The Employee acknowledges and confirms that all terms of the Employee's employment are personal and confidential, and undertake to keep such term in confidence and refrain from disclosing such terms and/or any other benefit received from the Company (including salary, bonuses, etc., if any) to any third party, including, without limitation, other employees of the Company.

 

  

  

  

 

THE EMPLOYEE ACKNOWLEDGES THAT HE IS FAMILIAR WITH AND UNDERSTANDS THE ENGLISH LANGUAGE AND THE PROVISIONS OF THIS AGREEMENT AND DOES NOT REQUIRE TRANSLATION OF THIS AGREEMENT OR ITS SCHEDULES TO ANY OTHER LANGUAGE.

 

.העובד מצהיר בזאת כי השפה האנגלית מוכרת ומובנת לו וכי הוא אינו זקוק לתרגום הסכם זה ונספחיו לשפה אחרת

 

IN WITNESS WHEREOF the Parties have signed this Agreement as of the date first hereinabove set forth.

 

 

	
Infinity Augmented Reality 

Israel Ltd.

By: _______________

Title: ______________

	  	
Zanzuri Ortal

 

  

  

  

 

Schedule ‎1

To the Personal Employment Agreement by and between

Infinity Augmented Reality Israel Ltd. and the Employee whose name is set forth herein

 

	
1.Name of Employee:

	
Zanzuri Ortal

	
2.ID No. of Employee:

	
036467934

	
3.Address of Employee:

	
Itzhak Rabin 26/15, Kiryat Ono

	
4.Position in the Company:

	
CFO

	
5.Under the Direct Direction of:

	
CEO

	
6.Base Salary + Fuel

	
40,000 NIS per month

	
7.Payment by Company for Severance Pay:

	
8.33%

	
8.Payment by Company for Pension Fund :

	
5%

	
9.Payment by Company for Loss of Earning Capacity:

	
2.5%

	
10.Deduction by Employee for Pension Fund:

	
5%

	
11.Education Fund - Payment by Company:

	
7.5%

	
12.Education Fund - Deduction from Employee:

	
2.5%

	
13.Vacation Days Per Year:

	
20 days per year.

	
14.Maximum Accumulation of Vacation Days:

	
In accordance with applicable law.

	
15.Sick Leave Days Per Year:

	
In accordance with applicable law.

	
16.Options:

	
200,000 (Two hundred thousand) Non-Qualified Stock Options (as defined by the Parent Company’s 2013 Equity Incentive Plan (the “2013 Plan”)) at an exercise price to be defined by the Parent Company's  Board of Directors, to be vested the Following: 50,000 Options shall be vested every 6 (six) months over a period of 2 (Two) years.

This provision is subject to the Parent Company’s adoption of an Israeli Employee Sub-Plan under the 2013 Equity Incentive Plan, if such will become applicable.

	
17.Commencement Date:

	
November 1st 2013

	
18.Notice Period:

	
60  days both sides

	
19.Parking:

	
Paid by company

	
20.Mobile Phone:

	
Paid by company

 

 

	  	  	
Zanzuri Ortal

 

  

  

  

 

Schedule ‎7

To the Personal Employment Agreement by and between

Infinity Augmented Reality Israel Ltd. and the Employee whose name is set forth herein

 

	
Name of Employee:

	
Zanzuri Ortal

	
ID No. of Employee:

	
036467934

 

General

 

1.           Capitalized terms herein shall have the meanings ascribed to them in the Agreement to which this Schedule is attached (the "Agreement"). For purposes of any undertaking of the Employee toward the Company, the term Company shall include any parent company, subsidiaries and affiliates of the Company. The Employee's obligations and representations and the Company's rights under this Schedule shall apply as of the Commencement Date, regardless of the date of execution of the Agreement.

 

2.           For the purpose of this Schedule ‎7 to the Agreement, the term "Field" shall refer to the Company's field of activities, i.e. AR.

 

Confidentiality; Proprietary Information

 

3.           "Proprietary Information" means confidential or proprietary information, whether or not patentable, whether in tangible or intangible form (including documentary, written, oral or computer generated), and whether marked or otherwise asserted as confidential, concerning the Company, including, without limitation, (i) conceptions, inventions, developments, improvements, designs, techniques, processes, methods, ideas, know-how, reports, research and research records, drawings, technical and other data, formulations and the existence, scope or activities of any projects of the Company; (ii) equipment, products (actual or planned), information and industrial secrets; (iii) trade secrets and market information, including, without limitation, sales, costs, prices, prospective customers, suppliers and sources of supply; (iv) forecasts, marketing activities and plans, advertising, competitive environments and competitors; (v) operations, credit and financial data, business information, and any information relating to the board, advisory board, investments, investors, consultants, employees, budget information and technical information (including research and development), business, strategic plans and regulatory information and affairs of the Company and its products; and (vi) patents, patent applications, copyright, trademark, trade dress, technologies and other intellectual property rights and strategies related thereto.

 

4.           Proprietary Information shall be deemed to include any and all proprietary information disclosed by or on behalf of the Company and irrespective of form but excluding information that (i) was known to Employee prior to Employee's association with the Company, as evidenced by written records; (ii) is or shall become part of the public knowledge except as a result of the breach of the Agreement or this Schedule by Employee; (iii) reflects general skills and experience; or (iv) reflects information and data generally and publicly known in the industries or trades in which the Company operates.

 

5.           Employee recognizes that the Company received and will receive confidential or proprietary information from third parties, subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. In connection with such duties, such information shall be deemed Proprietary Information hereunder, mutatis mutandis.

 

6.           Employee agrees that all Proprietary Information, and patents, trademarks, copyrights and other intellectual property and ownership rights in connection therewith shall be the property solely of the Company its subsidiaries and their assigns. At all times, both during the employment relationship and after the termination of the engagement between the Parties, Employee will keep in confidence and trust all Proprietary Information, and will not use or disclose any Proprietary Information or anything relating to it without the written consent of the Company or its subsidiaries, except as may be necessary in the ordinary course of performing Employee's duties under the Agreement.

 

7.           Upon termination of Employee's engagement with the Company for whatever reason, Employee will promptly deliver to the Company all documents and materials of any nature pertaining to Employee's engagement with the Company, and will not keep or take with him any documents or materials or copies thereof containing any Proprietary Information.

 

8.           Employee's undertakings set forth in Section ‎3 through Section ‎7 to this Schedule shall remain in full force and effect after termination of the Agreement or any renewal thereof.

 

  

  

  

 

Disclosure and Assignment of Inventions

 

9.           "Inventions" means any and all inventions, improvements, designs, concepts, techniques, methods, systems, processes, know how, computer software programs, databases, mask works and trade secrets, whether or not patentable, copyrightable or protectable as trade secrets; "Company Inventions" means any Inventions that are made or conceived or first reduced to practice or created by Employee, whether alone or jointly with others, during the period of Employee's engagement with the Company, and which are: (i) developed using equipment, supplies, facilities or Proprietary Information of the Company, (ii) result from work performed by Employee for the Company, or (iii) related to the Field (as defined in Section ‎2 to this Schedule above), or to past, current or anticipated research and development.

 

10.         The Employee hereby confirms that all rights that he may have had at any time in any and all Company's Inventions are and have been from inception in the ownership solely of the Company. If ever any doubt shall arise as to the Company's rights or title in any Company Invention and it shall be asserted that the Employee, allegedly, is the owner of any such rights or title, then the Employee hereby irrevocably transfers and assigns in whole to the Company without any further royalty or payment any and all rights, title and interest in any and all Company's Inventions. The Employee has attached as Exhibit ‎‎10 hereto a complete list of all inventions to which he claims ownerships (the "Prior Inventions") and that he desires to remove from the operation of this Schedule, and acknowledges and agrees that such list is complete. If no such list is attached to this Schedule, the Employee represents that he has no such Prior Inventions at the time of signing this Schedule. The Prior Inventions, if any, patented or unpatented, are excluded from the scope of this Schedule. If, in the course of performance of services for the Company, the Employee incorporates a Prior Invention into a Company product, process or machine, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sub-licensees) to make, have made, modify, use and sell such Prior Invention.  Notwithstanding the foregoing, the Employee agrees that it will not incorporate, or permit to be incorporated, Prior Inventions in any Company's Inventions without the Company's prior written consent. The Employee hereby represents and undertakes that no third party, including none of his previous employers or any entity with whom he was engaged, has any rights in the Prior Inventions and that his employment by the Company will not grant any third party any right in the results of the Employee's work.

 

11.         Employee undertakes and covenants he will promptly disclose in confidence to the Company all Inventions deemed as Company Inventions. The Employee agrees and undertakes not to disclose to the Company any confidential information of any third party and, in the framework of his employment by the Company, not to make any use of any intellectual property rights of any third party.

 

12.         Employee hereby irrevocably transfers and assigns to the Company all worldwide patents, patent applications, copyrights, mask works, trade secrets and other intellectual property rights in any Company Invention, and any and all moral rights that he may have in or with respect to any Company Invention. For the avoidance of any doubt, it is hereby clarified that the provisions contained in Section ‎‎11 and this Section ‎‎12 to this Schedule will apply also to any "Service Inventions" as defined in the Israeli Patent Law, 1967 (the "Patent Law").  However, in no event will such Service Invention become the property of the Employee and the provisions contained in Section 132(b) of the Patent Law shall not apply unless the Company provides in writing otherwise. The Employee will not be entitled to royalties or other payment with regard to any Prior Inventions, Company Inventions, Service Inventions or any of the intellectual property rights set forth above, including any commercialization of such Prior Inventions, Company Inventions, Service Inventions or other intellectual property rights, and the Employee hereby specifically and irrevocably waives any right he may have to such payment (including, inter-alia, in relation with Section 134 of the Patent Law).

 

13.         Employee agrees to assist the Company, at the Company's expense, in every proper way to obtain for the Company and enforce patents, copyrights, mask work rights, and other legal protections for the Company Inventions in any and all countries. Employee will execute any documents that the Company may reasonably request for use in obtaining or enforcing such patents, copyrights, mask work rights, trade secrets and other legal protections. Such obligation shall continue beyond the termination of Employee's engagement with the Company. Employee hereby irrevocably designates and appoints the Company and its authorized officers and agents as Employee's agent and attorney in fact, coupled with an interest to act for and on Employee's behalf and in Employee's stead to execute and file any document needed to apply for or prosecute any patent, copyright, trademark, trade secret, any applications regarding same or any other right or protection relating to any Proprietary Information (including Company Inventions), and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights, trademarks, trade secrets or any other right or protection relating to any Proprietary Information (including Company Inventions), with the same legal force and effect as if executed by Employee himself.

 

  

  

  

 

Non-Competition

 

14.         In consideration of Employee's terms of employment hereunder, which include special compensation for his undertakings under this Section ‎14 and the following Section ‎‎15, and in order to enable the Company to effectively protect its Proprietary Information, Employee agrees and undertakes that, so long as the Agreement is in effect and for a period of twelve (12) months following termination of the Agreement for whatever reason, he will not, directly or indirectly, in any capacity whatsoever, engage in, become financially interested in, be employed by, or have any connection with any business or venture that is engaged in any activities competing with the activities of the Company.

 

15.         Employee agrees and undertakes that during the employment relationship and for a period of twelve (12) months following termination of this engagement for whatever reason, Employee will not, directly or indirectly, including personally or in any business in which Employee may be an officer, director or shareholder, solicit for employment any person who is employed by the Company, or any person retained by the Company as a consultant, advisor or the like who is subject to an undertaking towards the Company to refrain from engagement in activities competing with the activities of the Company (for purposes hereof, a "Consultant"), or was retained as an employee or a Consultant during the six (6) months preceding termination of Employee's employment with the Company.

 

Reasonableness of Protective Covenants

 

16.           Insofar as the protective covenants set forth in this Schedule (the "Protective Covenants") are concerned, Employee specifically acknowledges, stipulates and agrees as follows: (i) the Protective Covenants are reasonable, necessary and essential to protect the goodwill, property and Proprietary Information of the Company, and the benefits, rights and expectations of the Company in conducting and operating its business; (ii) the area and time duration of the Protective Covenants are in all things reasonable and necessary to protect the goodwill and the operations and business of Company, and does not impose a greater restrain than is necessary to protect the goodwill or other business interests of the Company, and (iii) that good and valuable consideration exists under the Agreement, for Employee's agreement to be bound by the provisions of this Schedule. Nevertheless, if any of the restrictions set forth in this Schedule is found by a court having jurisdiction to be unreasonable or overly-broad as to geographic area, scope or time or to be otherwise unenforceable, the Parties hereto intend for the restrictions set forth in this Schedule to be reformed, modified and redefined by such court so as to be reasonable and enforceable and, as so modified by such court, to be fully enforced.

 

Remedies for Breach

 

17.         Employee acknowledges that the legal remedies for breach of the provisions of this Schedule may be found inadequate and therefore agrees that, in addition to all of the remedies available to Company in the event of a breach or a threatened breach of any of such provisions, the Company may also, in addition to any other remedies which may be available under applicable law, obtain temporary, preliminary and permanent injunctions against any and all such actions.

 

 

	  	  	
Zanzuri Ortal

 

  

  

  

 

Schedule‎10

 

Order and Confirmation Regarding Payments of Employers

to Pension Funds and Insurance Funds instead of Severance Pay

 

Pursuant to the power granted to me under section 14 of the Severance Pay Law 5723-1963 (“Law”) I hereby confirm that payments paid by an employer, commencing the date hereof, to an employee’s comprehensive pension fund into a provident fund which is not an insurance fund, as defined in the Income Tax Regulations (Registration and Management Rules of a Provident Fund) 5724-1964 (“Pension Fund”), or to a Manager’s Insurance Fund that includes the possibility of an allowance or a combination of payments to an Allowance Plan and to a plan which is not an Allowance Plan in an Insurance Fund (“Insurance Fund”), including payments which the employer paid by combination of payments to a Pension Fund and to an Insurance Fund whether there exists a possibility in the Insurance Fund to an allowance plan (“Employer Payments”), will replace the severance pay that the employee is entitled to for the salary and period of which the payments were paid (“Exempt Wages”)if the following conditions are satisfied:

 

	
(1)

	
Employer Payments –

 

	
  

	
(A)

	
for Pension Funds are not less than 14.33 % of the Exempt Wages or 12% of the Exempt Wages, if the employer pays for his employee an additional payment on behalf of the severance pay completion for a providence fund or Insurance Fund at the rate of 2.33% of the Exempt Wages. If an employer does not pay the additional 2.33% on top of the 12%, then the payment will constitute only 72% of the Severance Pay.

 

	
  

	
(B)

	
to the Insurance Fund are not less that one of the following:

 

	
  

	
(1)

	
13.33% of the Exempt Wages if the employer pays the employee additional payments to insure his monthly income in case of work disability, in a plan approved by the Supervisor of the Capital Market, Insurance and Savings in the Finance Ministry, at the lower of, a rate required to insure 75% of the Exempt Wages or 2.5% of the Exempt Wages (“Disability Payment”).

 

	
  

	
(2)

	
11% of the Exempt Wages if the employer pays an additional Disability Payment and in this case the Employer Payments will constitute only 72% of the employee’s severance pay; if, in addition to the abovementioned sum, the employer pays 2.33% of the Exempt Wages for the purpose of Severance Pay completion to providence fund or Insurance Funds, the Employer Payments will constitute 100% of the severance pay.

 

	
(2)

	
A written agreement must be made between the employer and employee no later than 3 months after the commencement of the Employer Payments that includes –

 

	
  

	
(A)

	
the agreement of the employee to the arrangement pursuant to this confirmation which details the Employer Payments and the name of the Pension Fund or Insurance Fund; this agreement must include a copy of this confirmation;

 

	
  

	
(B)

	
an advanced waiver of the employer for any right that he could have to have his payments refunded unless the employee’s right to severance pay is denied by judgment according to sections 16 or 17 of the Law, and in case the employee withdrew monies from the Pension Fund or Insurance Fund not for an Approved Event; for this matter, Approved Event or purpose means death, disablement or retirement at the age of 60 or over.

 

	
(3)

	
This confirmation does not derogate from the employee’s entitlement to severance pay according to the Law, Collective Agreement, Extension Order or personal employment agreement, for any salary above the Exempt Wages

 

[Name and Title of the Minister]ex10-29.htm

Exhibit 10.29

 

PROMISSORY NOTE

 

FOR VALUE RECEIVED, and subject to the terms and conditions set forth herein, CleanTech Innovations, Inc., a Nevada corporation listed on the NASDAQ Stock Market, which wholly owns its operating entities in the People’s Republic of China (“China”), with its principal executive offices located at C District, Maoshan Industry Park, Tieling Economic Development Zone, Tieling, Liaoning Province, China 112616 (the “Borrower”), hereby unconditionally promises to pay to the order of NYGG (Asia) Ltd., a British Virgin Islands company with an address of 12th Floor Ruttonjee House, 11 Duddell Street, Central, Hong Kong (together with its successors, representatives, and permitted assigns, and designees the “Noteholder,” and together with the Borrower, the “Parties” and each a “Party”), the aggregate of such amounts the Noteholder has disbursed to the Borrower pursuant to Section 2.2, together with all accrued interest thereon and all other amounts owed to Noteholder by Borrower as provided in this Promissory Note (this “Note”).

 

WHEREAS, the Parties agree that this Note and Advances made hereunder are being executed, at the request of the Borrower, and the Borrower represents and warrants that Borrower has obtained the full consent and approval with respect to this Note from (1) each director serving on the Borrower’s Board of Directors; (2) the holders of at least a majority (51%) of the Borrower’s issued and outstanding capital stock having the right to vote on such matters; and (3) Borrower’s senior management team led by its Chairman and CEO, Bei Lu, for the specific purpose of funding the Borrower so that it can retain attorneys and other professionals to recover damages and punitive damages from NASDAQ Stock Market and others whose wrongful acts have severely harmed the Borrower and its creditors and shareholders, so that the Borrower can repay this Note and all amounts due under the $10 million Promissory Note issued by the Borrower to the Noteholder on December 13, 2010, as amended (the “2010 Note”), which 2010 Note is now in a continuing default, with an outstanding unpaid balance as of August 13, 2013 of at least Chinese currency (RMB) of RMB 68,830,000 yuan); and also obtaining compensation for the shareholders of the Borrower for damage they have suffered from the wrongful delisting by the NASDAQ Stock Market, and compensating the Borrower for damage to it.

 

  

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WHEREAS, the Parties understand that the Borrower is in default on the December 13, 2010 Note which has not been waived and nothing in this Note shall constitute a waiver of such default.

 

NOW, THEREFORE, the Parties agree as follows:

 

1. Definitions.  Capitalized terms used herein shall have the meanings set forth in this Section 1.

 

“2010 Borrower Entities” has the meaning set forth in Section 6.8.

 

“2010 Loan” has the meaning set forth in Section 6.8.

 

“2010 Note” has the meaning set forth in the recitals above.

 

“Advance” means each disbursement made by the Noteholder to the Borrower pursuant to Section 2.2.

 

“Affiliate” means, as to any specified Person (i) any Person that, directly or indirectly, through one or more intermediaries, is in control of, is controlled by, or is under common control with such specified Person; (ii) any director, manager, member, officer, partner, trustee or employee of such specified Person; and (iii) any ancestor, friends or associates, spouse or family member, whether by blood or marriage, of any of the foregoing Persons, or any trust for the primary benefit of such Persons. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote fifty percent (50%) or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

 

“Applicable Rate” means a rate of interest equal to three percent (3%) per annum during the first six (6) months following each Advance, and zero percent (0%) thereafter.

 

“Borrower” has the meaning set forth in the introductory paragraph.

 

“Borrowing Notice” has the meaning set forth in Section 2.2.

 

  

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“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by Law to close.

 

“Damages” has the meaning set forth in Section 11.

 

“Debt” of the Borrower means all (a) indebtedness for borrowed money; (b) obligations for the deferred purchase price of property or services, except unsecured trade payables arising in the ordinary course of business; (c) obligations evidenced by notes, bonds, debentures or other similar instruments; (d) obligations as lessee under capital leases; (e) obligations in respect of any interest rate swaps, currency exchange agreements, commodity swaps, caps, collar agreements or similar arrangements entered into by the Borrower providing for protection against fluctuations in interest rates, currency exchange rates or commodity prices or the exchange of nominal interest obligations, either generally or under specific contingencies; (f) obligations under acceptance facilities and letters of credit; (g) guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person, or otherwise to assure a creditor against loss, in each case, in respect of indebtedness described in clauses (a) through (f) of a Person other than the Borrower; and (h) indebtedness described in clauses (a) through (g) of any Person other than Borrower secured by any Lien on any asset of the Borrower, whether or not such indebtedness has been assumed by the Borrower.

 

“Default” means any of the events specified in Section 9 which constitutes an Event of Default or which, upon the giving of notice, the lapse of time, or both pursuant to Section 9 would, unless cured or waived, become an Event of Default.

 

“Default Rate” means a rate of interest equal to twenty four percent (24%) per annum.

 

“Escrow Agent” means Holland & Knight, LLP, and any successor escrow agent thereto.

 

“Escrow Agreement” means that certain Escrow Agreement dated as of the date hereof, by and between the Borrower, the Noteholder and Holland & Knight LLP, as escrow agent, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms.

 

  

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“Event of Default” has the meaning set forth in Section 9.

 

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time.

 

“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions.

 

“Interest Payment Date” means the first day of each month in a calendar year during which any amounts are outstanding under this Note, commencing on the first such date to occur after the execution of this Note.

 

“Law” as to any Person, means any law (including common law), statute, ordinance, treaty, rule, regulation, policy or requirement of any Governmental Authority and authoritative interpretations thereon, whether now or hereafter in effect, in each case, applicable to or binding on such Person or any of its properties or to which such Person or any of its properties is subject.

 

“Lien” means any mortgage, pledge, hypothecation, encumbrance, lien, charge or other security interest.

 

“Loan” has the meaning set forth in Section 2.1.

 

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Borrower; (b) the validity or enforceability of this Note; (c) the rights or remedies of the Noteholder hereunder; or (e) the Borrower’s ability to perform any of its payment obligations hereunder.

 

  

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“Maturity Date” means the earlier of (a) the date on which all amounts under this Note shall become due and payable pursuant to Section 10; and (b) the date on which the Noteholder elects in writing to terminate its obligation to make Advances to the Borrower and demand payment of all amounts owed by the Borrower to the Noteholder hereunder.

 

“NASDAQ Delisting” has the meaning set forth in Section 7.6.

 

“Note” has the meaning set forth in the introductory paragraph.

 

“Noteholder” has the meaning set forth in the introductory paragraph.

 

“Noteholder Indemnitee” has the meaning set forth in Section 11.

 

“Order” as to any Person, means any order, decree, judgment, writ, injunction, settlement agreement, requirement or determination of an arbitrator or a court or other Governmental Authority, in each case, applicable to or binding on such Person or any of its properties or to which such Person or any of its properties is subject.

 

“Party” and “Parties” has the meaning set forth in the introductory paragraph.

 

“Permitted Debt” means Debt (a) existing or arising under this Note and any refinancing thereof; (b) existing or arising under the 2010 Loan, or existing as of the date of this Note and set forth in Schedule 1; and (c) any other Debt that is junior in priority to the obligations under this Note; provided, however, that any Debt having priority over the Loan and the rights granted to the Noteholder herein shall not be “Permitted Debt.”

 

“Person” means any individual, corporation, limited liability company, trust, joint venture, association, company, limited or general partnership, unincorporated organization, Governmental Authority or any other entity.

 

“Recovered Amounts” has the meaning set forth in Section 12.

 

“Subsidiaries” has the meaning set forth in Section 6.2.

 

  

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2. Loan Disbursement Mechanics.

 

2.1. Commitment.  From the period commencing on the date hereof and ending on the Maturity Date, the Noteholder shall, subject to Section 2.2, make available to the Borrower one or more Advances in an aggregate principal amount not to exceed Ten Million Dollars (US $10,000,000) (the “Loan”).

 

2.2. Advances.  As a condition to the disbursement of any Advance, the Borrower shall, at least three (3) Business Days prior to the requested disbursement date, deliver to each of the Noteholder and the Escrow Agent a written notice (the “Borrowing Notice”) setting out (a) the amount of the Advance; (b) the intended use of such Advance, which shall include, without limitation, each Person who will be paid any amounts from such Advance and a description of the services performed, or to be performed, by such Person; and (c) such other information as the Noteholder shall require in its sole discretion.  Each Borrowing Notice shall be deemed to restate and affirm the Borrower’s representations and warranties in Section 6 as of the date of such Borrowing Notice.  Following receipt of the Borrowing Notice and such other information as the Noteholder may require in its sole discretion, the Noteholder shall make available to the Borrower, but only through a payment in the U.S. directly to a service provider unaffiliated with the Borrower, the amount set forth in the notice in immediately available funds as provided in the Escrow Agreement.  Notwithstanding anything herein to the contrary, the Noteholder and any Affiliate thereof may, in its sole discretion, require that the Borrower receive an Advance and disburse such Advance to service providers or other Persons deemed important by the Noteholder for the Borrower to authorize and make payment to.

 

3. Final Payment Date; Optional Prepayments.

 

3.1. Final Payment Date.  The aggregate unpaid principal amount of the Loan, all accrued and unpaid interest and all other amounts payable under this Note shall be due and payable on the Maturity Date.

 

3.2. Optional Prepayment.  The Borrower may prepay the Loan in whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment.  No prepaid amounts may be reborrowed hereunder.

 

  

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4. Interest.

 

4.1. Interest Rate.  Except as otherwise provided herein, the outstanding principal amount of all Advances made hereunder shall bear interest at the Applicable Rate from the date such Advance was made until the Loan is paid in full, whether at maturity, upon acceleration, by prepayment or otherwise.

 

4.2. Default Interest.  Upon the occurrence of an Event of Default and so long as such Event of Default continues, all amounts payable hereunder shall bear interest at the Default Rate.  Without limiting the foregoing, if any amount payable hereunder is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, the outstanding principal amount of all Advances made hereunder shall bear interest at the Default Rate from the date of such non-payment until such amount is paid in full.

 

4.3. Interest Payment Dates.  Interest shall be payable in arrears to the Noteholder on each Interest Payment Date.

 

4.4. Computation of Interest.  All computations of interest shall be made on the basis of a year of 365 days and the actual number of days elapsed.  Interest shall accrue on each Advance on the day on which such Advance is made, and shall not accrue on any Advance for the day on which it is paid.

 

4.5. Interest Rate Limitation.  In no event will the rate of interest payable hereunder exceed the maximum rate of interest permitted to be charged by applicable Law, and any interest paid in excess of the permitted rate will be refunded to the Borrower.  Such refund will be made by application of the excessive amount of interest paid against any sums outstanding hereunder and will be applied in such order as the Noteholder may determine.  If the excessive amount of interest paid exceeds the sums outstanding, the portion exceeding the sums outstanding will be refunded in cash by the Noteholder.  Any such crediting or refunding will not cure or waive any Default by the Borrower.  The Borrower agrees, however, that in determining whether or not any interest payable hereunder exceeds the highest rate permitted by applicable Law, any non-principal payment, including without limitation prepayment fees and late charges, will be deemed to the extent permitted by Law to be an expense, fee, premium or penalty rather than interest.

 

  

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5. Payment Mechanics.

 

5.1. Manner of Payments.  All payments of interest and principal shall be made in United States Dollars no later than 12:00 PM ET (New York) on the date on which such payment is due by wire transfer of immediately available funds to the Noteholder’s account at such bank as may be designated in writing by the Noteholder from time to time.

 

5.2. Application of Payments; Payment Dates.  Except as otherwise provided in Section 12 with respect to Recovered Amounts, all payments made hereunder shall be applied (a) first, to the payment of any fees or charges outstanding hereunder, (b) second, to accrued interest, and (c) third, to the payment of the outstanding principal amount under this Note.  Whenever any payment to be made hereunder shall be due on a day that is not a Business Day, such payment shall be made on the Business Day immediately following such date.

 

5.3. Evidence of Debt.  The Noteholder is authorized to record on the grid attached hereto as Exhibit A each Advance made to the Borrower and each payment or prepayment thereof.  The entries made by the Noteholder shall, to the extent permitted by applicable Law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of the Noteholder to record such payments or prepayments, or any error or inaccuracy therein, shall not in any manner affect the obligation of the Borrower to pay or repay the Advances, accrued interest thereon or any other amounts owed by the Borrower to the Noteholder in accordance with the terms of this Note.

 

6. Representations and Warranties of the Borrower.  The Borrower hereby represents warrants and covenants to the Noteholder as follows:

 

6.1. Existence; Compliance With Laws.  The Borrower is (a) a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Nevada and has the requisite power and authority, and the legal right, to own, lease and operate its properties and assets and to conduct its business as it is now being conducted and (b) in compliance with all Laws and Orders.

 

  

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6.2. Organization and Conduct of Business.  (a) The Borrower is the sole owner of various subsidiary operating entities located in China (the “Subsidiaries”), and each such Subsidiary conducts its business in China as an WFOE (Wholly Foreign Owned Enterprise) and is in good standing under and in full compliance with the laws of the Unites States and China; (b) neither the Borrower nor any of its Affiliates (including, without limitation, its management members, the Borrower’s CEO, Bei Lu, and each Affiliate of such Persons), owns or controls, directly or indirectly, any other business in China other than the Borrower and the Subsidiaries; (c) neither the Borrower nor any Affiliate thereof have disposed of any of the Borrower’s assets, or transferred sales and/or receipts from the Borrower, and there have been no “related party transactions” by or among the Borrower and any of its Affiliates; and (d) the Borrower’s financial statements, filings with the U.S. Securities and Exchange Commission and other regulatory filings with various entities in the United States and elsewhere are accurate and complete in all aspects, and are not misleading.

 

6.3. Authorization; Execution and Delivery.  The execution, delivery and performance by the Borrower of this Note has been duly authorized by all necessary corporate action and will not violate any provision of any Law or Order to which the Borrower or any Affiliate thereof is subject, or the Borrower’s Articles of Incorporation or Bylaws, as amended, or result in the breach of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of the Borrower or its Subsidiaries pursuant to any agreement or instrument to which they are a party.  The Borrower has the power and authority, and the legal right, to execute and deliver this Note and to perform its obligations hereunder.

 

6.4. Enforceability.  This Note is a valid, legal and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

 

  

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6.5. No Approvals.  No consent or authorization of, filing with, notice to or other act by, or in respect of, any Governmental Authority or any other Person is required in order for the Borrower to execute, deliver, or perform any of its obligations under this Note.

 

6.6. No Litigation.  No action, suit, litigation, investigation or proceeding of, or before, any arbitrator or Governmental Authority is pending or threatened by or against the Borrower or any of its property or assets (a) with respect to this Note or any prior other Promissory Note issued by the Borrower (including, without limitation, the 2010 Note); (b) arising from or related to any transaction of any kind with the Noteholder or any Affiliate thereof, or any of the transactions contemplated hereby; or (c) that would be expected to materially adversely affect the Borrower’s financial condition or the ability of the Borrower to perform its obligations under the Note.

 

6.7. Capitalization.  Borrower represents that, as of the date hereof, the fair market value of the Borrower, as determined in accordance with GAAP, is not less than Ten Million Dollars (US $10,000,000).

 

6.8. Accuracy of Information.  Except as set forth in Schedule 6.7, each representation and warranty made by the Borrower, Liaoning Creative Bellows Co., Ltd. and Liaoning Creative Wind Power Equipment Co., Ltd., respectively (the “2010 Borrower Entities”) pursuant to that certain Loan Agreement dated as of December 13, 2010, as amended (the “2010 Loan”) by and among the Noteholder and the 2010 Borrower Entities is true and correct in all respects.

 

6.9. Observance of Prior Covenants.  Each of the 2010 Borrower Entities is in default which is continuing with respect to its respective covenants and obligations under, the 2010 Loan, as set forth on Schedule 6.8.

 

6.10. Priority.  There is no existing Debt or Lien that is senior in priority to the Loan, or that creates, or is reasonably likely to create, a valid obligation having priority over the rights granted to the Noteholder herein.

 

  

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7. Affirmative Covenants.  Until all of the Borrower’s obligations under this Note are satisfied in full, the Borrower shall:

 

7.1. Maintenance of Existence.  (a) Preserve, renew and maintain in full force and effect its corporate existence and (b) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

 

7.2. Compliance.  Comply with (a) all of the terms and provisions of its organizational documents; (b) its obligations under its material contracts and agreements except as stated herein and in Schedule 6.8; and (c) all Laws and Orders applicable to it and its business, including all disclosure requirements with respect to this Note, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect (it being understood and agreed by the Parties that the Noteholder shall have no obligation whatsoever to make any regulatory filings related to this Note).

 

7.3. Payment Obligations.  Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings, and reserves in conformity with GAAP with respect thereto have been provided on its books.

 

7.4. Notice of Events of Default.  As soon as possible and in any event within two (2) Business Days after it becomes aware that a Default or an Event of Default has occurred, notify the Noteholder in writing of the nature and extent of such Default or Event of Default and the action, if any, it has taken or proposes to take with respect to such Default or Event of Default.

 

7.5. NASDAQ Listing.  Cause shares of its capital stock to be registered, listed and traded on the NASDAQ Stock Market.

 

7.6. Recovery of Losses.  (a) Take all necessary steps to recover and recoup the losses suffered by its creditors and shareholders, including, without limitation, the Noteholder and/or its Affiliates, as a result of the delisting of the Borrower from the NASDAQ Stock Market (the “NASDAQ Delisting”); and (b) distribute and pay all Recovered Amounts as provided in Section 12.

 

  

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7.7. Use of Proceeds.  Use each Advance only for such purpose(s) as may be approved in writing by the Noteholder, in its sole discretion, with respect to such Advance.

 

7.8. Further Assurances.  Upon the request of the Noteholder, promptly execute and deliver such further instruments and do or cause to be done such further acts as may be necessary or advisable to carry out the intent and purposes of this Note.

 

7.9. Acceptance of Calculation of Outstanding Debt by Noteholder.  In the event that the Noteholder initiates a bankruptcy proceeding involving the Borrower, and to the fullest extent permitted by law, agree, accept and stipulate that the Noteholder’s calculation of the amount of outstanding principal and accrued interest due the Noteholder under this Note or the 2010 Note, or the amount of any other indebtedness owed by the Borrower or its Affiliates to the Noteholder, is correct and accurate.

 

8. Negative Covenants.  Without the prior written consent of the Noteholder, from the date hereof until all of the Borrower’s obligations under this Note are satisfied in full, the Borrower and each Affiliate thereof shall be prohibited from:

 

8.1. Dispositions.  Selling, leasing or otherwise disposing of their respective assets, except in the ordinary course of business.

 

8.2. Liens.  Incurring, creating, assuming or suffering to exist any Lien on any of Borrower’s or any its Affiliates’ property or assets, whether now owned or hereinafter acquired except for (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings; and (b) non-consensual Liens arising by operation of Law, arising in the ordinary course of business, and for amounts which are not overdue for a period of more than thirty (30) days or that are being contested in good faith by appropriate proceedings.

 

8.3. Dissolution.  Dissolving, liquidating, or winding up their respective businesses.

 

8.4. Conduct of Business.  Conducting their respective businesses other than in their ordinary and usual course, or otherwise effecting any fundamental change to any such business.

 

  

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8.5. Dividends.  Paying any dividend or make any other distributions of cash or property.

 

8.6. Existence.  Merging or consolidating with another entity (except the merger or consolidation of an Affiliate into the Borrower, in which the Borrower is the surviving entity).

 

8.7. Capitalization.  Issuing any new stock or redeeming any existing stock.

 

8.8. Indebtedness.  Incurring, creating or assuming any Debt, other than Permitted Debt.

 

8.9. Subsequent Delisting.  Following the date on which the Borrower’s securities are re listed on the NASDAQ or listed on any other securities exchange, permit the delisting of those securities from such securities exchange.

 

8.10. SEC Filings; Restatements.  Failing to make timely filings with the SEC, or restating any of its financial reports or related disclosures.

 

9. Events of Default.  The occurrence and continuance of any of the following shall constitute an Event of Default hereunder:

 

9.1. Failure to Pay.  The Borrower fails to pay (a) any principal amount of the Loan when due or (b) interest or any other amount when due and such failure continues for two (2) days following written notice to the Borrower.

 

9.2. Breach of Representations and Warranties.  Any representation or warranty made or deemed made by the Borrower to the Noteholder herein is incorrect in any material respect on the date as of which such representation or warranty was made or deemed made.

 

9.3. Breach of Covenants.  The Borrower fails to observe or perform (a) any covenant, condition or agreement contained set forth herein and such failure continues after the applicable grace period, if any.

 

  

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9.4. Bankruptcy.

 

(a) the Borrower commences any case, proceeding or other action (i) under any existing or future Law relating to bankruptcy, insolvency, reorganization, or other relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts or (ii) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower makes a general assignment for the benefit of its creditors;

 

(b) there is commenced against the Borrower any case, proceeding or other action of a nature referred to in Section 9.4(a) above;

 

(c) there is commenced against the Borrower any case, proceeding or other action seeking issuance of a warrant of attachment, execution or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which has not been vacated, discharged, or stayed or bonded pending appeal within thirty (30) days from the entry thereof;

 

(d) the Borrower takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in Section 9.4(a), Section 9.4(b) or Section 9.4(c) above; or

 

(e) the Borrower is generally not, or shall be unable to, or admits in writing its inability to, pay its Debts as they become due.

 

9.5. Judgments.  One or more judgments or decrees shall be entered against the Borrower and all of such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within thirty (30) days from the entry thereof, other than such judgments or decrees set forth in Schedule 9.6.

 

9.6. Restatements of Financial Statements.  The Borrower shall issue a restatement of any financial statements filed with the SEC previously or in the future.

 

  

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10. Remedies.  Upon the occurrence of any Event of Default and at any time thereafter during the continuance of such Event of Default, the Noteholder may at its option, by written notice to the Borrower (a) terminate its commitment to make any Advances hereunder; (b) declare the entire principal amount of this Note, together with all accrued interest thereon and all other amounts payable hereunder, immediately due and payable; and/or (c) exercise any or all of its rights, powers or remedies under applicable Law; provided, however that, if an Event of Default described in Section 9.4 shall occur, the principal of and accrued interest on the Loan shall become immediately due and payable without any notice, declaration or other act on the part of the Noteholder.

 

11. Indemnification.  The Borrower agrees to indemnify and hold harmless the Noteholder and its Affiliates and their respective directors, officers, managers, members, shareholders, employees and agents (each a “Noteholder Indemnitee”) from and against any and all losses, claims, damages, liabilities and expenses, including, without limitation, reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof (collectively, “Damages”) to which any such Noteholder Indemnitee may become subject (a) as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Borrower under this Note, or (b) arising from or in connection with any services performed by the Noteholder on behalf of or for the benefit of the Borrower (whether in connection with this Note or otherwise), other than such Damages incurred by a Noteholder Indemnitee solely as the result of such Noteholder Indemnitee’s gross negligence or willful misconduct).  The Borrower will reimburse any such Noteholder Indemnitee on demand for all such Damages as they are incurred by such Noteholder Indemnitee.

 

12. Distribution of Recovered Amounts.  In the event that the Borrower obtains a monetary judgment against any Person or is otherwise entitled to be paid monies by any Person in connection with a claim made or threatened by the Borrower against any Person in connection with or arising from the NASDAQ Delisting (such amounts, the “Recovered Amounts”), the Borrower shall (a) cause all such amounts to be deposited by such Person directly into the Escrow Account (and not to any account controlled by the Borrower); and (b) notify the Noteholder that such deposit will be or has been made to the Escrow Account; provided, however, that the terms and conditions of any settlement, including the amount, shall be agreeable to both the Borrower and the Noteholder; and provided further, that in the event of a disagreement between the Borrower and the Noteholder as to any proposed settlement of $31 million or less, the Borrower shall accept or reject such settlement at the Noteholder’s sole discretion.  Thereafter, such recovered amounts shall be paid or distributed from the Escrow Account as follows:

 

  

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12.1. First, to repay the principal amount of any outstanding Advances and all accrued and unpaid interest thereon;

 

12.2. Second, to repay all the principal and interest with an outstanding unpaid balance as of August 13, 2013 of at least RMB 68,830,000 yuan under the 2010 Loan, however the accrued interest of 2010 Loan should be at an annual interest rate of 8.5% after August 13, 2013 until Recovered Amounts received;

 

12.3. Third, to repurchase or redeem all shares of the Borrower’s capital stock from such investors and in such amounts as set forth on Schedule 12.3 pro rata, at an aggregate price of $14 million, and return such purchased or redeemed shares to the Borrower for cancellation;

 

12.4. Thereafter, as determined by the Borrower’s Board of Directors.

 

13. Miscellaneous.

 

13.1. Notice.  Unless otherwise provided, any notice required or permitted under this Note shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by mail, then such notice shall be deemed given upon the receipt of such notice by the recipient and (iii) if given by an internationally recognized overnight air courier, then such notice shall be deemed given two (2) Business Days after delivery to such carrier.  All notices shall be addressed to the Party to be notified at the address below, or at such other address as such Party may designate by ten (10) days advance written notice to the other Party:

 

  

16

  

 

If to the Borrower:

 

CleanTech Innovations, Inc.

C District, Maoshan Industry Park

Tieling Economic Development Zone,

Tieling, Liaoning Province, China 112616

Attention: Bei Lu

Tel: 86-13904026412

Email: beilv2010@l63.com

With a copy to (which copy shall constitute notice):

 

William Uchimoto, Esq.

Stevens & Lee P.C.

1818 Market St., 29th Fl.

Philadelphia, PA 19103

Office: 215-751-2876

Fax: 610-371-7742

Email: wwu@stevenslee.com

If to the Noteholder:

 

NYGG (Asia), Ltd.

12th Floor Ruttonjee House

11 Duddell Street, Central,

Hong Kong

Attention: Ming Li

Tel: (86) 10-6581-4338

With a copy to (which copy shall constitute notice):

 

Holland & Knight LLP

31 West 52nd Street

New York, New York 10019

Attention: Neal Beaton, Esq.

Tel: (212) 513-3470

Fax: (212) 341-7103

 

  

17

  

13.2. Expenses.  The Borrower shall reimburse the Noteholder on demand for all out-of-pocket costs, expenses and fees (including reasonable expenses and fees of its counsel) incurred by the Noteholder in connection with the transactions contemplated hereby including, without limitation, the negotiation, documentation and execution of this Note and the enforcement of the Noteholder’s rights hereunder.

 

13.3. Governing Law.  This Note, and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Note and the transactions contemplated hereby shall be governed by the Laws of the State of New York, without regard to choice of law principles thereof.

 

13.4. Submission to Jurisdiction.

 

(a) The Borrower hereby irrevocably and unconditionally (i) agrees that any legal action, suit or proceeding arising out of or relating to this Note may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York and (ii) submits to the exclusive jurisdiction of any such court in any such action, suit or proceeding.  Final judgment against the Borrower in any action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment.

 

(b) Nothing in this Section 13.4 shall affect the right of the Noteholder to (i) commence legal proceedings or otherwise sue the Borrower in any other court having jurisdiction over the Borrower or (ii) serve process upon the Borrower in any manner authorized by the Laws of any such jurisdiction.

 

13.5. Venue.  The Borrower irrevocably and unconditionally waives, to the fullest extent permitted by applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Note in any court referred to in Section 13.4 and the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

  

18

  

 

13.6. Waiver of Jury Trial.  THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY.

 

13.7. Counterparts; Integration; Effectiveness.  This Note and any amendments, waivers, consents or supplements hereto may be executed in counterparts, each of which shall constitute an original, but all taken together shall constitute a single contract.  This Note constitutes the entire contract between the Parties with respect to the subject matter hereof and supersedes all previous agreements and understandings, oral or written, with respect thereto.  Delivery of an executed counterpart of a signature page to this Note by facsimile or in electronic (i.e., “pdf or “tif”) format shall be effective as delivery of a manually executed counterpart of this Note.

 

13.8. Successors and Assigns.  This Note may be assigned or transferred by the Noteholder to any Person.  The Borrower may not assign or transfer this Note or any of its rights hereunder without the prior written consent of the Noteholder.  This Note shall inure to the benefit of, and be binding upon, the Parties and their permitted assigns.

 

13.9. Waiver of Notice.  The Borrower hereby waives demand for payment, presentment for payment, protest, notice of payment, notice of dishonor, notice of nonpayment, notice of acceleration of maturity and diligence in taking any action to collect sums owing hereunder.

 

13.10. USA PATRIOT Act.  The Noteholder hereby notifies the Borrower that to the extent required pursuant to the USA PATRIOT Act, it shall obtain, verify, and record information that identifies the Borrower, which information includes the name of the Borrower and other information that will allow the Noteholder to identify the Borrower in accordance with the US PATRIOT Act, and the Borrower agrees to provide any such information as may be requested from time to time by the Noteholder.

 

  

19

  

 

13.11. Interpretation.  For purposes of this Note (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Note as a whole.  The definitions given for any defined terms in this Note shall apply equally to both the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  Unless the context otherwise requires, references herein: (x) to Schedules, Exhibits and Sections mean the Schedules, Exhibits and Sections of this Note; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder.  This Note shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

13.12. Amendments and Waivers.  No term of this Note may be waived, modified or amended except by an instrument in writing signed by both of the Parties.  Any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given.

 

13.13. Headings.  The headings of the various Sections and subsections herein are for reference only and shall not define, modify, expand or limit any of the terms or provisions hereof.

 

13.14. No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising on the part of the Noteholder, of any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.

 

  

20

  

 

13.15. Severability.  If any term or provision of this Note is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Note or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

 

 

 

 

  

21

  

 

IN WITNESS WHEREOF, each of the Parties has executed this Note as of this 17th day of August 2013.

 

	 	BORROWER:	 
	 	 	 
	 	CLEANTECH INNOVATIONS, INC.	 
	 	 	 	 
	
 

	
By: 

	/s/ Bei Lu 	 
	 	 	Name: Bei Lu 	 
	 	 	Title: Chairman of the Board of Directors	 
	 	 	and Chief Executive Officer, acting in such	 
	 	 	capacity and on behalf of the holders of a	 
	 	 	majority of the voting shares of the Borrower	 

 

 

 

	 	NOTEHOLDER:	 
	 	 	 
	 	NYGG (ASIA), LTD.	 
	 	 	 	 
	
 

	
By: 

	/s/ Ming Li 	 
	 	 	Name: Ming Li 	 
	 	 	Title: Managing Director 	 
	 	 	 	 

 

  

22

  

SCHEDULES

 

SCHEDULE 1

 

NONE

 

[SEE SCHEDULE 6.8]

 

SCHEDULE 6.7

 

[ACCURACY OF 2010 LOAN INFORMATION]

 

[SEE SCHEDULE 6.8.]

 

SCHEDULE 6.8

 

[OBSERVANCE OF PRIOR COVENANTS]

 

The Borrower is in a continuing default on its $10 million loan from the Noteholder on December 13, 2010.  This default has not been waived.  At July 15, 2013 the total principal and interest due was US $13,271,111 (or the equivalent in the Chinese currency (RMB) of RMB 83,608,000 yuan).

 

The Noteholder hereby waives Section 5(G) of the 2010 Loan Agreement for the limited and sole purpose of permitting the Loan.

 

SCHEDULE 9.6

 

[JUDGMENTS]

 

There is an outstanding default judgment by the Supreme Court of New York County against the borrower in the amount of $450,000.  In the event that there are efforts to enforce this judgment, the Borrower will take steps, at its own expense, to have it vacated.

 

  

23

  

 

SCHEDULE 12.3

 

[CTEK $14 MILLION REDEMPTION DETAILS]

 

	

Shareholders/investors

	 	

Shares and warrants

	 
	
HanHua Limited

	 	 	1,046,875	 
	
Roosen Commercial Corp.

	 	 	1,046,875	 
	
Strong Growth Capital, Ltd

	 	 	1,046,875	 
	
Wolf Enterprises Limited

	 	 	1,046,875	 
	
NYGG (Asia), Ltd.

	 	 	300,000	 
	
Witter Global Opportunities Ltd.

	 	 	105,600	 
	
Total Shares to be Redeemed:

	 	 	4,593,100	 

  

24

  

 

EXHIBIT A

 

ADVANCES AND PAYMENTS ON THE LOAN

 

	
Date of

Advance

	
Amount of Advance

	
Amount of Principal Paid

	
Unpaid

Principal

Amount of

Note

	
Name of

Person Making the Notation

	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  

  

25

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