Document:

Unassociated Document

     

    
      
        Exhibit
          10.1

        

        SECURITIES
          PURCHASE AGREEMENT

         

        
          THIS
            SECURITIES PURCHASE AGREEMENT is entered into as of January
            9,
            2006
            (the “Agreement”), by and by and among Commerce Development Corporation, Ltd., a
            Maryland corporation (the “Company”), on the one hand, and each of the
            undersigned buyers identified on the signature pages hereto and on Schedule
            A
            attached
            hereto (collectively, the “Buyers”). Each party to this Agreement is referred to
            herein as a “Party,” and they are all referred to collectively as “Parties.”

        

         

        W
          I T N E
          S S E T H:

         

        WHEREAS,
          the Company wishes to issue and sell and the Buyers wish to purchase 72,001,735
          shares of the Company’s common stock (the “Securities”); 

         

        WHEREAS,
          in connection with this Agreement and as an inducement for the Buyers to
          purchase the Shares herein, certain shareholders of the Company are selling
          16,451,435 shares of the common stock of the Company pursuant to a Stock
          Purchase Agreement entered into between the Buyers and such selling shareholders
          which, along with the issuance and purchase of the Shares as set forth
          in this
          Agreement constitutes approximately 90% of the total outstanding shares
          of
          common stock of the Company;

         

        NOW,
          THEREFORE, in consideration of the premises and of the mutual representations,
          warranties and agreements set forth herein, the Parties hereto agree as
          follows:

         

        ARTICLE
          I

         

        PURCHASE
          OF SECURITIES

         

        1.1    Incorporation
          of Recitals. 
          The provisions and recitals set forth above are hereby referred to and
          incorporated herein and made a part of this Agreement by reference.

         

        1.2    Purchase
          of Shares. 
          Subject to the terms and conditions of this Agreement, on the Closing Date
          (as
          hereinafter defined) the Company shall issue and each of the Buyers shall
          purchase such amount of the Shares and for such consideration (the aggregate
          purchase price referred to herein as the “Purchase Price”) as set forth on
Schedule
          A
          attached
          hereto from the Sellers. 

         

        1.3    Closing. 
          The Closing shall take place on January 9, 2006 (the “Closing Date”). On the
          Closing Date, the Company shall deliver to the Buyers stock certificate(s)
          evidencing the Shares to be purchased in the name of the Buyers and/or
          its
          designees (the “Shares Certificates”). On the Closing Date, the Buyers shall
          deliver to the Sellers to total cash consideration of $82,833 for the purchase
          of the Shares. 

         

        ARTICLE
          II

         

        REPRESENTATIONS
          AND WARRANTIES OF THE COMPANY

         

        The
          Company represents and warrants to Buyer that now and/or as of the Closing
          (for
          purposes of this Article II, the Company shall referred to the Company
          and all
          of its subsidiaries):

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        2.1    Due
          Organization and Qualification; Subsidiaries; Due Authorization.

         

        (a)    The
          Company is a corporation duly incorporated, validly existing and in good
          standing under the laws of its jurisdiction of formation, with full corporate
          power and authority to own, lease and operate its respective business and
          properties and to carry on its respective business in the places and in
          the
          manner as presently conducted. The Company is in good standing as a foreign
          corporation in each jurisdiction in which the properties owned, leased
          or
          operated, or the business conducted, by it requires such qualification
          except
          for any failure, which when taken together with all other failures, is
          not
          likely to have a material adverse effect on the business of the Company,
          taken
          as a whole.

         

        (b)    The
          Company does not have, and has never had, any subsidiaries and does not
          own,
          directly or indirectly, any capital stock, equity or interest in any
          corporation, firm, partnership, joint venture or other entity.

         

        (c)    The
          Company has all requisite corporate power and authority to execute and
          deliver
          this Agreement, and to consummate the transactions contemplated hereby
          and
          thereby. The Company has taken all corporate action necessary for the execution
          and delivery of this Agreement and the consummation of the transactions
          contemplated hereby, and this Agreement constitutes the valid and binding
          obligation of the Company, enforceable against the Company in accordance
          with
          its respective terms, except as may be affected by bankruptcy, insolvency,
          moratoria or other similar laws affecting the enforcement of creditors’ rights
          generally and subject to the qualification that the availability of equitable
          remedies is subject to the discretion of the court before which any proceeding
          therefore may be brought. This
          Agreement, the Actions, and the transactions contemplated hereby have been
          unanimously approved by the Board of Directors of the Company and by the
          holders
          of a majority of the outstanding shares of Common Stock of the Company.
          

         

        2.2    No
          Conflicts or Defaults.  The
          execution and delivery of this Agreement by the Company and the consummation
          of
          the transactions contemplated hereby do not and shall not (a) contravene
          the
          Certificate of Incorporation or By-laws of the Company or (b) with or without
          the giving of notice or the passage of time (i) violate, conflict with,
          or
          result in a breach of, or a default or loss of rights under, any material
          covenant, agreement, mortgage, indenture, lease, instrument, permit or
          license
          to which the Company is a party or by which the Company is bound, or any
          judgment, order or decree, or any law, rule or regulation to which the
          Company
          is subject, (ii) result in the creation of, or give any party the right
          to
          create, any lien, charge, encumbrance or any other right or adverse interest
          (“Liens”) upon any of the assets of the Company, (iii) terminate or give any
          party the right to terminate, amend, abandon or refuse to perform, any
          material
          agreement, arrangement or commitment to which the Company is a party or
          by which
          the Company’s assets are bound, or (iv) accelerate or modify, or give any party
          the right to accelerate or modify, the time within which, or the terms
          under
          which, the Company is to perform any duties or obligations or receive any
          rights
          or benefits under any material agreement, arrangement or commitment to
          which it
          is a party.

         

        2.3    Capitalization. 
          The authorized capital stock of the Company, on the Closing Date, shall
          be
          300,000,000 shares of Common Stock, par value $0.001 per share, of which
          21,365,500 shares are as of the date hereof, issued and outstanding (the
          “Company Shares”). The
          Company has no issued and outstanding shares of preferred stock. All
          of
          the Company Shares are duly authorized, validly issued, fully paid and
          nonassessable, and have not been issued in violation of any preemptive
          right of
          stockholders. The Company Shares are not, and those shares of Common Stock
          when
          issued in accordance with the terms hereof will not be, subject to any
          preemptive or subscription right. There is no outstanding voting trust
          agreement
          or other contract, agreement, arrangement, option, warrant, call, commitment
          or
          other right of any character obligating or entitling the Company to issue,
          sell,
          redeem or repurchase any of its securities, and there is no outstanding
          security
          of any kind convertible into or exchangeable for the common stock of the
          Company, nor has the Company, or any of its agents orally agreed to issue
          any of
          the foregoing. There
          are
          no declared or accrued unpaid dividends with respect to any shares of the
          Company’s common stock. There are no agreements, written or oral, between the
          Company and any of their shareholders or among any Company shareholders
          relating
          to the acquisition (including without limitation rights of first refusal
          or
          preemptive rights), or disposition, or registration under the Securities
          Act or
          voting of the capital stock of the Company. There are no outstanding shares
          of
          Company Common Stock that are subject to vesting. The Company has no other
          capital stock authorized, issued or outstanding.

         

        
          
             

          

          
            2

            
              

            

          

          
             

          

        

        2.4    Financial
          Statements.

         

        (a)    SEC
          Documents. 
          The Company hereby makes reference to the following documents filed with
          the
          United States Securities and Exchange Commission (the “SEC”), as posted on the
          SEC’s website, www.sec.gov:
          (collectively, the “SEC Documents”): (a) Annual Report on Form 10-KSB for the
          fiscal year ended December 31, 2004, as amended; (b) Registration of Securities
          Of Small Business Issuers on Form SB-2 as filed on April 21, 2003, and
          all
          amendments thereto; and (c) Quarterly Reports on Form 10-QSB for the periods
          ended September 30, 2004 and 2005, March 31, 2005, and June 30, 2005, and
          all
          amendments thereto. The SEC Documents constitute all of the documents and
          reports that the Company was required to file with the SEC pursuant to
          the
          Securities Exchange Act of 1934 (“Exchange Act”) and the rules and regulations
          promulgated thereunder by the SEC since the effectiveness of the Company’s Form
          SB-2 filed on April 21, 2003, as amended. The
          financial statements included in the SEC Documents include copies of the
          balance
          sheets of the Company at December 31, 2003 and 2004, and the related statements
          of operations and stockholders’ cash flows for the fiscal years then ended,
          including the notes thereto, as audited by Lawrence Scharfman & Co., CPA
          P.A. Certified, independent accountants, and the balance sheet of the Company
          at
          September 30, 2005 and the related statements of operations and stockholders’
cash flows for the nine-month period then ended prepared by the Company’s
          management (all such statements being referred to collectively as the “Company
          Existing Financial Statements”). All the Company Existing Financial Statements,
          together with the notes thereto, have been prepared in accordance with
          U.S.
          generally accepted accounting principles applied on a basis consistent
          throughout all periods presented. These Company Existing Financial Statements
          present fairly the financial position of the Company as of the dates and
          for the
          periods indicated. The books of account and other financial records of
          the
          Company have been maintained in accordance with good business practices.
          

         

        (b)    Since
          the
          date of the latest Company Existing Financial Statements (the “Most Recent
          Date”), there has been no material adverse change in the condition, financial
          or
          otherwise, net worth, prospects or results of operations of the Company.
          Without
          limiting the foregoing, since the Most Recent Date:

         

        (i)    the
          Company has not sold, leased, transferred or assigned any of their assets,
          tangible or intangible, other than in the ordinary course of
          business;

         

        (ii)    the
          Company has not entered into any agreement, contract, commitment, lease
          or
          license (or series of related agreements, contracts, commitments, leases
          and
          licenses);

         

        (iii)    no
          party
          (including the Company) has accelerated, terminated, modified or canceled
          any
          agreement, contract, lease or license (or series of related agreements,
          contracts, leases and licenses) to which the Company is a Party or by which
          the
          Company or its assets are bound;

         

        (iv)    the
          Company has not made any capital expenditure (or series of related capital
          expenditures) of whatever nature;

         

        
          
             

          

          
            3

            
              

            

          

          
             

          

        

        (v)    the
          Company has not made any capital investments in, any loans to, or any
          acquisitions of the securities or assets of any other Person (or a series
          of
          related capital investments, loans and acquisitions);

         

        (vi)    the
          Company has not issued any notes, bonds or other debt securities, or created,
          incurred, assumed or guaranteed any indebtedness for borrowed money or
          capitalized lease obligation;

         

        (vii)    the
          Company has not canceled, compromised, waived or released any right or
          claim (or
          series of related rights and claims);

         

        (viii)    the
          Company has not made any loans to, or entered into any other transactions
          with,
          any of their respective directors, officers, or employees; and

         

        (ix)    the
          Company has committed to do any of the foregoing.

         

        2.5    Further
          Financial Matters. 
          The Company does not have any (a) assets of any kind or (b) liabilities
          or
          obligations, whether secured or unsecured, accrued, determined, absolute
          or
          contingent, asserted or unasserted or otherwise, which are required to
          be
          reflected or reserved in a balance sheet or the notes thereto under generally
          accepted accounting principles, and which are not reflected in the Company
          Financial Statements. 

         

        2.6    Taxes.
           The Company has filed all United States federal, state, county, local and
          foreign, national, provincial and local returns and reports which were
          required
          to be filed on or prior to the Closing Date hereof in respect of all income,
          withholding, franchise, payroll, excise, property, sales, use, value-added
          or
          other taxes or levies, imposts, duties, license and registration fees,
          charges,
          assessments or withholdings of any nature whatsoever (together, “Taxes”), and
          has paid all Taxes (and any related penalties, fines and interest) which
          have
          become due pursuant to such returns or reports or pursuant to any assessment
          which has become payable, or, to the extent its liability for any Taxes
          (and any
          related penalties, fines and interest) has not been fully discharged, the
          same
          have been properly reflected as a liability on the books and records of
          the
          Company and adequate reserves therefore have been established. All such
          returns
          and reports filed on or prior to the date hereof have been properly prepared
          and
          are true, correct (and to the extent such returns reflect judgments made
          by the
          Company, as the case may be, such judgments were reasonable under the
          circumstances) and complete in all material respects. The amount shown
          on the
          Company’s most recent balance sheet as provision for taxes is sufficient in all
          material respects to pay all accrued and unpaid federal, state, local and
          foreign taxes for the period then ended and all prior periods. No tax return
          or
          tax return liability of the Company has been audited or, presently under
          audit.
          The Company has not given or been requested to give waivers of any statute
          of
          limitations relating to the payment of any Taxes (or any related penalties,
          fines and interest). There are no claims pending or, to the knowledge of
          the
          Company, threatened, against the Company for past due Taxes. All payments
          for
          withholding taxes, unemployment insurance and other amounts required to
          be paid
          for periods prior to the date hereof to any governmental authority in respect
          of
          employment obligations of the Company, including, without limitation, amounts
          payable pursuant to the Federal Insurance Contributions Act, have been
          paid or
          shall be paid prior to the Closing and have been duly provided for on the
          books
          and records of the Company and in the Financial Statements. All such amounts
          and
          penalties are set forth in the Company’s balance sheet.

         

        2.7    Indebtedness;
          Contracts; No Defaults; Liabilities.

         

        (a)    The
          Company has no instruments, agreements, indentures, mortgages, guarantees,
          notes, commitments, accommodations, letters of credit or other arrangements
          or
          understandings, whether written or oral, to which the Company is a party,
          all of
          which will be extinguished shortly after the Closing. 

         

        
          
             

          

          
            4

            
              

            

          

          
             

          

        

        (b)    Neither
          the Company, nor, to the Company’s knowledge, any other person or entity is in
          breach, or in default under any contract, agreement, arrangement, commitment
          or
          plan to which the Company is a party, and no event or action has occurred,
          is
          pending or is threatened, which, after the giving of notice, passage of
          time or
          otherwise, would constitute or result in such a breach or default by the
          Company
          or, to the knowledge of the Company, any other person or entity. The Company
          has
          not received any notice of default under any contract, agreement, arrangement,
          commitment or plan to which it is a party, which default has not been cured
          to
          the satisfaction of, or duly waived by, the party claiming such default
          on or
          before the date hereof.

         

        (c)    Other
          than the liabilities set forth on Schedule
          B
          which
          shall be paid off immediately upon the closing, the Company shall have
          no
          liabilities.

        

        2.8    Real
          Property. 
          The Company does not own or lease any real property. 

         

        2.9    Compliance.
          

         

        (a)    The
          Company is not conducting its respective business or affairs in violation
          of any
          applicable federal, state or local law, ordinance, rule, regulation, court
          or
          administrative order, decree or process, or any requirement of insurance
          carriers. The Company has not received any notice of violation or claimed
          violation of any such law, ordinance, rule, regulation, order, decree,
          process
          or requirement.

        

        (b)    The
          Company is in compliance with all applicable federal, state, local and
          foreign
          laws and regulations. There are no claims, notices, actions, suits, hearings,
          investigations, inquiries or proceedings pending or, to the knowledge of
          the
          Company, threatened against the Company, and there are no past or present
          conditions that the Company has reason to believe are likely to give rise
          to any
          material liability or other obligations of the Company under any
          circumstances.

        

        2.10    Permits
          and Licenses. 
          The Company has all certificates of occupancy, rights, permits, certificates,
          licenses, franchises, approvals and other authorizations as are reasonably
          necessary to conduct its respective business and to own, lease, use, operate
          and
          occupy its assets, at the places and in the manner now conducted and operated,
          except those the absence of which would not materially adversely affect
          its
          respective business. The Company has not received any written or oral notice
          or
          claim pertaining to the failure to obtain any material permit, certificate,
          license, approval or other authorization required by any federal, state
          or local
          agency or other regulatory body, the failure of which to obtain would materially
          and adversely affect its business.

         

        2.11    Litigation.

         

        (a)    There
          is
          no claim, dispute, action, suit, inquiry, proceeding or investigation pending
          or, to the knowledge of the Company, threatened, against or affecting the
          business of the Company, or challenging the validity or propriety of the
          transactions contemplated by this Agreement, at law or in equity or admiralty
          or
          before any federal, state, local, foreign or other governmental authority,
          board, agency, commission or instrumentality, nor has any such claim, dispute,
          action, suit, proceeding or investigation been pending or threatened, during
          the
          12 month period preceding the date hereof; 

         

        (b)    There
          is
          no outstanding judgment, order, writ, ruling, injunction, stipulation or
          decree
          of any court, arbitrator or federal, state, local, foreign or other governmental
          authority, board, agency, commission or instrumentality, against or affecting
          the business of the Company; and 

         

        (c)    The
          Company has not received any written or verbal inquiry from any federal,
          state,
          local, foreign or other governmental authority, board, agency, commission
          or
          instrumentality concerning the possible violation of any law, rule or regulation
          or any matter disclosed in respect of its business.

         

        
          
             

          

          
            5

            
              

            

          

          
             

          

        

        2.12    Insurance. 
          The Company does not currently maintain any form of insurance. 

         

        2.13    Articles
          of Incorporation and By-laws; Minute Books. 
          Certified copies of the Company’s Articles of Incorporation and its by-laws have
          been forwarded to the Buyer. Such copies of the Articles of Incorporation
          and
          By-laws (or similar governing documents) of the Company, and all amendments
          to
          each are true, correct and complete. The minute books of the Company as
          forwarded to the Buyer contain true and complete records of all meetings
          and
          consents in lieu of meetings of their respective Board of Directors (and
          any
          committees thereof), or similar governing bodies, since the time of their
          respective organization. The stock books of the Company as forwarded to
          the
          Buyer are true, correct and complete.

         

        2.14    Employee
          Benefit Plans.
           The Company does not maintain, nor has the Company maintained in the past,
          any employee benefit plans (“as defined in Section 3(3) of the Employee
          Retirement Income Security Act of 1974, as amended (“ERISA”)), or any plans,
          programs, policies, practices, arrangements or contracts (whether group
          or
          individual) providing for payments, benefits or reimbursements to employees
          of
          the Company, former employees, their beneficiaries and dependents under
          which
          such employees, former employees, their beneficiaries and dependents are
          covered
          through an employment relationship with the Company, any entity required
          to be
          aggregated in a controlled group or affiliated service group with the Company
          for purposes of ERISA or the Internal Revenue Code of 1986 (the “Code”)
          (including, without limitation, under Section 414(b), (c), (m) or (o) of
          the
          Code or Section 4001 of ERISA, at any relevant time (“Benefit
          Plans”).

         

        2.15    Patents;
          Trademarks and Intellectual Property Rights. 
          The Company does not own or possess any patents, trademarks, service marks,
          trade names, copyrights, trade secrets, licenses, information, Internet
          web
          site(s) or proprietary rights of any nature. The business conducted by
          the
          Company has not and will not cause the Company to infringe or violate any
          of the
          patents, trademarks, service marks, trade names, copyrights, mask-works,
          licenses, trade secrets, processes, data, know-how or other intellectual
          property rights of any other Person.

         

        2.16    Brokers. 
          The Company has not agreed to or incurred any obligation or other liability
          that
          could be claimed against the Company or Buyer or any other person for any
          finder’s fee, brokerage commission or similar payment.

         

        2.17    Affiliate
          Transactions. 
          Neither the Company nor any officer, director or employee of the Company
          (or any
          of the relatives or Affiliates of any of the aforementioned Persons) is
          a party
          to any agreement, contract, commitment or transaction with the Company
          or
          affecting the business of the Company, or has any interest in any property,
          whether real, personal or mixed, or tangible or intangible, used in or
          necessary
          to the Company which will subject the Company to any liability or obligation
          from and after the Closing Date.

         

        2.18    Trading.
           The Company Common Stock is currently listed for trading on the OTC
          Bulletin Board (the “Bulletin Board”), and the Company has not received any
          notices that its common stock is subject to being delisted
          therefrom.

         

        2.19    Compliance. 
          The Company has complied with the requirements of the Securities Exchange
          Act of
          1934, as amended (the “Exchange Act”) and the Securities Act of 1933, as amended
          (the “Securities Act”), and is current in its filings under the Exchange Act and
          the Securities Act.

         

        
          
             

          

          
            6

            
              

            

          

          
             

          

        

        2.20    Filings.
           To the knowledge of the Company, none of the filings made by the Company
          under the Securities Act or the Exchange Act make any untrue statement
          of a
          material fact or omit to state a material fact necessary in order to make
          the
          statements made, in light of the circumstances under which they were made,
          not
          misleading.

         

        2.21    Consents. 
          No consent, waiver, approval, order or authorization of, or registration,
          declaration or filing with, any court, administrative agency or commission
          or
          other federal, state, county, local or other foreign governmental authority,
          instrumentality, agency or commission (“Governmental Entity”) is required by or
          with respect to the Company in connection with the execution and delivery
          of
          this Agreement and any related agreements to which the Company is a party
          or the
          consummation of the transactions contemplated hereby and thereby, except
          for
          such consents, waivers, approvals, orders, authorizations, registrations,
          declarations and filings as may be required under applicable securities
          laws.

         

        2.22    Schedules. 
          All
          lists
          or other statements, information or documents set forth in, attached to
          any
          Schedule provided pursuant to this Agreement or delivered hereunder shall
          be
          deemed to be representations and warranties by the Company with the same
          force
          and effect as if such lists, statements, information and documents were
          set
          forth herein. Any list, statement, document or any information set forth
          in,
          attached to any Schedule provided pursuant to this Agreement or delivered
          hereunder shall not be deemed to constitute disclosure for any other Schedule
          provided pursuant to this Agreement unless specific cross reference is
          made and
          shall survive after closing.

         

        2.23    Environmental
          Matters. 
          The Company has never: (i) operated any underground storage tanks at any
          property that the Company has at any time owned, operated, occupied or
          leased;
          or (ii) illegally released any material amount of any substance that has
          been designated by any Governmental Entity or by applicable foreign, federal,
          state, or local law to be radioactive, toxic, hazardous or otherwise a
          danger to
          health or the environment, including, without limitation, PCBs, asbestos,
          petroleum, and urea-formaldehyde and all substances listed as hazardous
          substances pursuant to the Comprehensive Environmental Response, Compensation,
          and Liability Act of 1980, as amended, or defined as a hazardous waste
          pursuant
          to the United States Resource Conservation and Recovery Act of 1976, as
          amended,
          and the regulations promulgated pursuant to said laws), but excluding office
          and
          janitorial supplies properly and safely maintained.

         

        2.24.    Subsidiaries. 
          The Company does have any subsidiaries and does not own any securities
          of
          another corporation, partnership, limited liability company or other forms
          of
          business entities.

        

        2.25    Representations
          and Warranties. 
          The representations and warranties of the Company included in this Agreement
          and
          any list, statement, document or information set forth in, attached to
          any
          Schedule provided pursuant to this Agreement or delivered hereunder, are
          true
          and complete in all material respects and do not contain any untrue statement
          of
          a material fact or omit to state a material fact required to be stated
          therein
          or necessary to make the statements contained therein not misleading, under
          the
          circumstance under which they were made and shall survive after closing
          as set
          forth herein.

         

        

        ARTICLE
          III

         

        REPRESENTATIONS
          AND WARRANTIES OF THE BUYERS

         

        Each
          of
          the Buyer hereby represents and warrants to the Company that now and/or
          as of
          the Closing:

         

        
          
             

          

          
            7

            
              

            

          

          
             

          

        

        3.1    Authority
          Relative to this Agreement.
           The Buyers have the requisite power and/or authority to enter into this
          Agreement and carry out his/her obligations hereunder. This Agreement has
          been
          duly and validly executed and delivered by the Buyers and constitutes a
          valid
          and binding obligation of the Buyers, enforceable in accordance with its
          terms,
          except as such enforcement may be limited by bankruptcy, insolvency or
          other
          similar laws affecting the enforcement of creditors' rights generally or
          by
          general principles of equity. 

         

        3.2    Buyer
          Representation Regarding the Securities.
           The Buyers understand that the Securities are “restricted securities” and
          have not been registered under the Securities Act or any applicable state
          securities law and is acquiring the Securities as principal for its own
          account
          and not with a view to or for distributing or reselling such Securities
          or any
          part thereof, has no present intention of distributing any of such Securities
          and has no arrangement or understanding with any other persons regarding
          the
          distribution of such Securities (this representation and warranty not limiting
          such Buyer’s right to sell the Securities pursuant to the Registration Statement
          or otherwise in compliance with applicable federal and state securities
          laws).
          The Buyers are acquiring the Shares hereunder in the ordinary course of
          its
          business. The Buyers do not have any agreement or understanding, directly
          or
          indirectly, with any Person to distribute any of the Securities.

        

        3.3    Buyer
          Status. 
          At the time the Buyers receive any of the Securities, the Buyers will be
          an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
          (a)(8) under the Securities Act. 

        

        3.4     Experience
          of the Buyers.  The
          Buyers, either alone or together with its representatives, have such knowledge,
          sophistication and experience in business and financial matters so as to
          be
          capable of evaluating the merits and risks of the prospective investment
          in the
          Securities, and has so evaluated the merits and risks of such investment.
          The
          Buyers are able to bear the economic risk of an investment in the Securities
          and, at the present time, is able to afford a complete loss of such
          investment.

        

        3.5    General
          Solicitation.
           The Buyers are not receiving the Securities as a result of any
          advertisement, article, notice or other communication regarding the Shares
          published in any newspaper, magazine or similar media or broadcast over
          television or radio or presented at any seminar or any other general
          solicitation or general advertisement.

        

        ARTICLE
          IV
           

        

        DELIVERIES
          & CONDITIONS

         

        4.1    Items
          to be delivered to the Buyers at the Closing by the Company. 
          The Buyers’ obligation to purchase the Securities is conditioned on the
          following closing conditions and deliveries:

         

        (a)    A
          copy of
          this Agreement duly executed has been delivered to the Escrow
          Agent;

         

        (b)    Share
          Certificates issued in the name of the Buyer or its designee or
          assignee;

        

        (c)    Any
          other
          document reasonably requested by Buyer that Buyer deems necessary for the
          consummation of this transaction;

         

        (d)    The
          Buyers are satisfied with its due diligence investigation of the Company,
          in its
          sole discretion; and

        

        (e)    the
          representations and warranties set forth in Articles 2 of this Agreement
          shall
          be true and correct in all material respects. 

          

        
          
             

          

          
            8

            
              

            

          

          
             

          

        

        4.2    Items
          to be delivered at Closing by Buyer.
          

         

        (a)    All
          applicable exhibits and schedules hereto;

         

        (b)    A
          copy of
          this Agreement duly executed;

         

        (c)    Any
          other
          document reasonably requested by the Company that it deems necessary for
          the
          consummation of this transaction.

         

        ARTICLE
          V
           

        

        TERMINATION

         

        5.1    Termination. 
          This Agreement may be terminated:

         

        (a)    at
          any
          time before, or at, Closing by written notice of the Buyers; 

         

        (b)    prior
          to
          the Closing by any Party at any time if
          any
          provision (including, but not limited to, the representations and warranties)
          of
          this Agreement that is applicable to or required to be performed by the
          other
          Party shall be materially untrue or fail to be accomplished or if any conditions
          set forth in Article 4 hereof have not been fully satisfied;

         

        (c)    Upon
          termination of this Agreement for any reason, in accordance with the terms
          and
          conditions set forth in this paragraph, each Party shall bear all costs
          and
          expenses as that Party has incurred. 

         

        

        ARTICLE
          VI

         

        MISCELLANEOUS

         

        6.1    Survival
          of Representations, Warranties and Agreements. 
          All representations, warranties and statements made by a Party to in this
          Agreement or in any document or certificate delivered pursuant hereto shall
          survive the Closing Date. Each of the Parties hereto is executing and carrying
          out the provisions of this Agreement in reliance upon the representations,
          warranties and covenants and agreements contained in this agreement or
          at the
          closing of the transactions herein provided for and not upon any investigation
          which it might have made or any representations, warranty, agreement, promise
          or
          information, written or oral, made by the other Party or any other person
          other
          than as specifically set forth herein.

         

        6.2    Access
          to Books and Records. 
          During the course of this transaction through Closing, each Party agrees
          to make
          available for inspection all corporate books, records and assets, and otherwise
          afford to each other and their respective representatives, reasonable access
          to
          all documentation and other information concerning the business, financial
          and
          legal conditions of each other for the purpose of conducting a due diligence
          investigation thereof. Such due diligence investigation shall be for the
          purpose
          of satisfying each Party as to the business, financial and legal condition
          of
          each other for the purpose of determining the desirability of consummating
          the
          proposed transaction. The Parties further agree to keep confidential and
          not use
          for their own benefit, except in accordance with this Agreement any information
          or documentation obtained in connection with any such
          investigation.

         

        
          
             

          

          
            9

            
              

            

          

          
             

          

        

        6.3    Further
          Assurances. 
          If, at any time after the Closing, the Parties hereby mutually agree
          that any further deeds, assignments or assurances in law or that any other
          things are necessary, desirable or proper to complete the transactions
          contemplated hereby in accordance with the terms of this agreement or to
          vest,
          perfect or confirm, of record or otherwise, the title to any property or
          rights
          of the Parties hereto, the Parties agree that their proper officers and
          directors shall execute and deliver all such proper deeds, assignments
          and
          assurances in law and do all things necessary, desirable or proper to vest,
          perfect or confirm title to such property or rights and otherwise to carry
          out
          the purpose of this Agreement, and that the proper officers and directors
          the
          Parties are fully authorized to take any and all such action.

         

        6.4    Notice.
          All
          communications, notices, requests, consents or demands given or required
          under
          this Agreement shall be in writing and shall be deemed to have been duly
          given
          when delivered to, or received by prepaid registered or certified mail
          or
          recognized overnight courier addressed to, or upon receipt of a facsimile
          sent
          to, the Party for whom intended, as follows, or to such other address or
          facsimile number as may be furnished by that Party by notice in the manner
          provided herein:

         

        If
          to the
          Company:

         

        Andrew
          Mercer

        8880
          Rio
          San Diego Drive

        8th
          Floor

        San
          Diego, CA 92108

         

        If
          to
          Buyer:

         

        Kevin
          K.
          Leung, Esq.

        Richardson
          & Patel LLP

        10900
          Wilshire Blvd. Suite 500

        Los
          Angeles, CA 90024

         

        6.5    Entire
          Agreement.
           This Agreement, the Exhibits and Schedules hereto and any instruments and
          agreements to be executed pursuant to this Agreement, set forth the entire
          understanding of the Parties hereto with respect to its subject matter,
          merges
          and supersedes all prior and contemporaneous understandings with respect
          to its
          subject matter and may not be waived or modified, in whole or in part,
          except by
          a writing signed by each of the Parties hereto. No waiver of any provision
          of
          this Agreement in any instance shall be deemed to be a waiver of the same
          or any
          other provision in any other instance. Failure of any party to enforce
          any
          provision of this Agreement shall not be construed as a waiver of its rights
          under such provision.

         

        6.6    Successors
          and Assigns. 
          This Agreement shall be binding upon, enforceable against and inure to
          the
          benefit of, the Parties hereto and their respective heirs, administrators,
          executors, personal representatives, successors and assigns, and nothing
          herein
          is intended to confer any right, remedy or benefit upon any other person.
          This
          Agreement may not be assigned by the Corporation except with the prior
          written
          consent of the Buyer. This Agreement and all of the obligations of the
          Company
          may be assigned by the Buyer without the prior notice to the Company or
          written
          consent of the Company and upon assignment, all of the rights and obligations
          of
          Buyer shall be the rights and obligations of the Buyer’s designated
          assignee.

         

        
          
             

          

          
            10

            
              

            

          

          
             

          

        

        6.7    Governing
          Law. 
          This Agreement shall in all respects be governed by and construed in accordance
          with the laws of the State of California, USA that are applicable to agreements
          made and fully to be performed in such state, without giving effect to
          conflicts
          of law principles.

         

        6.8    Counterparts.
           This Agreement may be executed in multiple counterparts, each of which
          shall be deemed an original, but all of which together shall constitute
          one and
          the same instrument.

         

        6.9    Construction. 
          Headings contained in this Agreement are for convenience only and shall
          not be
          used in the interpretation of this Agreement. References herein to Articles,
          Sections and Exhibits are to the articles, sections and exhibits, respectively,
          of this Agreement. The Schedules hereto are hereby incorporated herein
          by
          reference and made a part of this Agreement. As used herein, the singular
          includes the plural, and the masculine, feminine and neuter gender each
          includes
          the others where the context so indicates.

         

        6.10    Severability. 
          If any provision of this Agreement is held to be invalid or unenforceable
          by a
          court of competent jurisdiction, this Agreement shall be interpreted and
          enforceable as if such provision were severed or limited, but only to the
          extent
          necessary to render such provision and this Agreement enforceable.

         

        6.11    Arbitration.
           Any controversy arising out of, connected to, or relating to any matters
          herein of the transactions with the Parties hereto on behalf of the undersigned,
          or this Agreement, or the breach thereof, including, but not limited to
          any
          claims of violations of federal and/or state securities laws, banking statutes,
          consumer protection statutes, federal and/or state anti-racketeering (e.g.
          RICO)
          claims as well as any common law claims and any state law claims of fraud,
          negligence, negligent misrepresentations, and/or conversion, or the laws
          of any
          territory, country or jurisdiction, shall be settled by arbitration; and
          in
          accordance with this paragraph any judgment on the arbitrator’s award may be
          entered in any court having jurisdiction thereof. In the event of such
          a
          dispute, each party agrees to arbitration conducted through the auspices
          of
          American Arbitration Association. Venue for any action shall lie in Nevada,
          USA.

         

        6.12    [intentionally
          omitted.] 

         

        6.13    Confidentiality;
          Public Disclosure.
           Each of the parties hereto hereby agrees that the information obtained
          pursuant to the negotiation and execution of this Agreement shall be treated
          as
          confidential and not be disclosed to third parties who are not agents of
          one of
          the Parties to this Agreement.

         

        6.14    Notification
          of Certain Matters. 
          Each
          Party shall give prompt notice to the other of (i) the occurrence or
          non-occurrence of any event, the occurrence or non-occurrence of which
          is likely
          to cause any representation or warranty of such party contained in this
          Agreement to be untrue or inaccurate and (ii) any failure of such party
          to
          comply with or satisfy any covenant, condition or agreement to be complied
          with
          or satisfied by it hereunder; provided,
          however,
          that
          the delivery of any notice pursuant to this Section shall not limit or
          otherwise affect any remedies available to the party receiving such notice.
          Further, disclosure pursuant to this Section shall not be deemed to amend
          or supplement the Schedules hereto or prevent or cure any
          misrepresentations, breach of warranty or breach of covenant.

         

        6.15    Currency. 
          The parties hereto agree that all monetary amounts set forth herein are
          referenced in United States dollars, unless otherwise stated.

         

        6.16    Rules
          of Construction.
           The
          parties hereto agree that they have been represented by counsel during
          the
          negotiation and execution of this Agreement and, therefore, waive the
          application of any law, regulation, holding or rule of construction providing
          that ambiguities in an agreement or other document will be construed against
          the
          party drafting such agreement or document.

         

        
          
             

          

          
            11

            
              

            

          

          
             

          

        

        6.17    Counterparts.
           This Agreement may be executed in counterparts and by facsimile
          signatures. In the event that any signature is delivered by facsimile
          transmission, such signature shall create a valid and binding obligation
          of the
          party executing (or on whose behalf such signature is executed) with the
          same
          force and effect as if such facsimile signature page were an original thereof.
          All such counterparts shall together constitute one and the same
          instrument.

         

        [Signatures
          to Follow]

        
          
             

          

          
            12

            
              

            

          

          
             

          

        

        IN
          WITNESS WHEREOF, each of the Parties hereto has executed this Agreement
          as of
          the date first set forth above.

        
           

          
            	 	COMPANY:
	 	 
	
                     

                  	
                    
                      Commerce
                        Development Corporation, Ltd,

                      a
                        Maryland corporation

                    

                  
	 	 	 
	
                     

                  	
                    
                      By:

                    

                  	
                    /s/
                      Andrew M. Mercer

                  
	
                     

                  	
                     

                  	
                    Andrew
                      M. Mercer

                    Chief
                      Executive Officer

                  

          

          
             

            
              	 	BUYERS:
	 	 
	
                       

                    	
                      
                        [Signatures
                          set forth in Schedule A]

                      

                    
	 	 	 

            

            

            
              
                 

              

              
                13

                
                  

                

              

              
                 

              

            

          

        

        Schedule
          A

        Buyers

        

          

          
            	
                    Buyers:
                      Shares

                  	 	 	
                    Shares

                  	
                     

                  	
                     

                  	
                    Consideration

                  	
                     

                  	
                     

                  	
                    Signature

                  	 
	 	 	 	 	 	 	 	 	 	 	 
	
                    Mark
                      Y. Abdou

                  	 	 	
                    10,289,048

                  	 	
                    $

                  	
                    11,838

                  	 	 	
                    /s/
                      Mark Y. Abdou

                  	 
	 	 	 	 	 	 	 	 	 	 	 
	
                    Addison
                      Adams

                  	 	 	
                    5,140,924

                  	 	
                    $

                  	
                    5,914

                  	 	 	
                    /s/
                      Addison Adams

                  	 
	 	 	 	 	 	 	 	 	 	 	 
	
                    Corporate
                      Capital Partners

                  	 	 	
                    2,059,250

                  	 	
                    $

                  	
                    2,369

                  	 	 	
                    By:
                      /s/ Michael Donahue

                    Name:
                      Michael Donahue

                    Title:
                      General Partner

                  	 
	 	 	 	 	 	 	 	 	 	 	 
	
                    Ryan
                      Hong

                  	 	 	
                    3,088,874

                  	 	
                    $

                  	
                    3,554

                  	 	 	
                    /s/
                      Ryan Hong

                  	 
	 	 	 	 	 	 	 	 	 	 	 
	
                    RP
                      Capital LLC

                  	 	 	
                    41,141,792

                  	 	
                    $

                  	
                    47,330

                  	 	 	
                    By:
                      /s/ Nimish Patel

                    Name:
                      Nimish Patel

                    Title:
                      Chief Executive Officer

                  	 
	 	 	 	 	 	 	 	 	 	 	 
	
                    Luan
                      Phan

                  	 	 	
                    5,140,924

                  	 	
                    $

                  	
                    5,914

                  	 	 	
                    /s/
                      Luan Phan

                  	 
	 	 	 	 	 	 	 	 	 	 	 
	
                    Silas
                      Phillips

                  	 	 	
                    5,140,924

                  	 	
                    $

                  	
                    5,914

                  	 	 	
                    /s/
                      Silas Phillips

                  	 
	 	 	 	 	 	 	 	 	 	 	 
	
                    TOTAL:

                  	 	 	
                    72,001,735

                  	 	
                    $

                  	
                    82,833

                  	 	 	 	 

          

          

        
          
             

          

          
             

            
            

          

          
             

          

        

        Schedule
          B

        Schedule
          of Liabilities

         

         

        $62,833
          payable to Andy MercerEMPLOYMENT AGREEMENT

Exhibit 10.28

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT entered into on December 22, 2005.

BETWEEN:

GARY L. WESTERHOLM, domiciled and residing at Brighton, Michigan;

(hereinafter referred to as the "Employee")

AND:

McKENZIE BAY INTERNATIONAL, LTD. (hereinafter referred to as "MKBY"), a corporation duly incorporated under the laws of the State of Delaware, United States of America, having its principal office at 37899 Twelve Mile Road, Suite 300, Farmington Hills, Michigan, U.S.A., 48331, represented herein by Gregory N. Bakeman, President, duly authorized as he so declares;

WHEREAS MKBY wishes to retain the Employee;

WHEREAS the Employee and MKBY are desirous of entering into an agreement for the Employee's employment, all subject to the terms and conditions set forth in this Agreement;

NOW IT IS HEREBY AGREED:

1.

INTERPRETATION

1.1

Definitions

In this Agreement, the following words and expressions have the respective meanings ascribed to them below:

(a)                                                                                                                                                

"Affiliate" with respect to a Person means a Person that controls, is controlled by or under common control with such Person.  For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meaning collative to the foregoing;

(b)                                                                                                                                                

"Agreement" means this employment agreement;

(c)                                                                                                                                                

"Board of Directors" means the board of directors of MKBY

(d)                                                                                                                                                

"Cause" shall mean  

1.

The Employee has committed a wilful, serious act such as fraud, embezzlement or theft, committed any act against the Employer intending to enrich himself at the expense of the Employer or made an unauthorized use or disclosure of secret or confidential information pertaining to the business of the Employer;

2.

The Employee has been convicted of a felony or commits an act constituting a felony;

3.

The Employee has engaged in conduct which has caused demonstrable and serious injury, monetary or otherwise, to the Employer;

4.

The Employee, in carrying out his duties hereunder, has been guilty of wilful, gross neglect or wilful misconduct, or

5.

The Employee has materially breached this Agreement (including without limitation any failure to perform the duties assigned to him in accordance with this Agreement; provided, however, that the mere failure to reach established financial performance targets shall not in itself constitute a failure to perform if Employee has otherwise performed such actions as have been requested or assigned to him in connection with such financial performance targets) and has not remedied such breach within 30 days after receipt of written notice from the Employer specifying in reasonable detail, the nature of the breach.  

(e)                                                                                                                                                

"Commencement Date" means April 1, 2006;

(f)                                                                                                                                                

"Disability" shall mean the inability or incapacity (by reason of a medically-determinable physical or mental impairment) of the Employee to perform the duties and responsibilities related to the job or position with the Employer described in Section 3 of this Agreement for a period that lasts or that can be reasonably expected to last more than 180 days.  Such inability or incapacity shall be documented to the reasonable satisfaction of the Employer by appropriate correspondence from registered physicians reasonably satisfactory to Employer.

(g)                                                                                                                                                

"Discoveries and Works" includes by way of example but without limitation, intellectual property, trade secrets and other confidential information, patents and patent applications, trademarks and trademark registrations and applications, service marks and service mark 

2

registrations and applications, trade names, copyrights and copyright registrations and applications;

(h)                                                                                                                                                

"Parties" means MKBY and the Employee and "Party" means one or the other as the case may be;

(i)                                                                                                                                                

"Person" means any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association or other entity;

(j)                                                                                                                                                

"Restriction Period" means the period of time covering the Term plus a period equivalent to twenty-four (24) months following Employee's Termination Date;

(k)                                                                                                                                                

"Subsidiary" means a corporation controlled by MKBY, or by another subsidiary of MKBY;

(l)                                                                                                                                                

"Term", "Initial Term", and "Additional Term" shall have the meaning set forth in Section 4;

(m)                                                                                                                                                

"Termination Date" means the effective date of the Employee's termination of employment with MKBY, regardless of the reason;

2.

EMPLOYMENT

The Employer hereby employs the Employee and the Employee hereby accepts employment with the Employer upon the terms and subject to the conditions set forth herein.  

3.

DUTIES AND RESPONSIBILITIES

3.1

During the Term of this Agreement, the Employee shall initially be employed as Chairman of the Board of Directors and shall perform the services and functions relating to the office or offices in which he is from time to time elected or otherwise reasonably incident to such office or offices, all in accordance with the job description which is attached hereto and which is incorporated herein by reference and made a part hereof, and such amendments or modifications to said job description as shall be directed by the Board of Directors or the President of Employer.  The Employee shall be subject to the direction of the Board of Directors and the President of the Employer. 

3.2

During the Term of this Agreement, the Employee will devote his best efforts and his time and attention to the performance of his duties under this Agreement except for vacation periods and reasonable absences due to injury or illness as 

3

permitted by Employer’s general policies.  The employment relationship between the parties shall be governed by the general employment policies and practices of the Employer, except that when the terms of this Agreement differ from or are in conflict with the Employer’s general employment policies or practices, this Agreement shall control.

3.3

It is contemplated that the Employee will be obliged from time to time and for reasonable periods of time to travel in the performance of his duties and obligations under this Agreement. However, the principal place of employment of the Employee which the Employee shall report for work will be at the Employer’s office in Ada, Michigan as well as Employer’s primary office in Southeastern Michigan.

3.4

It is expressly understood and agreed that during the Term of this Agreement, the Employee shall not engage in any other business or business opportunity whether or not such business activity is pursued for gain, profit or other pecuniary advantage; provided, however, that:

(a)

The Employee may engage in personal, charitable, professional and investment activities to the extent such activities do not conflict or interfere with the Employee’s duties and obligations under this Agreement or with Employee’s ability to perform his duties and responsibilities under this Agreement; and,

(b)

The Employee shall not be prevented from investing his assets in such form or manner as will not require any substantial amount of time or services on the part of the Employee in the operation of the affairs of the enterprises in which such investments are made.  

4.

TERM

Unless sooner terminated as provided for in this Agreement, the terms of the Employee's employment shall commence on April 1, 2006 and shall continue for one (1) year (the "Initial Term"), provided, however, that the Initial Term of the Employee's employment under this Agreement shall automatically be extended for additional periods of twelve (12) months each (an "Additional Term") unless and until MKBY shall have given Employee notice, not less than three (3) months prior to the expiration of the Initial Term or any subsequent Additional Term, of the termination by MKBY of the Employee's employment effective as of the next succeeding anniversary date of the expiration of the Initial Term or Additional Term (the Initial Term and any Additional Term(s) are collectively referred to as the "Term" in this Agreement).

5.

COMPENSATION

4

The Employee shall be paid an annual base salary of Two Hundred Twenty Five Thousand ($225,000.00) Dollars (US) payable in accordance with the then-current payroll policies of the Employer.  Employer agrees to review Employee’s compensation annually during the last month of each fiscal year and to grant increases in compensation which will be effective on the first day of the immediately-following calendar year, based upon the Employee’s performance, scope of responsibility assumed, compensation paid to similar employees in similar companies and such other factors as may guide the Employer in setting reasonable compensation.  

6.

EXPENSES

MKBY shall reimburse the Employee for all necessary and reasonable expenses incurred by him in the performance of his duties under this Agreement. The Employee shall, on being so required, provide MKBY with vouchers or other evidence of actual payment of the said expenses in a form satisfactory to MKBY.

7.

BENEFITS  

Subject to the right of the Employer to amend or terminate any employee and/or group or senior executive benefit, bonus and/or stock option plan or program and to the terms and conditions of such plans and programs, the Employee shall be entitled to receive the following employee benefits:

7.1

Employee Plans

The Employee shall have the right to participate in such medical and dental plans as are maintained by the Employer and are available to its exempt, salaried employees generally (including without limitation disability, accident, medical, life insurance and hospitalization plans which are normal and customary).

7.2

Bonus Plans

The Employee shall have the right to participate in all senior executive benefit, bonus and/or stock option plans as are maintained by the Employer and are available to the Employer’s senior executive officers generally, all in accordance with the Employer’s regular practices with respect to senior executive officers.  

7.3

Vacation

The Employee shall be entitled to vacation days and holiday pay in accordance with the policies applicable to the Employer’s senior executive officers generally.

5

8.

RETURN OF DOCUMENTS AND PROPERTY

Upon the termination of Employee's employment with MKBY, or at anytime upon the request of MKBY, Employee (or his heirs or personal representatives) shall deliver to MKBY (a) all documents and materials (including without limitation, computer files) containing trade secrets or other confidential information relating to the business and affairs of MKBY, and (b) all documents, materials and other property (including, without limitation, computer files) belonging to MKBY, which in either case are in the possession or under the control of Employee (or his heirs or personal representatives).

9.

DISCOVERIES AND WORKS

All Discoveries and Works made or conceived by Employee during his employment by MKBY, jointly or with others, that relate to the present or anticipated activities of MKBY, or are used or usable by MKBY shall be owned by MKBY. Employee shall (a) promptly notify, make full disclosure to, and execute and deliver any documents requested by MKBY to evidence or better assure title to Discoveries and Works in MKBY, as so requested, (b) renounce any and all claims, including but not limited to claims of ownership and royalty, with respect to all Discoveries and Works and all other property owned or licensed by MKBY, (c) assist MKBY in obtaining or maintaining for itself at its own expense American and foreign patents, copyrights, trade secret protection or other protection of any and all Discoveries and Works, and (d) promptly execute, whether during his employment with MKBY or thereafter, all applications or other endorsements necessary or appropriate to maintain patents and other rights for MKBY and to protect the title of MKBY thereto, including but not limited to assignments of such patents and other rights. Any Discoveries and Works which, within six (6) months after the Termination Date, are made, disclosed, reduced to a tangible or written form or description, or are reduced to practice by Employee and which pertain to the business carried on or products or services being sold or developed by MKBY at the time of such termination shall, as between Employee and MKBY be presumed to have been made during Employee's employment by MKBY.

10.

DEATH

The Employee's employment under this Agreement shall terminate upon his death. In the event of the termination of the Employee's employment as a result of his death, MKBY shall promptly pay to any one or more beneficiaries designated by the Employee pursuant to a notice to MKBY or, failing such designation, to the Employee's estate, the annual base salary provided for in this Agreement through the conclusion of the month in which such termination occurs.  All other benefits the Employee may have under the Employee and/or Group or senior executive benefit bonus and/or stock option plans and 

6

programs of the Employer shall be determined in accordance with the terms and conditions of such plans and programs.  

11.

DISABILITY

The Employee's employment under this Agreement may be terminated as a result of Disability at the option of MKBY by notice to the Employee.  Such termination shall be effective upon the receipt by the Employee of such notice. In the event of the termination of the Employee's employment as a result of Disability, MKBY shall pay the Employee one (1) times his full annual base salary less any credit for sick pay or other benefits received by the Employee deriving from any private medical insurance or other similar arrangements entered into by MKBY.  All other benefits the Employee may have under the Employee and/or Group or senior executive benefit bonus and/or stock option plans and programs of the Employer shall be determined in accordance with the terms and conditions of such plans and programs.  

12.

TERMINATION FOR CAUSE BY MKBY

The Employee's employment under this Agreement may be terminated by MKBY for Cause. In the event that the Employee's employment under this Agreement shall validly be terminated by MKBY for Cause pursuant to this Section 12, MKBY shall promptly pay accrued but unpaid salary and reimburse or pay any other accrued but unpaid amounts due under this Agreement as of the date of termination, and thereafter MKBY shall have no further obligations under this Agreement.  All other benefits the Employee may have under the Employee and/or Group or senior executive benefit bonus and/or stock option plans and programs of the Employer shall be determined in accordance with the terms and conditions of such plans and programs.  

13.

VOLUNTARY EARLY TERMINATION

The Employee may voluntarily terminate his employment under this Agreement at any time by providing at least 30 days prior written notice to the Employer.  In such event, the Employee shall be entitled to receive his base salary until the date his employment terminates, and all other benefits the Employee may have under the Employee and/or Group or senior executive benefit bonus and/or stock option plans and programs of the Employer shall be determined in accordance with the terms and conditions of such plans and programs.  

14.

TERMINATION RESULTING FROM SALE OF BUSINESS

If there should be (a) a sale of substantially all the assets of MKBY to another Person; (b) a merger, amalgamation or consolidation of MKBY with another Person to form a 

7

new entity; or (c) a change in control of MKBY and as a result the Employee’s employment hereunder is terminated but the acquirer or the new entity, as the case may be, offers the Employee employment on terms and conditions that are essentially the same or better than those provided under this Agreement, then in the event the Employee refuses that offer of employment, Employee will not be entitled to any compensation hereunder.  However, if there should be (a) a sale of substantially all the assets of MKBY to another Person; (b) a merger, amalgamation or consolidation of MKBY with another Person to form a new entity; or (c) a change in control of MKBY and as a result the Employee’s employment hereunder is terminated and the Employee is not offered employment by the acquirer or new entity, then the Employee shall be entitled to receive his annual salary for a period of one year from and after the Effective Date of termination and any accrued but unpaid vacation pay payable in a lump sum (but discounted by a factor equal to the applicable federal rate for short-term obligations) or in accordance with the then-payroll policies of the Employer at the option of the Employer.  All other benefits the Employee may have under the Employee and/or Group or senior executive benefit bonus and/or stock option plans and programs of the Employer shall be determined in accordance with the terms and conditions of such plans and programs.  

15.

CONSTRUCTIVE TERMINATION PRIOR TO EXPIRATION OF EMPLOYMENT TERM

15.1

Constructive Termination

If prior to the expiration of the Term of this Agreement, the Employer:

(a)

terminates the employment of the Employee other than for Due Cause as a result of the death of the Employee or because of a Disability;

(b)

demotes the Employee to a lesser position than as provided in Section 3 of this Agreement (including a material diminution in the nature or status of the Employee’s responsibilities, authorities, powers or duties);

(c)

decreases the Employee’s Base Salary and benefits below the levels provided for by the terms of Sections 5, 6 and 7 of this Agreement (other than as a result of any amendment or termination of any employee and/or group or senior executive benefit, bonus and/or stock option plan which amendment or termination is applicable to all employees or executives of the Employer, as the case may be, eligible to participate in such plan prior to its termination);

(d)

assigns to the Employee any duties materially inconsistent with the status and responsibilities of the position provided for in Section 2 

8

of this Agreement and such action is not cured by the Employer within 15 days after receipt of written notice from the Employee specifying in reasonable detail the nature of such inconsistency; or

(e)

materially breaches any provision of this Agreement and such breach is not cured by the Employer within 15 days after receipt of written notice from the Employee specifying in reasonable detail the nature of the breach,

then such action by the Employer, unless consented to in writing by the Employee, shall be deemed to be a Constructive Termination by the Employer of the Employee’s employment (“Constructive Termination”); provided, however, that except in the case of clause (a) above, no Constructive Termination shall be deemed to have occurred unless the Employee notifies the Employer of the Employee’s election to treat such event as a Constructive Termination within 90 days of the occurrence of such event.  

15.2

Result of Constructive Termination

In the event of a Constructive Termination:

(a)

the Employee shall be entitled to receive his base salary for a period of one year from and after the effective date of Constructive Termination, payable in a lump sum (but discounted by a reasonable factor as mutually determined by the Employer and the Employee) or in accordance with the then payroll policies of the Employer at the option of the Employer;

(b)

the provisions of Sections 17 and 18 shall apply for the balance of the Employment Term but shall not apply for the period after the Employment Term. 

(c)

all other rights and benefits the Employee may have under the employee and/or group or senior executive benefit, bonus and/or stock option plans and programs of the Employer shall be determined in accordance with the terms and conditions of such plans and programs.

15.3

In the event of the death or disability of the Employee following a Constructive Termination, the amounts set forth in Section 15.2 of this Agreement shall continue to be owing and shall be paid to the estate of the Employee or the Employee as applicable.  

15.4

The Employer agrees that in the event of a Constructive Termination, the Employee shall not be required to seek other employment or to attempt in 

9

any way to reduce any amount payable to the Employee by the Employer pursuant to this Agreement and that any amounts due to the Employee hereunder shall not be reduced by any compensation earned by the Employee as a result of employment by another employer or by any retirement benefits paid to the Employee.  

16.

CONFLICT OF INTEREST

During the Term of this Agreement, the Employee shall not, either directly or in conjunction with any person, firm, association, syndicate, company or corporation as principal, agent, shareholder, or in any other manner whatsoever, carry on or be engaged in, or advise, lend money to, guarantee the debts or obligations of, or permit his name or any part of it to be used or employed by any person, firm, association, syndicate, company or corporation engaged in any business in competition with the business then carried on by MKBY or a Subsidiary, provided that the holding of not more than two per cent (2%) of the issued shares of a public company listed on any recognized stock exchange in the United States or Canada or traded in the United States or Canadian over-the-counter market, shall not be deemed a breach of this covenant.

17.

CONFIDENTIALITY

During the Term of this Agreement and for a period of two (2) years thereafter, the Employee shall keep secret and retain in strictest confidence, and shall not use for his benefit or for the benefit or others, directly or indirectly, any and all confidential information relating to MKBY and its Subsidiaries of which the Employee shall obtain knowledge by reason of his employment under this Agreement, including, without limitation, trade and business secrets or any other non-public or proprietary information concerning the business, customer lists, financial plans or projections, pricing policies, marketing plans or strategies, business acquisition or divestiture plans, new personnel acquisition plans, technical processes, inventions and other research projects, and except in connection with the performance of his duties under this Agreement, he shall not disclose any such information to anyone outside MKBY and any of its Subsidiaries, except as required by law (provided prior written notice is given by the Employee to MKBY) or except with the prior written consent of MKBY, unless such information is known generally to the public or the trade through sources other than the unauthorized disclosure by the Employee. 

18.

NON-COMPETITION AND NON-SOLICITATION

18.1

The Employee acknowledges and understands that (i) he has access to MKBY’s and MKBY's customers, channels for developing customers and recruiting executives for employment, and other confidential information of 

10

MKBY, (ii) he has direct substantial responsibility to maintain MKBY’s business relationship with customers of MKBY whose affairs he handles, (iii) the non-competition and non-solicitation provisions set forth in this Section 18 constitute a material part of the consideration received by MKBY under this Agreement, (iv) it would be unfair to MKBY if the Employee were to appropriate for himself or for others the benefits of MKBY’s many years of developing such business relationships, especially when the Employee enjoys a relationship with customers of MKBY as a result of his being introduced to the customer's personnel as the representative of MKBY, (v) it would be unfair to MKBY if the Employee were to appropriate for himself or for others the benefits of the business, technical processes, personnel, goodwill, business plan and other confidential information which MKBY has developed in the conduct of its business, and (vi) it is therefore fair that reasonable restrictions as set forth below should be placed on certain activities of the Employee after his employment with MKBY terminates.

18.2

The Employee shall not, without the prior written consent of MKBY, at any time during the Restriction Period, either individually or in partnership or jointly or in connection with any Person, as principal, agent, consultant, lender, contractor, employer, employee, investor or shareholder, or in any other manner, directly or indirectly:

(a)                                                                                                                                                

advise, manage, carry on, establish, acquire control of, work for, perform, render, or engage in, any business or service or activity that utilizes technical processes, goodwill, the business plan or strategic planning of MKBY; or,

(b)                                                                                                                                                

invest in or lend money to, or guarantee the debts or obligations of, any business or service or activity, or any Person engaged in any business or service or activity, that utilizes technical processes, goodwill, the business plan or strategic planning of MKBY; or 

(c)                                                                                                                                                

permit the Employee's name or any part thereof to be used or employed by any Person that operates, is engaged in or has an interest in any business or service or activity that utilizes technical processes, goodwill, the business plan or strategic planning of MKBY.

(d)                                                                                                                                                

The Employee shall not during the Restriction Period, without the written consent of MKBY, directly or indirectly (as owner, principal, agent, partner, officer, employee, independent contractor, consultant, stockholder, or otherwise), (i) cause or attempt to cause any person or entity to divert, terminate, limit, modify or fail to enter into any existing or potential business relationship with MKBY, or (ii) induce or attempt to induce any employee, consultant or advisor of MKBY to leave his or her position with MKBY or accept employment or an affiliation with a 

11

business which is competitive with any business in which MKBY or its subsidiaries is engaged at the time of Employee’s termination or which is, on that date, set forth in MKBY’s strategic plan as approved by the Board of Directors.

18.3

Upon the termination of the Employee's employment for whatever reason, the Employee shall deliver to MKBY all documents, papers, records, accounts of all and any description relating to the affairs of MKBY and its Affiliates within his possession or under his control, it being the intention of the Employee and MKBY that all such notes or memoranda made by the Employee during the course of his employment under this Agreement shall be the property of MKBY and its Affiliates and shall be left at its registered office or principal place of business upon the termination of the Employee's employment.

18.4

The Employee acknowledges that the provisions of this Section 18 of this Agreement are expressly for the benefit of the Employer, that the Employer would be irreparably injured by a violation of the provisions of this Section and that the Employer would have no adequate remedy at law in the event of such violation.  Therefore, the Employee acknowledges and agrees that in addition to any other remedies available, injunctive relief, specific performance or any other appropriate equitable remedy (without any bond or other security being required) are appropriate remedies to enforce compliance by the Employee with the provisions of this Section 18.  

19.

WITHHOLDING

MKBY shall be entitled to withhold from any and all amounts payable to the Employee under this Agreement such amounts as from time to time be required to be withheld pursuant to applicable tax laws and regulations.

20.

GENERAL PROVISIONS

20.1

Further Assurances

Each of the parties upon the request of any other party, whether before or after the date hereof, shall do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably necessary or desirable to effect complete consummation of the transactions contemplated by this Agreement.

12

20.2

Successors in Interest

This Agreement and the provisions hereof shall inure to the benefit of and be binding upon the Parties and their respective successors and assigns.

20.3

Notices

Any notice, direction or other instrument required or permitted to be given hereunder shall be in writing and given by delivery or sent by (i) registered or certified mail, (ii) reputable overnight courier, (iii) personal delivery, (iv) telecopier or similar telecommunication device and addressed:

(a)                                                                                                                                                

in the case of MKBY at:

McKenzie Bay International, Ltd.

37899 Twelve Mile Road, Suite 300

Farmington Hills, MI

U.S.A., 48331

Attn: Gregory N. Bakeman, President

Telecopier: 248-489-4163

with a copy to:

Donald C. Harms

General Counsel

McKenzie Bay International, Ltd.

37899 Twelve Mile Road, Suite 300

Farmington Hills, MI 

U.S.A., 48331

(b)                                                                                                                                                

in the case of the Employee at:

3362 Moraine Drive

Brighton, MI 48114

Any notice, direction or other instrument given as aforesaid shall be deemed to have been effectively given and received, if sent by mail on the fourth (4th) business day following such mailing, if sent by telecopier or similar telecommunications device on the next business day following such transmission or, if delivered, to have been given and received on the date of such delivery. Any party may change its address for service by written notice given as aforesaid.

20.4

Amendments

13

This agreement may not be amended except by written instrument duly executed by or on behalf of all parties hereto.

20.5

Governing Laws

This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, United States of America.

20.6

Gender

Any reference in this Agreement to any gender shall include all genders and words used herein importing the singular number only shall include the plural and vice versa.

20.7

Headings

The division of this Agreement into articles, sections, subsections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in the construction or interpretation hereof.

20.8

Severability

Any article, section, subsection or other subdivision of this Agreement or any other provision of this Agreement which is, or becomes, illegal, invalid or unenforceable shall be severed here from and shall be ineffective to the extent of such illegality, invalidity or unenforceability and shall not affect or impair the remaining provisions hereof, which provisions shall be severed from any illegal, invalid or unenforceable article, section, subsection or other subdivision of this Agreement or any other provision of this Agreement.

20.9

Waiver

No waiver of any of the provisions of this Agreement shall be deemed to constitute a waiver of any other provision (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided in a written document duly executed by the party to be bound thereby.

20.10

Attorney’s Fees

14

If any legal proceeding is necessary to enforce or interpret the terms of this Agreement or to recover damages for breach hereof, the prevailing party shall be entitled to reasonable attorney’s fees as well as costs and disbursements in addition to any other relief to which he or it may be entitled.  

20.11

Waiver of Jury Trial

TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE RELATIONSHIP CONTEMPLATED HEREBY.

20.12

Previous Arrearage

The parties understand and agree that there is an arrearage owed to Employee under the terms of the previous Employment Agreement between the parties.  Employee agrees that, given current and anticipated near term business conditions, the previous arrearage and any further arrearage under this Employment Agreement will not be considered a breach of the agreement, provided, however, Employer agrees to make up and pay such arrearage as soon as reasonably possible.           

IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above written.

			
	 	 	McKENZIE BAY INTERNATIONAL, LTD.

	 	 	 
	 	 	 
	 	per:

	 
	 	 	GREGORY N. BAKEMAN, PRESIDENT

	 	 	 
	 	 	 
	 	 	 
	Witness

	 	GARY L. WESTERHOLM, EMPLOYEE

GARY L. WESTERHOLM

JOB DESCRIPTION

DECEMBER, 2005

Reports to the CEO – MKBY 

·

Develops markets and materials for advertising/distribution mediums;

·

Establishes the calendar of conferences and exhibits and budget (with CFO) for same at the beginning of the year, with focus on speaking engagements and inclusion in brochures to optimize MKBY/WindStor advertising; 

·

Attend trade shows and conferences on behalf of company, including the planning, ordering and gathering materials, etc., and follow up to make sure that any business referrals rising out of a show were properly referred to a sales representative

·

Special projects as assigned by President

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