Document:

savw_ex102.htm

EXHIBIT 10.2

 

EMPLOYMENTAGREEMENTBETWEEN SAVWATT USA, INC. AND  ISAAC H. SUTTON

 

THIS AGREEMENT made this lst day of December 2011 , by and between SavWatt USA, I nc., a Delaware corporation with its principal office at 1100 Wicomico Street Baltimore, MD 21230 (hereinafter "SavWatt" or the "Company" or the "Corporation") and Isaac H. Sutton (hereinafter "Sutton" or the "Executive") residing at 1365 York Avenue New York, NY 1 0021.

 

WITNESSETH

 

WHEREAS, the said Sutton is to be the Chairman of the Board of Directors and the Chief Executive Officer of SavWatt and an integral part of management and SavWatt desires to assure itself of his continuing services and of a continuity in management and also desires to assure Sutton of continued employment during the period of employment hereunder and of retirement benefits upon his retirement, and

 

WHEREAS, Sutton is willing to commit himself to continue to remain in the employ of SavWatt , and, except as is provided hereinafter, to forego opportunities elsewhere during such period on the terms and conditions as set forth herei n.

 

NOW THEREFORE, in consideration of the mutual promises and conditions contained herein, the parties, intending to be legally bound hereby, agree as follows:

 

1. EMPLOYMENT AND TERM:

 

(a) The Company hereby agrees to employ Sutton, and the said Sutton hereby agrees to be employed by SavWatt, upon the terms and conditions hereinafter stated, for a Period of Employment which shall commence on January 1, 2012, (hereinafter the "Commencement Date" and which shall be deemed the date of this Agreement) and, subject only to the express terms of this Agreement relating to death and disability, shall i) continue until the close of business on December 31.2017 (the Terminal Date) or ii) until such later date as the parties shall agree upon, or iii) upon such other date as shall result from the operation of the terms and conditions of this Agreement, or iv) until Executive shall die, or v) until Executive is disabled as defined hereinafter. In the event that Executive shall continue in the full-time employment of the Company after December 31, 2017, such employment shall continue to be subject to the terms and conditions of this Agreement, as now stated or as hereafter amended, and the Period of Employment shall include the entire period during which Executive in fact continues in such employment.

 

(b) The termination date of December 31, 2017 set forth in (a) above shall be extended for five years, as of that date and as of each subsequent fifth anniversary of that date, unless either party shall have given to the other party notice, in the manner hereinafter provided, no later than on September 30, 2017, or September 30th of each subsequent fifth anniversary year of employment, that the Terminal Date is not to be extended. Upon such Terminal Date Executive shall be vested with all of the pension benefits commensurate with twenty years service with the Company, its successors or assigns, pension, profit sharing, incentive stock option, supplemental retirement or other compensation plans for qualified and non-qualified executive employees of the Company, now or hereafter implemented.

  

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2. POSITION, DUTIES AND RESPONSIBILITIES:

(a) It is contemplated that during the Period of Employment Executive will serve as Chairman of the Executive Committee, Chief Executive Officer and Chairman of the Board of Directors of the Company, its successors and assigns, with office(s) and title(s), reporting responsibility, duties, other responsibilities importance and scope, and with the functions, duties and responsibilities attached thereto and as the same may be changed, in writing, from time to time after the date of this Agreement by mutual agreement of the parties. The parties further agree that upon a change of control of the Company as defined herein, or if the Company fails and refuses to elect, appoint or name Executive as the Chairman of the Board and Chief Executive Officer of the Company, Executive, at his sole and exclusive option shall be entitled to terminate this contract and upon such termination receive all of the salary and benefits to which he would have become entitled if he had remained in the Company's continuous employ until the fifth anniversary of the then next successive anniversary of the Terminal Date ie. if such change in control date is June 1, 2013, then the Company shall pay Executive all of his salary and benefits until December 31, 2022. same being the fifth anniversary following the next anniversary of the Terminal Date or December 31. 2017, together with full vesting of all of the retirement benefits, and successor retirement benefits to which he, and his beneficiaries, would have become entitled, as if on such day he had completed twenty (20) years active service of employment or deemed upon his retirement had Executive continued in the "Company's continuous employ until the last date or event contemplated by this agreement with twenty years fully vested service.

 

Notwithstanding the foregoing, the parties further agree that they shall be deemed to have mutually agreed to a change in office(s), title(s), reporting responsibility, duties and responsibilities, at any time, if such change shall have been assigned by the Board of Directors of the Company and Executive, 1) shall have agreed in writing in advance to such change, and provided that in all events the salaries and benefits reserved to Executive shall not be reduced or compromised in any manner.

 

(b) Executive's office(s), title(s). reporting responsibility, duties and responsibilities as of the date of this Agreement, may not be changed after the date of this Agreement without the written consent of Executive.

 

(c) During the Period of Employment Executive shall, without compensation other than that herein provided (unless the Board of Directors of the Company shall assign an additional salary for said continued service), also serve and continue to serve, if and when elected and re-elected, as an officer or director, or both, of any subsidiary, division or affiliate of the Company, provided Executive shall not be obliged to relocate from the New York City Metropolitan area and shall not incur any personal liabilities therefore that the Company does not bond or insure against in amounts satisfactory to Executive.

 

  

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(d) Throughout the Period of Employment Executive shall devote his primary time and attention during normal business hours to the business and affairs of the Corporation except for reasonable vacations and except for illness or incapacity, but nothing in this Agreement shall preclude Executive from devoting reasonable periods required for i) serving as a director of any business, corporation involving no conflict of interest with the interest of the Corporation; (ii) delivering lectures, fulfilling speaking engagements, teaching at educational institutions; (iii) engaging in charitable and community activities; and (iv) managing investments, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement.

 

(e) Unless otherwise agreed to by Executive, the office of Executive shall be located at the principal offices of the Company within the area of Metropolitan New York and Executive shall not be required to locate his office elsewhere without his prior written consent. Executive shall not be required to travel outside the New York Metropolitan area more than 60 days per annum.

 

3. COMPENSATION, COMPENSATION PLANS, PERQUISITES:

 

Upon execution of this Agreement and for all services rendered by Executive in any capacity during the Period of Employment, including, without limitation, services as an executive, officer, director or member of any committee of the Company or of any subsidiary, division or affiliate thereof, effective January 1, 2012, Executive shall be paid as compensation a base annual salary of $240,000, payable in equal monthly payments of $20,000, together with annual increases, in no event less than ten (10%) per cent per annum, and together with such increases as shall be awarded by the Company from time to time effective in accordance with the Company's regular administrative practices of other salary and bonuses applicable to executives of the Company (such as attendance fees for Board of Directors meetings) in effect from time to time, together with incentive awards or bonuses provided for herein, if any, and such annual short-term and long-term incentive awards and bonuses, including qualified and non-qualified stock options, provided for under any compensation plan, or any successor compensation plan in effect as of the date of this Agreement or that may be adopted by the Company during any period of employment, or as may be awarded from time to time by the Board of Directors of the Company or a duly authorized committee thereof in its sole discretion.

 

Any increase in salary or in annual incentive award or other compensation, including stock options, paid or payable to Executive shall in no way diminish any other obligation of the Company under this Agreement. Nothing in this Agreement shall preclude other benefits awarded in accordance with the Company policy and improvement of reward opportunities in such plans or other plans in accordance with the practice of the Company on or after the date of this Agreement. Any provision of the Company's Additional Compensation Plan (or any successor plan) to the contrary notwithstanding, any Awards due to Executive before, or made to Executive on account of, or following a Change in Control of the Company, that occurs during the Period of Employment (whether for services rendered prior to or after such Change in Control) shall be paid wholly in cash within ninety (90) days after the awards are made.

 

  

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(b) Within ninety (90) days following the end of the "Company's" fiscal year, in each year of the Employment Period, the Company shall pay to Executive, in cash, an amount equal to three quarters (3/4%) of one per cent of, gross sales recorded by the Company in excess of Twenty Million Dollars and reported in its annual statement to the Securities and Exchange Commission and/or to the "Company's" shareholders. Executive may, at his sole and exclusive discretion, convert said cash bonus, or the entitlement thereto into an option to purchase from the Company, if available, shares of the common stock of the Company for the book value of the Common Stock of the Company as of December 31, 2011.

 

(c) During the period of employment the Executive shall be entitled to purchase up to 5.000,000 shares of the Common Stock of the "Company," for the book value of the Common Stock as of December 31, 2011. The "Executive," shall have the right to exercise such options at any time, in whole or in part during the term of this Agreement and for an additional period of one year from and after the Terminal Date. In the event there is a reverse stock split the book value of the Common stock will not be adjusted.

 

(d) Subject to the provisions herein, during the Period of Employment Executive shall be and continue to be a full participant in any Incentive Stock Option Plan of the Company, any Additional Compensation Plan of the Company (providing for Short and Long-Term Awards) and in any and all other executive incentive plans in which executives of the Company participate that may hereafter be adopted, including without limitation, any stock option, stock purchase or stock appreciation plans, or any successor plans that may be adopted by the Company, with at least the same reward opportunities, if any, that have heretofore been provided to Executive and, in the case of Long-Term Awards under the Additional Compensation Plan of the Corporation, with at least the same reward opportunities following a Change in Control as the highest reward opportunity, if any, that shall have been provided to Executive prior to the date on which a Change in Control of the Company shall have occurred. Nothing in this Agreement shall preclude other benefits awarded in accordance with the Company policy and improvement of reward opportunities in such plans or other plans in accordance with the practice of the Company on or after the date of this Agreement.

 

(e) During the Period of Employment Executive shall be entitled to perquisites, including, without limitation, long term disability insurance coverage until age 65, long term health care insurance, health and major medical insurance, fully funded whole life insurance in an amount not less than Two Million Dollars, an office, secretarial and legal staff, and fringe benefits, including, without limitation, the business and personal use of an automobile, including storage fees, insurance and maintenance incidental thereto; and payment or reimbursement of a business club initiation fees and dues and related expenses, as well as reimbursement, upon proper accounting, of business class travel and entertainment expenses and disbursements incurred in the ordinary course of business.

 

The compensation, perquisites and benefits provided for in this Section, together with other matters therein set forth, are in addition to any benefits otherwise provided for in this Agreement and are to be of a nature commensurate with the Chief Executive Officer of a NYSE listed firm with revenues in excess of Twenty Million Dollars.

  

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4. EFFECT OF DEATH OR DISABILITY:

 

(a) In the event of the death of Executive during the Period of Employment, in addition to any other benefits or entitlements herein provided for, the legal representative of Executive shall be entitled to the compensation provided for above for one year plus the month in which death shall have taken place, at the rate being paid at the time of death, and the Period of Employment shall be deemed to have ended as of the close of business on the first anniversary of the last day of the month in which death shall have occurred, which payments shall be payable promptly and without prejudice to any payments due in respect of Executive's death. The Company shall cause to be obtained and maintained a Two Million Dollar fully paid and nonassessable whole life insurance insuring the life of the "Executive". Said policy shall be maintained on a Equity Split Dollar basis for the entire term of employment and upon the cessation of employment, for a period often years thereafter, (b) The term "Total Disability," as used in this Agreement shall be defined by the long term disability policy obtained paragraph 3 (e) hereof otherwise, "Total Disability" shall mean an illness or accident occurring during the Period of Employment which prevents Executive from resuming performance of his duties under this Agreement after a leave of absence of eighteen consecutive months, during which period Executive shall receive 100% of his compensation. In such event and following a determination by the Board of Directors of the Company that in its judgment Executive is Totally Disabled, the Period of Employment shall be deemed to have ended as of the close of business on the last day of such eighteen months' period but without prejudice to any payments due Executive in respect of a disability. During any period of leave of absence occasioned by illness or injury. Executive will submit to such physical examinations as may reasonably be requested by the Board of Directors and shall authorize release to the Board of Directors of copies of all hospital or other medical reports concerning Executive's illness, injury, and course and progress of treatment.

 

(c) In the event of the Total Disability of Executive during the Period of Employment Executive shall receive 100% of his compensation, Executive shall thereafter be entitled to 90% of the compensation provided for above, at the rate and in the manner being paid at the time of the commencement of Total Disability (i) for the period of such Disability or (ii) until death or (iii) until Executive becomes 70 years of age or (iv) for a period of 15 years, whichever of the events shall first occur. The Company shall obtain insurance policies to cover the disability of Executive, however, the failure so to do for any reason does not mitigate the Company obligation to pay such compensation to Executive, which obligation shall be perfected into a secured obligation of the Company.

 

(d) If during the Period of Employment Executive shall become temporarily, or intermittently, disabled through illness or accident from performing his duties hereunder, he shall be entitled to a leave of absence from his employment duties for the period of such temporary, or intermittent, disability, not to exceed 180 days in any twelve month period. Executive's full compensation and status as an employee shall continue during any such temporary, or intermittent, disability and leaves of absence.

 

  

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(e) In the event of the death of Executive during the Period of Employment the Company agrees to pay to his surviving spouse, in addition to the insurance proceeds as set forth above 60% of the compensation provided for above, at the rate and in the manner being paid at the time immediately before Executive's death until i) her death or ii) she becomes 70 or iii) for a period of 20 years whichever shall first occur. The amount of any payments due under this paragraph may be reduced by any payments which Executive shall have received for the same period because of disability under any disability or pension plan of the Company or any subsidiary or affiliate thereof.

 

5. TERMINATION:

 

(a) In the event of a Termination, as defined below, during the Period of Employment, the provisions of this Article shall apply. Any provision of this Agreement to the contrary notwithstanding, the payments, benefits, service credit for benefits and other matters provided by this Article in the event of such a Termination are in addition to any payments, benefits, service credit for benefits and other matters herein provided that may apply in such event.

 

(b) In the event of a Termination and subject to the provisions of this Agreement, relating to mitigation of damages, and to compliance by Executive with the provisions relating to confidential information, the Corporation shall, as liquidated damages or severance pay, or both, pay to Executive and provide him, his dependents, beneficiaries and estate, with (i) compensation for sixty months of service after the month in which Termination shall have occurred at the rate being paid at the time of Termination.

 

(c) During the period that the payments provided for in subparagraph (b) of this paragraph are required to be made, Executive, his dependents and beneficiaries, shall continue to be entitled to all benefits under employee benefit plans of the Company, as if Executive were still employed during such period under this Agreement, including stock options, major medical and health insurance, death, long term health care, disability and, if and to the extent that such benefits shall not be payable or provided under any such plan by reason of Executive's no longer being an employee of the Company as the result of Termination, the Company shall itself pay or provide for payment to Executive, his dependents and beneficiaries, of such benefits and the service credit for benefits provided for below.

 

(d) The period in which the payments provided for are required to be made shall be considered service with the Company for the purpose of continued credits under any stock option or employee benefit plans referred to above, or otherwise in force and effect, and all other benefit plans of the Company applicable to Executive or his beneficiaries as in effect immediately prior to Termination but prior to any reduction of benefits there under as the result of amendment or termination during the Period of Employment, and for purposes of determining payments and other rights in respect of awards made or accrued and award opportunities granted prior to Termination under any, and all, of the Company's Executive Incentive Plans (including, without limitation, Long-Term Award opportunities granted prior to Termination under the Company's Additional Compensation Plan) and all other incentive plans of the Company in which Executive was a participant prior to Termination.

 

  

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(e) In the event that Executive shall at the time of Termination hold any outstanding and unexercised (whether or not exercisable at the time) option or options theretofore granted by the Company its successors or assigns, the Company at the Executives option shall immediately pay to Executive, in a lump sum, an amount equal to the excess above the option price under each such option, the Fair Market Value of the shares subject to each such option at the time of Termination. Solely for the purpose of this subparagraph, Fair Market Value at the time of Termination shall be deemed to mean the higher of (i) the average of the reported closing prices of the Common Shares of the Company, as reported on the Stock Exchange on which it is traded for the last trading day prior to the Termination and for the last trading day of each of the two preceding thirty-day periods, and (ii) in the event that a Change in Control of the Company, as defined below, prior to Termination shall have taken place as the result of a tender or exchange offer, or otherwise, and such Change in Control was consummated within twelve months of Termination, an amount equal to the per share consideration paid for a majority of the Common Shares of the Company acquired in the course of such tender or exchange offer. Upon receiving the payment from the Company called for by subparagraph (b) of this paragraph, Executive shall execute and deliver to the Company a general release in favor of the Company, its successors and assigns, in respect of any and all matters, including, without limitation, any and all rights under any outstanding and unexercised options at the time of Termination, except for the payments and obligations required to be made or assumed by the Company under this Agreement which at the time had not yet been made or assumed and except for such other valid obligations of the Company as shall be set forth in such release.

 

(f) If a Change in Control of the Company, as defined below, shall have occurred at any time during the term hereof, as same may be extended from time to time, the Company shall pay to Executive, in cash, within ninety (90) days following such termination an amount equal to two (2) times the amount of Executive's then annual base salary times sixty months. In addition thereto. Executive, and/or his beneficiaries and survivors, shall be entitled to all of the benefits of this agreement based upon Executive's retirement, including full health insurance, disability insurance, long term health care and life insurance, together with twenty (20) years fully vested service with respect to any employee benefit plans of the Company, which shall be deemed to have occurred one (1) day prior to the date of said termination,

 

(g) The word "Termination," for the purpose of this of this Agreement, shall mean

 

(i) Termination by the Company its successors or assigns of the employment of Executive by the Company and its subsidiaries for any reason other than for Cause as defined below or for Disability as defined above; or

 

(ii) Termination by Executive of his employment by the Company and its subsidiaries upon the occurrence of any of the following events:

 

(a) Failure to elect or re-elect Executive as Chief Executive Officer or as Chairman of the Board of Directors of the Company during the Period of Employment, or removal of Executive from, any of the office(s) described above;

 

(b) A significant change in the nature or scope of Executive's authorities, powers, functions or duties, or a reduction in compensation, which is not remedied within 30 days after receipt by the Company of written notice from Executive;

 

  

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(c) A determination by Executive made in good faith that as a result of a Change in Control of the Company, as defined in below, and a change in circumstances thereafter and since the date of this Agreement significantly affecting his position, he is unable to carry out the authorities, powers, functions or duties attached to his position and contemplated by this Agreement and the situation is not remedied within 30 days after receipt by the Company of written notice from Executive of such determination;

 

(d) A breach by the Corporation of any provision of this Agreement not embraced within the foregoing clauses of this subparagraph which is not remedied within 30 days after receipt by the Company of written notice from Executive;

 

(e) The liquidation, dissolution, consolidation or merger of the Company or transfer of all or a significant portion of its assets unless a successor or successors (by merger, consolidation or otherwise) to which all or a significant portion of its assets have been transferred shall have assumed all duties and obligations of the Company under this Agreement but without releasing the corporation that is the original party to this Agreement; provided that in any event set forth in this subparagraph Executive shall have elected to terminate his employment under this Agreement upon not less than thirty and not more than ninety days' advance written notice to the Board of Directors of the Company, attention of the Secretary, given, except in the case of a continuing breach, within three calendar months after (A) failure to be so elected or re-elected, or removed, (B) expiration of the thirty-day cure period with respect to such event, or (C) the closing date of such liquidation, dissolution consolidation, merger or transfer of assets, as the case may be,

 

An election by Executive to terminate his employment given under the provisions of this paragraph shall not be deemed to be a voluntary termination of employment by Executive for the purpose of this Agreement or any plan or practice of the Company.

 

(h) For the purpose of any provision of this Agreement, the termination of Executive's employment shall be deemed to have been for Cause only (i) if termination of his employment shall have been the result of a proven act or acts of dishonesty, constituting a felony, adjudicated by a competent court having jurisdiction of Executive and resulting or intended to result directly or indirectly in gain or personal enrichment at the expense of the Company.

 

  

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(i) Anything in this paragraph or elsewhere in this Agreement to the contrary notwithstanding, the employment of Executive shall in no event be considered to have been terminated by the Company for Cause if termination of his employment took place (i) as the result of bad judgment or negligence on the part of Executive, or (ii) as the result of an act or omission without intent of gaining a profit there from, directly or indirectly, to which Executive was not legally entitled, or (iii) because of an act or omission believed by Executive in good faith to have been in or not opposed to the interests of the Company, or (iv) for any act or omission in respect of which a determination could properly be made that Executive met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under (A) the Bylaws of the Company, or (B) the laws of either the State of Delaware, or (C) the directors' and officers' liability insurance of the Company, in each case either as in effect at the time of this Agreement or in effect at the time of such act or omission, or (v) as the result of an act or omission which occurred more than twelve calendar months prior to Executive's having been given notice of the termination of his employment for such act or omission unless the commission of such act or such omission could not at the time of such commission or omission have been known to a member of the Board of Directors of the Company (other than Executive, if he is then a member of the Board of Directors), in which case more than twelve calendar months from the date that the commission of such act or such omission was or could reasonably have been so known, or (vi) as the result of a continuing course of action which commenced and was or could reasonably have been known to a member of the Board of Directors of the Company (other than Executive, if he is then a member of the Board of Directors) more than twelve calendar months prior to notice having been given to Executive of the termination of his employment.

 

(j) In the event that Executive's employment shall be terminated by the Company during the Period of Employment and such termination is alleged to be for Cause, or Executive's right to terminate his employment under this Agreement shall be questioned by the Company, or the Company shall withhold payments or provisions of benefits because Executive is alleged to be engaged in Competition in breach of the provisions of this Agreement or for any other reason, Executive shall have the right, in addition to all other rights and remedies provided by law, at his election either to seek arbitration in New York City under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Company or, at Executive's sole and exclusive option, to institute a judicial proceeding, in either case within ninety days after having received notice of termination of his employment or notice in any form that the termination of his employment is subject to question or that the Company is withholding or proposes to withhold payments or provision of benefits or within such longer period as may reasonably be necessary for Executive to take action in the event that his illness or incapacity should preclude his taking such action within such ninety-day period.

 

(k) (i) In the event that the Company defaults on any obligation of this. Agreement and shall have failed to remedy such default within thirty (30) days after having received written notice of such default from Executive or his legal representatives, in addition to all other rights and remedies that Executive may have as a result of such default, Executive may demand and the Company shall thereupon be required to deposit, with the third-party stakeholder hereinafter described, an amount equal to the undiscounted value of any and all undischarged, future obligations of the Company under this Agreement and such amount shall thereafter be held, paid, applied or distributed by such third-party stakeholder for the purpose of satisfying such undischarged, future obligations of the Company when and to the extent that they become due and payable. Any interest or other income on such amount shall be paid over currently as earned by the "Company." To the extent not theretofore expended, such amount shall be repaid to the Company at such time as the third-party stakeholder, in its sole discretion, reasonably exercised, determines, upon the advice of counsel and after consultation with the Company and Executive or, in the event of his death, his beneficiary, that all obligations of the Company under this Agreement have been substantially satisfied.

 

  

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(ii) Such amount shall, in the event of any question, be determined jointly by the firm of certified public accountants regularly employed by the Company and a firm of certified public accountants selected by Executive, in each case upon the advice of actuaries. To the extent the certified public accountants are unable to agree on a resolution of the question, such amount shall be determined by an independent firm of certified public accountants selected jointly by both firms of accountants,

 

(iii) The third-party stakeholder, the fees and expenses of which shall be paid by the Company, shall be a national or state bank or trust company having a combined capital, surplus and undivided profits and reserves of not less than One Hundred Million Dollars ($100,000,000.00) which is duly authorized and qualified to do business in the state in which Executive resides at the time of such default,

 

6. NO OBLIGATION TO MITIGATE DAMAGES:

 

(a) In the event of a Termination other than a Voluntary Termination as defined herein, Executive shall have no obligation to mitigate damages by seeking other employment. Provided, further, that he shall not be required to accept a position of less dignity and importance or of substantially different character and salary than the highest position theretofore held by him with the Company or a position that would call upon him to engage in Competition within the meaning below.

 

(b) To the extent that Executive shall receive compensation, benefits and service credit for benefits from other employment secured pursuant to the provisions of the subparagraph above, the payments to be made and the benefits and service credit for benefits to be provided by the Company (other than the credit for Twenty (20) Years Constructive Service provided therein) shall be correspondingly reduced. Such reduction shall, in the event of any question, be determined jointly by the firm of certified public accountants regularly employed by the Company and a firm of certified public accountants selected by Executive, in each case upon the advice of actuaries to the extent the certified public accountants consider necessary, and, in the event such two firms of accountants are unable to agree on a resolution of the question, such reduction shall be determined by an independent firm of certified public accountants selected jointly by both firms of accountants.

  

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7.    CONFIDENTIAL INFORMATION:

 

(a) Executive agrees not to disclose, either while in the Company's employ or at any time thereafter, to any person not employed by the Company, or not engaged to render services to the Company, except in his sole discretion as he may deem reasonable within the scope of his employment and in the interest of the Company, any confidential information obtained by him while in the employ of the Company, including without limitation, information relating to any of the Company's inventions, processes, formulae, plans, devices, compilations of information, methods of distribution, customers, client relationships, marketing strategies or trade secrets; provided, however, that this provision shall not preclude Executive from use or disclosure of information in furtherance of the Company business opportunities or of such information known generally to the public or of information not considered confidential by persons engaged in the business conducted by the Company or from disclosure required by law or Court order. The agreement herein made in this paragraph shall be in addition to, and not in limitation or derogation of, any obligations otherwise imposed by law upon Executive in respect of confidential information and trade secrets of the Company, its subsidiaries and affiliates.

 

(b) Executive also agrees that upon leaving the Company's employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company, and he will surrender to the Company any record, list, drawing, blueprint, specification or other document or property of the Company, its subsidiaries and affiliates, together with any copy and reproduction thereof, mechanical or otherwise, which is of a confidential nature relating to the Company, its subsidiaries and affiliates, or, without limitation, relating to its or their methods of distribution, client relationships, marketing strategies or any description of any formulae or secret processes, or which was obtained by him or entrusted to him during the course of his employment with the Company.

 

8.    SEVERANCE ALLOWANCE, COMPETITION:

 

(a) In addition to the foregoing, in the event of termination of the employment of Executive by the Company at any time prior to the attainment by Executive of 65 years of age and such termination shall be for any reason other than for Cause, as defined above, the Company, subject to the provisions below relating to Competition, shall pay Executive a severance allowance commencing on the first day of each month following termination of his employment and continuing on the first day of each month until the next "Terminal Date" and thereafter for a period of 60 calendar months but in no event beyond the last day of the month in which either Executive shall have attained 65 years of age or his death shall have occurred, whichever shall first occur. Such severance allowance shall for each such month be an amount equal to the average Monthly Compensation of Executive for the twelve-month period preceding the Termination Date.

 

  

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(b) During the period that the payments provided for in subparagraph (a) of this Article are required to be made, Executive, his dependents and beneficiaries, shall continue to be entitled to all benefits inclusive of service credit for benefits under employee benefit plans of the Company as if Executive were still employed during such period and, if and to the extent that such benefits shall not be payable under any such plan by reason of Executive's no longer being an employee of the Company, the Company shall itself pay or provide for payment of such benefits to Executive, his dependents and beneficiaries. The amount of any benefit payable under this paragraph shall be reduced by any corresponding benefit with respect to the same period for which the cost is payable by the Company under the provisions of this Agreement.

 

(c) (A) Subject to the provisions above, there shall be no obligation on the part of the Company to make any further payments provided for above and in this Article or to provide any further benefits specified above or in this Article if Executive shall, during the period that such payments are being made or benefits provided, engage in direct Competition with the Company as hereinafter defined, provided all of the following shall have taken place:

(i) The Secretary of the Company, pursuant to resolution of the Board of Directors of the Company, shall have given written notice to Executive that, in the opinion of the Board of Directors. Executive is engaged in such direct Competition, specifying the details;

(ii) Executive shall have been given a reasonable opportunity upon reasonable notice to appear before and to be heard by the Board of Directors prior to the determination of the Board evidenced by such resolution;

(iii) Executive shall neither have ceased to engage in such direct Competition within thirty days from his receipt of such notice nor diligently taken all reasonable steps to that end during such thirty-day period and thereafter.

 

  

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(B) The word "Competition" for the purposes of this paragraph and any other provision of this Agreement shall mean (i) taking a management position with or control of a business engaged in the design, development, marketing or distribution of services and products which constituted 15% or more of the sales of the Company and its subsidiaries and affiliates during the last fiscal year of the Company preceding the termination of Executive's employment, in any geographical area in which the Company, its subsidiaries or affiliates is at the time engaging in the design, development, manufacture, marketing or distribution of such products; provided, however, that in no event shall ownership of less than 5% of the outstanding capital stock entitled to vote for the election of directors of a corporation with a class of equity securities held of record by more than 500 persons, standing alone, be deemed Competition with the Company within the meaning of this paragraph, (ii) soliciting any person who is a customer of the businesses conducted by the Company, or any business in which Executive has been engaged on behalf of the Company and its subsidiaries or affiliates at any time during the term of this Agreement on behalf of a business described in clause (i) of this subparagraph or (iii) inducing or attempting to persuade any employee of the Company or any of its subsidiaries or affiliates to terminate his employment relationship in order to enter into employment with a business described in clause (i) of this subparagraph.

 

9.    WITHHOLDING:

 

Anything to the contrary notwithstanding, all payments required to be made by the Company under this Agreement to Executive or his estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company independent Certified Public Accounting firm may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required by law to be withheld in respect of any or all of such payments.

 

10.   NOTICES:

 

All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed in the continental United States by registered or certified mail or personally delivered to the party entitled thereto at the address stated from time to time in the Exhibit to this Agreement which address shall be such address as the addressee January have given most recently by a similar notice. Any such notice delivered in person shall be deemed to have been received on the date of delivery.

 

  

13

  

 

11.   GENERAL PROVISIONS:

 

(a) There shall be no right of set-off or counterclaim in respect of any claim, debt or obligation against any payments to Executive, his dependents, beneficiaries or estate, provided for in this Agreement.

 

(b) The Company and Executive recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained in this Agreement and, in the event of any such breach, the Company and Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus or other appropriate remedy to enforce performance of such agreements.

 

(c) No right or interest to or in any payments shall be assignable by Executive; provided, however, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate.

 

(d) (i) No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect

(ii) Executive shall not have any right, title, or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations under this Agreement.

 

(iii) Subject to the provisions above, nothing contained in this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and Executive or any other person.

(iv) Subject to the provisions above, to the extent that any person acquires a right to receive payments from the Company under this Agreement, except to the extent provided by law such right shall be no greater than the right of an unsecured general creditor of the Company.

(v) Subject to the provisions above, all payments to be made under this Agreement shall be paid from the general funds of the Company and except as provided herein no special or separate fund shall be established and no segregation of assets shall be made to assure payment of amounts payable under this Agreement, except as set forth in paragraph 4(c). Provided, however, that the Company shall have, at its sole discretion, the right to substitute fully paid annuity policies in place and instead of any deferred compensation benefits provided that such annuity provide to Executive, and or his beneficiaries, payments at least equal to the payment of the deferred compensation as required under any plan of deferred compensation in which Executive may have been enrolled in at any time.

 

  

14

  

 

(e) The term "beneficiaries" as used in this Agreement shall, in the event of the death of Executive, include his wife, Gayle Sutton, as beneficiary and daughter, Lara Sutton, as beneficiary, and son, Leigh Sutton, as beneficiary, unless a change in beneficiary or beneficiaries designated on a form filed with the Company by Executive to receive any amount that may be payable after his death or, if his spouse predeceases him then to his son and daughter, if both predecease him then to his estate, if no beneficiary has been so designated, the legal representative of Executive's estate.

 

(f) In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries.

 

(g) If any event provided for in this Agreement is scheduled to take place on a legal holiday, such event shall take place on the next succeeding business day that is not a legal holiday.

 

(h) The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section.

 

(i) This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs and legal representatives, and the Company and its successors, including and not limited to SavWatt as provided herein.

 

(j) This instrument contains the entire agreement of the parlies relating to the subject matter of this Agreement and supersedes and replaces all prior agreements and understandings with respect to such subject matter, and with respect to the subject matter herein contained the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein.

 

12.      AMENDMENT OR MODIFICATION; WAIVER:

 

No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver shall be authorized by the Board of Directors of the Company or any authorized committee of the Board of Directors and shall be agreed to in writing, signed by Executive and by an officer of the Company thereunto duly authorized. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same time or at any prior or subsequent time.

 

  

15

  

 

13.      SEVERABILITY:

 

Anything in this Agreement to the contrary notwithstanding:

 

(i) In the event that any provision of this Agreement, or portion thereof, shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement and parts of such provision not so invalid or unenforceable shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law;

 

(ii) Any provision of this Agreement, or portion thereof, which may be invalid or unenforceable in any jurisdiction shall be limited by construction thereof, to the end that such provision, or portion thereof, shall be valid and enforceable in such jurisdiction; and

 

(iii) Any provision of this Agreement, or portion thereof, which may for any reason be invalid or unenforceable in any jurisdiction shall remain in effect and be enforceable in any jurisdiction in which such provision, or portion thereof, shall be valid and enforceable.

 

14.      SUCCESSORS TO THE COMPANY

 

Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation or corporations acquiring directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed embraced within the term "the Company for the purposes of this Agreement), but shall not otherwise be assignable by the Company.

 

15.     CHANGE IN CONTROL

 

For the purpose of this Agreement, the term "Change in Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 as in effect on the date of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if and when (a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Corporation representing twenty-five percent (25%) or more of the combined voting power of the Corporation's then outstanding securities or (b) during any period of 24 consecutive months, commencing before or after the date of this Agreement, individuals who at the beginning of such twenty-four month period were directors of the Company cease for any reason to constitute at least a majority of the Board of Directors of the Company.

 

  

16

  

 

16.     GOVERNING LAW:

 

The validity, interpretation, construction, performance and enforcement of this Agreement shall be governed by the laws of the State of New York without giving effect to the principles of conflict of laws thereof.

 

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

 

 

 

 

 

17pyhh_ex104.htm

EXHIBHIT 10.4

 

 

STOCK ACQUISITION AGREEMENT

 

BETWEEN

 

QUESTE CAPITAL

 

AND

 

PHYHEALTH CORPORATION

 

 

  

 

  

TABLE OF CONTENTS

	ARTICLE 1	 
	SALE AND PURCHASE OF THE SHARES	 
	 	 	 	 	 	 
	1.1	 	Issuance of the Shares. 	 	 	1	 
	1.2	 	
Consideration 

	 	 	1	 
	1.3	 	Deposit 	 	 	1	 
	  ARTICLE 2	 
	REPRESENTATIONS AND WARRANTIES	 
	 	 	 	 	 	 	 
	2.	 	
Representations and Warranties of the Parties

	 	 	2	 
	 	 	
2.1 Organization, Standing, Power

	 	 	2	 
	 	 	
2.2 Authority

	 	 	2	 
	 	 	
2.3 Capitalization of  the Parties

	 	 	3	 
	 	 	
2.4 Subsidiaries

	 	 	4	 
	 	 	
2.5 No Defaults 

	 	 	4	 
	 	 	
2.6 Governmental Consents

	 	 	4	 
	 	 	
2.7 Financial Statements and Reports 

	 	 	4	 
	 	 	
2.8 Absence of Undisclosed Liabilities 

	 	 	4	 
	 	 	
2.9 Absence of Changes 

	 	 	5	 
	 	 	2.10 Patents and Trademarks	 	 	5	 
	 	 	2.11 Certain Agreements 	 	 	5	 
	 	 	2.12 Compliance with Other Instruments 	 	 	6	 
	 	 	2.13 Employee Benefit Plans	 	 	6	 
	 	 	2.14 Other Personal Property	 	 	6	 
	 	 	
2.15 Properties and Liens 

	 	 	6	 
	 	 	
2.16 Inventory 

	 	 	6	 
	 	 	2.17 Major Contracts	 	 	7	 
	 	 	2.18 Questionable Payments	 	 	8	 
	 	 	
2.19 Recent Transactions 

	 	 	8	 
	 	 	2.20 Leases in Effect	 	 	8	 
	 	 	2.21 Taxes	 	 	8	 
	 	 	2.22 Disputes and Litigation	 	 	9	 
	 	 	2.23 Compliance with Laws	 	 	9	 
	 	 	2.24 Related Party Transactions	 	 	9	 
	 	 	2.25 Minute Books	 	 	9	 
	 	 	
2.26 Disclosure 

	 	 	9	 
	 	 	
2.27 Reliance

	 	 	9	 
	 	 
	ARTICLE 3	 
	CONDITIONS PRECEDENT	 
	 	 
	3.1	 	
Conditions to Each Party's Obligations

	 	 	10	 
	3.2	 	
Conditions to Company's Obligations 

	 	 	10	 
	3.3	 	
Conditions to Buyer's Obligations

	 	 	10	 

 

  

 

  

 

	ARTICLE 4	 
	CLOSING AND DELIVERY OF DOCUMENTS	 
	4.1	 	Time and Place	 	12	 
	4.2	 	Deliveries by Company	 	12	 
	4.3	 	Deliveries by Buyer	 	12	 
	 	 	 	 	 	 
	ARTICLE 5	 
	INDEMNIFICATION	 
	 	 	 	 	 	 
	5.1	 	Company's Indemnity Obligations	 	 	13	 
	5.2	 	Buyers Indemnity Obligations	 	 	13	 
	 	 	 	 	 	 	 
	ARTICLE 6	 
	DEFAULT, AMENDMENT AND WAIVER	 
	 	 	 	 	 	 	 
	6.1	 	Default. 	 	 	14	 
	6.2	 	Waiver and Amendment	 	 	14	 
	 	 	 	 	 	 	 
	ARTICLE 7	 
	MISCELLANEOUS	 
	 	 
	7.1	 	
Expenses. 

	 	 	14	 
	7.2	 	
Notices  

	 	 	14	 
	7.3	 	
Entire Agreement

	 	 	15	 
	7.4	 	
Survival of Representations 

	 	 	15	 
	7.5	 	
Incorporated by Reference 

	 	 	15	 
	7.8	 	

Remedies Cumulative

	 	 	15	 
	7.7	 	
Execution of Additional Documents 

	 	 	15	 
	7.8	 	

Costs and Fees

	 	 	15	 
	7.9	 	
Choice of Law, 

	 	 	16	 
	7.10	 	
Jurisdiction

	 	 	16	 
	7.11	 	
Attorneys' Fees

	 	 	16	 
	7.12	 	Binding Effect and Assignment 	 	 	16	 
	7.13	 	Counterparts; Electronic or Facsimile Signatures	 	 	16	 

 

  

 

  

Table of Contents

Table of Schedules and Exhibits

 

	Exhibit A 	Queste Capital - Disclosure Schedules
	 	 
	Exhibit B 	Phyhealth Corporation. - Disclosure Schedules

 

  

 

  

ACQUISITION AGREEMENT

 

THIS STOCK ACQUISITION AGREEMENT (the "Agreement), dated April 2, 2012, is by and between QUESTE CAPITAL, a Nevada corporation (the "Buyer"), and PHYHEALTH CORPORATION, a Delaware corporation (the "Company", (individually, a 'Party'; collectively, the "Parties")

 

RECITALS

 

A   The capital stock of the Company consists of Fifty Million (50,000,000) authorized shares of which Forty Million (40,000,000) are designated as the Common Stock, $0.0001 (the "Common Stock"), Five Million (5,000,000) shares designated as "Series A Preferred Stock", $0.0001 (the "Series A Preferred Stock"), convertible at 1:1; Five Million (5,000,000) shares designated as "Series B Preferred Stock', $0.0001 (the "Series B Preferred Stock"), convertible at 40:1. There are presently issued and outstanding Eleven Million One Hundred Sixty One Thousand Five Hundred Seventy Two (11,161,572) shares of Common Stock, Two Million Nine Hundred Sixty Four Thousand Four Hundred Seventy 2,964,470 Series A Preferred Convertible shares which convert into Common Stock on the one share for one share basis and Six Hundred Twelve Thousand Four Hundred Eighty One (612,481) Series B Preferred Convertible shares which convert into Common Stock on the one share for 40 shares of Common Stock.

 

B.   Upon the terms and conditions set forth below, Company desires to sell Company Shares to Buyer, such that, following such transaction, the Buyer will own 95% of the issued and outstanding common shares of the Company.

 

NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the Parties hereto agree as follows:

 

ARTICLE 1

 

SALE AND PURCHASE OF THE SHARES

 

1.1          Issuance of the Shares. Subject to the terms and conditions herein set forth, and on the basis of the representations, warranties and agreements herein contained, Company shall sell and transfer to Buyer that certain number of the Company Shares that will constitute ninety-five percent (95%) of the issued and outstanding common stock of the Company.

 

1.2          Consideration. The purchase price for the Company Shares shall be Four Hundred Twenty Five Thousand Dollars ($425,000).

 

1.3          Deposit. The Buyer shall deposit said purchase price in a mutually agreed escrow or attorney's trust account prior to closing. Said amount shall be refundable to the Buyer if the acquisition fails to close.

 

  

1

  

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

 

2.            Representations and Warranties of the Parties. Except as disclosed in a document referring specifically to the representations and warranties in this Agreement that identifies by section number the section and subsection to which such disclosure relates and is delivered by each Party to the other prior to the execution of this Agreement (the "Disclosure Schedules"), the Parties represent and warrant each to the other, as of the date hereof and as of the Closing. as follows:

 

2.1          Organization, Standing, Power.

 

(a)   Buyer.Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the state of Nevada. It has all requisite corporate power, franchises, licenses, permits, and authority to own its properties and assets and to carry on its business as it has been and is being conducted. Buyer is duly qualified and in good standing to do business in each jurisdiction in which a failure to so qualify would have a Material Adverse Effect (as defined below) on Buyer. For purposes of this Agreement, the term "Material Adverse Effect' means any change or effect that, individually or when taken together with all other such changes or effects which have occurred prior to the date of determination of the occurrence of the Material Adverse Effect, is or is reasonably likely to be materially adverse to the business, assets (including intangible assets), financial condition, or results of operations of the entity.

 

(b)   The Company. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the state of Delaware. It has all requisite corporate power, franchises, licenses, permits, and authority to own its properties and assets and to carry on its business as it has been and is being conducted. The Company is duly qualified and in good standing to do business in each jurisdiction in which a failure to so qualify would have a Material Adverse Effect (as defined above) on the Company.

 

2.2         Authority. The Parties have all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by the Parties of this Agreement and the consummation of the transactions contemplated hereby have been duty authorized by all necessary action on the parts of the Parties, including the approval of the Board of Directors of each Party. This Agreement has been duly executed and delivered by the Parties to each other and constitutes a valid and binding obligation of each Party enforceable in accordance with its terms, except that such enforceability may be subject to: 

 

(a)    bankruptcy, insolvency, reorganization, or other similar laws relating to enforcement of creditors' rights generally; and 

 

(b)    general equitable principles.Subject to the satisfaction of the conditions set forth in Article 3 below, the execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, conflict with or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation, or acceleration of any obligation, or to loss of a material benefit under, or the creation of alien, pledge, security interest, charge, or other encumbrance on any assets of any of the Parties (any such conflict, violation, default, right, loss, or creation being referred to herein as a "Violation") pursuant to: (i) any provision of the organization documents of the Parties; or (ii) any loan or credit agreement, note, bond, mortgage, indenture, contract, lease, or other agreement, or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to each of the Parties' respective properties or assets, other than in the case of any such Violation which individually or in the aggregate would not have a Material Adverse Effect on any of the Parties.

 

  

2

  

 

2.3         Capitalization of the Parties,

 

(a)   The Company. The capital stock of the Company consists of Fifty Million (50,000,000) authorized shares of which Forty Million (40,000,000) are designated as the Common Stock, $0.0001 (the "Common Stock"), Five Million (5,000,000) shares designated as "Series A Preferred Stock", $0.0001 (the "Series A Preferred Stock"), convertible at 11; Five Million (5,000,000) shares designated as "Series B Preferred Stock", $0.0001 (the "Series B Preferred Stock"), convertible at 40:1. There are presently issued and outstanding Eleven Million One Hundred Sixty One Thousand Five Hundred Seventy Two (11,161,572) shares of Common Stock, Two Million Nine Hundred Sixty Four Thousand Four Hundred Seventy 2,964,470 Series A Preferred Convertible shares which convert into Common Stock on the one share for one share basis and Six Hundred Twelve Thousand Four Hundred Eighty One (612,481) Series B Preferred Convertible shares which convert into Common Stock on the one share for 40 shares of Common Stock.

 

(b)   Upon issuance pursuant to the terms of this Agreement, the Shares will be duly and validly issued, fully paid and nonassessable, and issued in accordance with the registration or qualification provisions of the Securities Act of 1933, as amended (the "Act"), and any relevant state securities laws or pursuant to valid exemptions therefrom. The Shares are free of restrictions on transfer other than restrictions on transfer as set forth in the Disclosure Schedules and under applicable state and federal securities laws. The Shares shall be issued in a private transaction and consequently will be deemed to be "Restricted Securities" as set forth in Rule 144 promulgated under the Act. At the time of dosing there shall be 84,499,930 common shares issued on a fulty diluted basis of which, 80,274,933 common shares shall be issued to the Buyer.

 

(c)   Except as set forth on the Disclosure Schedules, there are no options, warrants, rights, calls, commitments, plans, contracts, or other agreements of any character granted or issued by any of the Parties which provide for the purchase, issuance, or transfer of any additional shares of the capital stock of the Parties nor are there any outstanding securities granted or issued by any of the Parties that are convertible into any shares of the equity securities of the Parties, and none is authorized. None of the Parties have outstanding any bonds, debentures, notes, or other indebtedness the holders of which have the right to vote (or convertible or exercisable into securities having the right to vote) with holders of the Parties' capital stock on any matter.

 

(d)   Except as set forth on the Disclosure Schedules, none of the Parties are a party or subject to any agreement or understanding, and, to the best of the Parties' knowledge, there is no agreement or understanding between any persons and/or entities, which affects or relates to the voting or giving of written consents with respect to any security or by a shareholder or director of any of the Parties.

 

(e)   Except as set forth on the Disclosure Schedules, none of the Parties have granted or agreed to grant any registration rights, including piggyback rights, to any person or entity.

 

  

3

  

 

2.4          Subsidiaries. "Subsidiary" or 'Subsidiaries" means all corporations, trusts, partnerships, associations, joint ventures, or other Persons, as defined below, of which any of the Parties or any Subsidiary of any of the Parties owns not less than 20% of the voting securities or other equity or of which any of the Parties or any Subsidiary of any of the Parties possesses, directly or indirectly, the power to direct or cause the direction of the management and policies, whether through ownership of voting shares, management contracts, or otherwise. "Person" means any individual, corporation, trust, association, partnership, proprietorship, joint venture, or other entity. Prior to the Closing of this Agreement, there are no Subsidiaries of any of the Parties other than as disclosed herein or disclosed on the Disclosure Schedules.

 

2.5          No Defaults. None of the Parties has received notice that they would be, with the passage of time, in default or violation of any term, condition, or provision of: (i) their Articles of Incorporation or Bylaws; (ii) any judgment, decree, or order applicable to any of the Parties; or (iii) any loan or credit agreement, note, bond, mortgage, indenture, contract, agreement, lease, license, or other instrument to which any of the Parties is now a party or by which they or any of their properties or assets may be bound, except for defaults and violations which, individually or in the aggregate, would not have a Material Adverse Effect on any of the Parties.

 

2.6         Governmental Consents. Any consents, approvals, orders, or authorizations of or registrations, qualifications, designations, declarations, or filings with or exemptions by (collectively "Consents"), any court, administrative agency, or commission, or other federal, state, or local governmental authority or instrumentality, whether domestic or foreign (each a "Governmental Entity"), which may be required by or with respect to any of the Parties in connection with the execution and delivery of this Agreement or the consummation by the Parties of the transactions contemplated hereby, except for such Consents which if not obtained or made would not have a Material Adverse Effect on any of the Parties for the transactions contemplated by this Agreement, are the responsibility of the respective Party. Each of the Parties hereby represents and warrants that such Consents have been obtained by them, if necessary.

 

2.7         Financial Statements and Reports. The Company has furnished to Buyer through its filings with the Securities Exchange Commission all reports and financial statements both audited and unaudited as required by the Securities Exchange Commission. The financial reports have been prepared internally as well as audited as required and fairly present the financial positions of the Company as at the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, recurring audit adjustments not material in scope or amount). To the best of the Company's directors' knowledge and belief, there has been no change in the Company's accounting policies or the methods of making accounting estimates or changes in estimates that are material to the Financial Statements, except as described in the notes thereto.

 

2.8          Absence of Undisclosed Liabilities. To the best of their knowledge and belief, none of the Parties have any liabilities or obligations (whether absolute, accrued, or contingent) except: (i) liabilities that are accrued or reserved against in their respective Balance Sheets; or (ii) additional liabilities reserved against since December 31, 2011 that (x) have arisen in the ordinary course of business; (y) are accrued or reserved against on their books and records; and (z) amount in the aggregate to less than $10,000.

 

  

4

  

 

2.9          Absence of Changes. To the best of their knowledge and belief, since December 31, 2011 the Parties have conducted their businesses in the ordinary course and there has not been: (i) any Material Adverse Effect on the business, financial condition, liabilities, or assets of the Parties or any development or combination of developments of which management of the Parties has knowledge which is reasonably likely to result in such an effect; (ii) any damage, destruction, or loss, whether or not covered by insurance, having a Material Adverse Effect on the Parties; (iii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock, or property) with respect to the capital stock of the Parties; (iv) any increase or change in the compensation or benefits payable or to become payable by the Parties to any of their employees, except in the ordinary course of business consistent with past practice; (v) any sale, lease, assignment, disposition, or abandonment of a material amount of property of the Parties, except in the ordinary course of business; (vi) any increase or modification in any bonus, pension, insurance, or other employee benefit plan, payment, or arrangement made to, for, or with any of their employees; (vii) the granting of stock options, restricted stock awards, stock bonuses, stock appreciation rights, and similar equity based awards; (viii) any resignation or termination of employment of any office of the Parties; and the Parties, to the best of their knowledge, do not know of the impending resignation or termination of employment of any such office; (ix) any merger or consolidation with another entity, or acquisition of assets from another entity except in the ordinary course of business; (x) any loan or advance by the Parties to any person or entity, or guaranty by the Parties of any loan or advance; (xi) any amendment or termination of any contract, agreement, or license to which any of the Parties is a party, except in the ordinary course of business; (xii) any mortgage, pledge, or other encumbrance of any asset of any of the Parties; (xiii) any waiver or release of any right or claim of the Parties, except in the ordinary course of business; (xiv) any write off as uncollectible any note or account receivable or portion thereof; or (xv) any agreement by any of the Parties to do any of the things described in this Section 2.9.

 

2.10       Patents and Trademarks. The Parties each have sufficient title and ownership of all patents, trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights, and processes (collectively, intellectual Property") necessary for their businesses as now conducted without any conflict with or infringement of the rights of others. There are no outstanding options, licenses, or agreements of any kind relating to the Intellectual Property, nor are any of the Parties bound by or a party to any options, licenses, or agreements of any kind with respect to the Intellectual Property of any other person or entity. None of the Parties has received any communications alleging that they have violated or, by conducting their businesses as proposed, would violate any of the Intellectual Property of any other person or entity. None of the Parties are aware that any of their employees is obligated under any contract (including licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of his or her best efforts to promote the interests of the Parties or that would conflict with each of the Parties' respective business as proposed to be conducted. Neither the execution or delivery of this Agreement, nor the carrying on of each of the Parties' respective business by their respective employees, nor the conduct of each of the Parties' respective business as proposed, will, to the best of the Parties' knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant, or instrument under which any of such employees is now obligated. None of the Parties believe that it is or will be necessary to utilize any inventions of any of its employees (or people it currently intends to hire) made prior to their employment by any of the Parties.

 

2.11       Certain Agreements. To the best of the Parties' knowledge and belief, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will: (i) result in any payment (including, without limitation, severance, unemployment compensation, parachute payment, bonus, or otherwise), becoming due to any director, employee, or independent contractor of any of the Parties, from any other Party under any agreement or otherwise; (ii) materially increase any benefits otherwise payable under any agreement; or (iii) result in the acceleration of the time of payment or vesting of any such benefits.

 

  

5

  

 

2.12       Compliance with Other Instruments. To the best of the Parties' knowledge and belief, none of the Parties are in violation or default of any provision of their respective articles of incorporation or bylaws, or of any instrument, judgment, order, writ, decree, or contract to which they are a party or by which they are bound, or, to the best of their knowledge, of any provision of any federal or state statute, rule, or regulation which may be applicable to them. The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree, or contract, or an event that results in the creation of any lien, charge, or encumbrance upon any assets of any Party or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization, or approval applicable to any Party, its businesses, or operations, or any of its assets or properties.

 

2.13       Emolovee Benefit Plans. The Parties have no employee benefit plans (including without limitation all plans which authorize the granting of stock options, restricted stock, stock bonuses, or other equity based awards) covering active, former, or returned employees, other than as listed in the Disclosure Schedules.

 

2.14      Other Personal Properly. The books and records of each of the Parties contain a complete and accurate description, and specify the location, of all trucks, automobiles, machinery, equipment, furniture, supplies, and other tangible personal property owned by, in the possession of, or used by the Parties in connection with their businesses. Except as set forth in the Disclosure Schedules, no personal property used by the Parties in connection with their businesses is held under any lease, security agreement, conditional sales contract, or other title retention or security arrangement.

 

2.15       Properties and Liens.Except as reflected in the Financial Statements or as set forth in the Disclosure Schedules, and except for statutory mechanics' and material men's liens, liens for current taxes not yet delinquent, the Parties own, free and clear of any liens, claims, charges, options, or other encumbrances, all of their tangible and intangible property, real and personal, whether or not reflected in the Financial Statements (except that sold or disposed of in the ordinary course of business since the date of such statements) and all such property acquired since the date of such statements. All real property and tangible personal property of the Parties is in good operating condition and repair, ordinary wear and tear excepted.

 

2.16       Inventory. In reliance upon their respective auditing firms, the inventories, if any, of the Parties shown on the Financial Statements and inventories acquired by them subsequent to the date of the Financial Statements consist solely of items of a quality and quantity usable and salable in the normal course of business, with the exception of obsolete materials and materials below standard quality, all of which have been written down in the books of the Parties to net realizable market value or have been provided for by adequate reserves. Except for sales made in the ordinary course of business, all inventory is the property of the Parties. No items are subject to security interests, except as set forth in the Disclosure Schedules. The value of the inventories has been determined on a first-in, first-out basis consistent with prior years.

 

  

6

  

 

2.17       Major Contracts. Except as otherwise disclosed in the Disclosure Schedules, none of the Parties is a party or subject to:

 

(a)    Any union contract, or any employment contract or arrangement providing for future compensation, written or oral, with any officer, consultant, director, or employee which is not terminable by the Party on 30 days' notice or less without penalty or obligations to make payments related to such termination;

 

(b)   Any joint venture contract, partnership agreement or

 

arrangement or any other agreement which has involved or is expected to Involve a sharing of revenues with other persons or a joint development of products with other persons;

 

(c)   Any manufacture, production, distribution, sales, franchise,

 

marketing, or license agreement, or arrangement by which products or services of the Party are developed, sold, or distributed;

 

(d)   Any material agreement, license, franchise, permit, indenture, or authorization which has not been terminated or performed in its entirety and not renewed which may be, by its terms, accelerated, terminated, impaired, or adversely affected by reason of the execution of this Agreement, or the consummation of the transactions contemplated hereby or thereby;

 

(e)   Any material agreement, contract, or commitment that requires the consent of another person for the Party to enter into or consummate the transactions contemplated by this Agreement;

 

(f)   Except for object code license agreements for any of the Party's executed in the ordinary course of business, any indemnification by the Party with respect to infringements of proprietary rights; or

(g)   Any contract containing covenants purporting to materially limit the Party's freedom to compete in any line of business in any geographic area.

 

AU contracts, plans, arrangements, agreements, licenses, franchises, permits, indentures, authorizations, instruments, and other commitments of the Parties are valid and in full force and effect and to the best of their knowledge, neither the Parties themselves nor any other party thereto, breached any material provisions of, or is in default in any material respect under the terms thereof.

 

  

7

  

 

2.18       Questionable Payments.None of the Parties, nor to their knowledge any director, officer, employee, or agent of any of the Parties, has: (i) made any payment or provided services or other favors in the United States or any foreign country in order to obtain preferential treatment or consideration by any Governmental Entity with respect to any aspect of the business of the Parties; or (ii) made any political contributions that would not be lawful under the laws of the United States, any foreign country or any jurisdiction within the United States or any foreign country. None of the Parties, nor to their knowledge any director, officer, employee, or agent of any of the Parties, has been or is the subject of any investigation by any Governmental Entity in connection with any such payment, provision of services, or contribution.

 

2.19       Recent Transactions. None of the Parties, nor to their knowledge any director, officer, employee, or agent of any of the Parties, is participating in any discussions and do not intend to engage in any discussion: (i) with any representative of any corporation or corporations regarding the consolidation or merger of any of the Parties with or into any such corporation or corporations; (ii) with any corporation, partnership, association, or other business entity or any individual regarding the sale, conveyance, or disposition of all or substantially all of the assets of the Parties or a transaction or series of related transactions in which more than 50% of the voting power of any of the Parties is disposed of; or (iii) regarding any other form of acquisition, liquidation, dissolution, or winding up of the Parties.

 

2.20        Leases in Effect. All real property leases and subleases as to which any of the Parties is a party and any amendments or modifications thereof (each a "Lease" and, collectively, the "Leases") are valid, in full force and effect and enforceable, and there are no existing defaults on the part of any Party and no Party has received nor given notice of default or claimed default with respect to any Lease, nor is there any event that with notice or lapse of time, or both, would constitute a default thereunder. Except as set forth on the Disclosure Schedules, no consent is required from any Party under any Lease in connection with the completion of the transactions contemplated by this Agreement, and none of the Parties have received notice that any party to any Lease intends to cancel, terminate, or refuse to renew the same or to exercise any option or other right thereunder, except where the failure to receive such consent, or where such cancellation, termination, or refusal would not have a Material Adverse Effect on the Parties.

 

2.21       Taxes. Except as set forth elsewhere in this Agreement or in the Disclosure Schedules.

 

(a)   All taxes, assessments, fees, penalties, interest, and other governmental charges with respect to the Parties which have become due and payable by March 15, 2012 have been paid in full or adequately reserved against by the Parties, and all taxes, assessments, fees, penalties, interest, and other governmental charges which have become due and payable subsequent to March 15, 2012 have been paid in full or adequately reserved against on their books of account and such books are sufficient for the payment of all unpaid federal, state, local, foreign, and other taxes, fees, and assessments (including without limitation, income, property, sales, use, franchise, capital stock, excise, added value, employees' income withholding, social security, and unemployment taxes), and all interest and penalties thereon with respect to the periods then ended and for all periods prior thereto;

 

(b)   There are no agreements, waivers, or other arrangements providing for an extension of time with respect to the assessment of any tax or deficiency against the Parties, nor are there any actions, suits, proceedings, investigations, or claims now pending against the Parties in respect of any tax or assessment, or any matters under discussion with any federal, state, local, or foreign authority relating to any taxes or assessments, or any claims for additional taxes or assessments asserted by any such authority; and

 

(c)   There are no liens for taxes upon the assets of the Parties except for taxes that are not yet payable. The Parties have withheld all taxes required to be withheld in respect of wages, salaries, and other payments to all employees, officers, and directors and timely paid all such amounts withheld to the proper taxing authority.

 

  

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2.22  Disputes and Littleton. Except as disclosed in the Disclosure Schedules, there is no suit, claim, action, litigation, or proceeding pending or, to the knowledge of the Parties, threatened against or affecting any of the Parties, respectively, or any of their properties, assets, or business or to which any of the Parties is a party, in any court or before any arbitrator of any kind or before or by any Governmental Entity, which would, if adversely determined, individually or in the aggregate, have a Material Adverse Effect on the Parties, nor is there any judgment, decree, injunction, rule, or order of any Governmental Entity or arbitrator outstanding against any of the Parties, respectively, and having, or which, insofar as reasonably can be foreseen, in the future could have, any such effect. To the knowledge of the Parties, there is no investigation pending or threatened against any of the respective Parties before any foreign, federal, state, municipal, or other governmental department, commission, board, bureau, agency, instrumentality, or other Governmental Entity.

 

2.23   Compliance with Laws. Except as set forth in the Disclosure Schedules, to the best of their knowledge and belief, none of the Parties' businesses is being conducted in violation of, or in a manner which could cause liability under any applicable law, rule, or regulation, judgment, decree, or order of any Governmental Entity, except for any violations or practices, which, individually or in the aggregate, have not had and will not have a Material Adverse Effect on the Parties. The Parties each have all franchises, permits, licenses, and any similar authority necessary for the conduct of their business as now being conducted by them, the lack of which could materially and adversely affect the business, properties, prospects, or financial condition of the Parties and believes they can obtain, without undue burden or expense, any similar authority for the conduct of their business as it is planned to be conducted. To the best of their respective knowledge and belief, none of the Parties are in default in any material respect under any of such franchises, permits, licenses, or other similar authority.

 

2.24   Related Party Transactions. To the best of each of the Parties' knowledge and belief, no employee, officer, or director of any Party nor member of his or her immediate family is indebted to that Party or any other Party, nor is any Party indebted (or committed to make loans or extend or guarantee credit) to any of them. To the best of each of the Parties' knowledge, none of such persons has any direct or indirect ownership interest in any firm or corporation with which any of the Parties is affiliated or with which any of the Parties has a business relationship, or any firm or corporation that competes with the Parties, except that employees, officers, or directors of the Parties and members of their immediate families may own stock in publicly traded companies that may compete with the Parties. To the best knowledge of each of the Parties, respectively, no member of the immediate family of any officer or director of any of the Parties is directly or indirectly interested in any material contract with any of the Parties.

 

2.25       Minute Books. The minute books of the Company provided to Buyer contain a complete summary of all meetings of directors and shareholders since the time of incorporation and reflect all transactions referred to in such minutes accurately in all material respects.

 

2.26       Disclosure. No representation or warranty made by any of the Parties in this Agreement, nor any document, written information, statement, financial statement, certificate, or exhibit prepared and furnished or to be prepared and furnished by the Parties or their representatives pursuant hereto or in connection with the transactions contemplated hereby, when taken together, contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements or facts contained herein or therein not misleading in light of the circumstances under which they were furnished, to the best of each of the Parties' knowledge and belief.

 

2.27       Reliance. The foregoing representations and warranties are made by each Party with the knowledge and expectation that the other Parties are placing reliance thereon.

 

  

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ARTICLE 3

 

CONDITIONS PRECEDENT

 

3.1          Conditions to Each Party's Obligations. The respective obligations of each Party hereunder shall be subject to the satisfaction prior to or at the Closing of the following conditions:

 

(a)   No Restraints. No statute, rule, regulation, order, decree, or injunction shall have been enacted, entered, promulgated, or enforced by any court or Governmental Entity of competent jurisdiction which enjoins or prohibits the consummation of this Agreement and shall be in effect.

 

(b)            Legal Action. There shall not be pending or threatened in writing any action, proceeding, or other application before any court or Governmental Entity challenging or seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or seeking to obtain any material damages.

 

3.2          Conditions to Company's Obligations. The obligations of Company shall be subject to the satisfaction prior to or at the Closing of the following conditions unless waived by Company

 

(a)   Representations and Warranties of Buyer. The representations and warranties of Buyer set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing as though made on and as of the Closing, except: (i) as otherwise contemplated by this Agreement or (ii) in respects that do not have a Material Adverse Effect on the Parties or on the benefits of the transactions provided for in this Agreement. Company shall have received a certificate signed on behalf of Buyer by the President or Chief Executive Officer of Buyer to such effect on the Closing.

 

(b)   Performance of Obligations of Buyer. Buyer shall have performed all agreements and covenants required to be performed by it under this Agreement prior to the Closing, except for breaches that do not have a Material Adverse Effect on the Parties or on the benefits of the transactions provided for in this Agreement. Company shall have received a certificate signed on behalf of Buyer by the President or Chief Executive Officer of Buyer to such effect on the Closing.

 

3.3         Conditions to Buyer's Obligations. The obligations of Buyer shall be subject to the satisfaction prior to or at the Closing of the following conditions unless waived by Buyer:

 

(a)   Representations and Warranties of Company. The representations and warranties of Company set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing as though made on and as of the Closing, except: (i) as otherwise contemplated by this Agreement; or (ii) in respects that do not have a Material Adverse Effect on the Parties or on the benefits of the transactions provided for in this Agreement. Buyer shall have received certificates signed on behalf of Company by the President or Chief Executive Officer of the Company.

 

  

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(b)   Performance of Obligations of Company. Company shall have performed all agreements and covenants required to be performed by it under this Agreement prior to the Closing, except for breaches that do not have a Material Adverse Effect on the Parties or on the benefits of the transactions provided for in this Agreement. Buyer shall have received certificates signed on behalf of Company and by the President or Chief Executive Officer to such effect on the Closing.

 

(c)   Governmental Approvals. All Consents of Governmental Entities legally required by Company for the transactions contemplated by this Agreement shall have been filed, occurred, or been obtained, other than such Consents, the failure of which to obtain would not have a Material Adverse Effect on the consummation of the transactions contemplated by this Agreement.

 

(d)   Consents of Other Third Parties. Company shall have received and delivered to Buyer all requisite consents and approvals of all lenders, lessors, and other third parties whose consent or approval is required in order for Company to consummate the transactions contemplated by this Agreement, or in order to permit the continuation after the Closing of the business activities of the Company in the manner such business is presently carried on by it. Buyer shall have received copies of any necessary written consent(s) to this Agreement and the transactions contemplated herein.

 

(e)            Material Adverse Change. Since the date hereof and through Closing, there shall not have occurred any change, occurrence, or circumstance in Company having or reasonably likely to have, individually or in the aggregate, in the reasonable judgment of Buyer, a Material Adverse Effect on the Parties or on the transactions contemplated by this Agreement.

 

  

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ARTICLE 4

CLOSING AND DELIVERY OF DOCUMENTS

 

4.1          Time and Place. The closing of the transactions contemplated by this

 

Agreement shall take place at the offices of Buyer, located at 871 Coronado Center Drive, Suite 200, Henderson, NV 89052 within forty-five days (45) of the full execution of this Agreement, granting the parties adequate time to satisfy all conditions, and the delivery of all required documents. The closing may occur at such other time and place as the Parties mutually agree upon (which time and place are hereinafter referred to as the 'Closing").

 

4.2          Deliveries by Company. At Closing, Company shall make the following deliveries to Buyer:

 

(a)   A stock certificate(s) sold by the Company to the Buyer as set forth in Section 1.1 above representing ninety-five percent (95%) of the issued and outstanding common shares;

 

(b)   A certificate of good standing for the Company;

 

(c)   A certificate executed by the Company certifying that: (i) all Company's representations and warranties under this Agreement are true as of the Closing, as though each of those representations and warranties had been made on that date; and (ii) Company has performed all agreements and covenants required to be performed by it under this Agreement prior to the Closing, except for breaches that do not have a Material Adverse Effect on the Parties or on the benefits of the transactions provided for in this Agreement; and

 

(d)   Certified resolutions of the Board of Directors of Company, in form satisfactory to counsel for Buyer, authorizing the execution and performance of this Agreement; and

 

(e)   The minute book and corporate records of the Company; and

 

(f)   The financial statements of the Company as required in Section 2.7; and

 

(g)   A current shareholders list that will disclose the Buyer's ownership percentage as set forth in Section 1.1.

 

4.3         Deliveries by Buyer. At Closing, Buyer shall make the following deliveries to Company:

 

(a)   A certificate executed by Buyer certifying that: (i) Buyer's representations and warranties under this Agreement are true as of the Closing, as though each of those representations and warranties had been made on that date; and (ii) Buyer has performed all agreements and covenants required to be performed by it under this Agreement prior to the Closing, except for breaches that do not have a Material Adverse Effect on the Parties or on the benefits of the transactions provided for in this Agreement;

 

(b)   A certificate of good standing for Buyer; and

 

(c)   Certified resolutions of the Board of Directors of Buyer in form satisfactory to counsel for Company, authorizing the execution and performance of this Agreement.

 

(d)   The transfer of funds as set forth in Section 1.2 less applicable fees and charges.

 

  

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ARTICLE 5

INDEMNIFICATION

 

5.1         Company's Indemnity Obligations.

 

(a)   Upon receipt of notice thereof, the Company shall indemnify, defend, and hold harmless Buyer from any and all claims, demands, liabilities, damages, deficiencies, losses, obligations, costs and expenses, including attorney fees and any costs of investigation that Buyer shall incur or suffer, that arise, result from or relate to: (i) any breach of, or failure by the Company to perform, any of their representations, warranties, covenants, or agreements in this Agreement or in any schedule, certificate, exhibit, or other instrument furnished or to be furnished by the Company under this Agreement; and (ii) the employment of any of the Company's employees which is in violation of any law, regulation, or ordinance of any Governmental Entity.

 

(b)   Buyer shall notify promptly the Company of the existence of any claim, demand, or other matter to which the Company's indemnification obligations would apply, and shall give it a reasonable opportunity to defend the same at their own expense and with counsel of their own selection, provided that Company shall at all times also have the right to fully participate in the defense. If the Company, within a reasonable time after this notice, fails to defend, Buyer shall have the right, but not the obligation, to undertake the defense of, and, with the written consent of the Company, to compromise or settle the claim or other matter on behalf, for the account, and at the risk, of the Company.

 

5.2          Buyers Indemnity Obligations.

 

(a)    Upon receipt of notice thereof, Buyer shall indemnify, defend, and hold harmless the Company from any and all claims, demands, liabilities, damages, deficiencies, losses, obligations, costs, and expenses, including attorney fees and any costs of investigation that the Company shall incur or suffer, that arise, result from or relate to any breach of, or failure by Buyer to perform, any of its representations, warranties, covenants, or agreements in this Agreement or in any schedule, certificate, exhibit, or other instrument furnished or to be furnished by Buyer under this Agreement.

 

(b)           The Company shall notify promptly Buyer of the existence of any claim, demand or other matter to which Buyer's indemnification obligations would apply, and shall give it a reasonable opportunity to defend the same at its own expense and with counsel of its own selection, provided that the Company shall at all times also have the right to fully participate in the defense. If Buyer, within a reasonable time after this notice, fails to defend, the Company shall have the right, but not the obligation, to undertake the defense of, and, with the written consent of Buyer, to compromise or settle the claim or other matter on behalf, for the account, and at the risk, of Buyer.

 

  

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ARTICLE 6

 

DEFAULT, AMENDMENT AND WAIVER

 

6.1          Default. Upon a breach or default under this Agreement by any of the Parties (following the cure period provided herein), the non-defaulting party shall have all rights and remedies given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. Notwithstanding the foregoing, in the event of a breach or default by any Party hereto in the observance or in the timely performance of any of its obligations hereunder which is not waived by the non-defaulting Party, such defaulting Party shall have the right to cure such default within 15 days after receipt of notice in writing of such breach or default.

 

6.2          Waiver and Amendment. Any term, provision, covenant, representation, warranty, or condition of this Agreement may be waived, but only by a written instrument signed by the party entitled to the benefits thereof. The failure or delay of any party at any time or times to require performance of any provision hereof or to exercise its rights with respect to any provision hereof shall in no manner operate as a waiver of or affect such party's right at a later time to enforce the same. No waiver by any party of any condition, or of the breach of any term, provision, covenant, representation, or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or waiver of any other condition or of the breach of any other term, provision, covenant, representation, or warranty. No modification or amendment of this Agreement shall be valid and binding unless it be in writing and signed by all Parties hereto.

 

ARTICLE 7

MISCELLANEOUS

 

7.1          Expenses. Whether or not the transactions contemplated hereby are consummated, each of the Parties hereto shall bear all taxes of any nature (including, without limitation, income, franchise, transfer, and sales taxes) and all fees and expenses relating to or arising from its compliance with the various provisions of this Agreement and such party's covenants to be performed hereunder, and except as otherwise specifically provided for herein, each of the Parties hereto agrees to pay all of its own expenses (including, without limitation, attorneys' and accountants' fees, and printing expenses) incurred in connection with this Agreement, the transactions contemplated hereby, the negotiations leading to the same and the preparations made for carrying the same into effect, and all such taxes, fees, and expenses of the Parties hereto shall be paid prior to Closing.

 

7.2          Notices. Any notice, request, instruction, or other document required by the terms of this Agreement, or deemed by any of the Parties hereto to be desirable, to be given to any other party hereto shall be in writing and shall be given by personal delivery, overnight delivery, mailed by registered or certified mail, postage prepaid, with return receipt requested, or sent by electronic or facsimile transmission to the addresses of the Parties as follows:

 

	To Buyer:	 	Queste Capital 
	 	 	871 Coronado Center Drive, Suite 200
	 	 	Henderson, NV 89052
	 	 	Phone 702 837-7800 
	 	 	Attn: Richard Ham, President
	 	 	 
	To Company:	 	Phyhealth Corporation 
	 	 	700 South Royal Poinciana Boulevard, Suite 506
	 	 	Miami, Florida 33166
	 	 	Phone: 305 779-1760 
	 	 	

Attn: Robert L. Trinka, President

	 	 	 
	With a copy to: For the Buyer	 	Carl P. Ranno 
	 	 	2733 East Vista 
	 	 	Dr. Phoenix, AZ 85032 
	 	 	Phone: 602 493-0369
	 	 	 
	With a copy to: For the Company	 	Randall S. Goulding 
	 	 	1333 Sprucewood, 
	 	 	Deerfield, IL 60015 
	 	 	
Phone: 847-948-5431

 

The persons and addresses set forth above may be changed from time to time by a notice sent as aforesaid. If notice is given by personal delivery or overnight delivery in accordance with the provisions of this Section, such notice shall be conclusively deemed given at the time of such delivery provided a receipt is obtained from the recipient. If notice is given by mail in accordance with the provisions of this Section, such notice shall be conclusively deemed given upon receipt and delivery or refusal. If notice is given by electronic or facsimile transmission in accordance with the provisions of this Section, such notice shall be conclusively deemed given at the time of delivery if during business hours and if not during business hours, at the next business day after delivery, provided a confirmation is obtained by the sender.

 

  

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7.3         Entire Agreement. This Agreement, together with the Schedules and Exhibits hereto, sets forth the entire agreement and understanding of the Parties hereto with respect to the transactions contemplated hereby, and supersedes all prior agreements, arrangements and understandings related to the subject matter hereof. No understanding, promise, inducement, statement of intention, representation, warranty, covenant, or condition, written or oral, express or implied, whether by statute or otherwise, has been made by any party hereto which is not embodied in this Agreement, or in the schedules or exhibits hereto or the written statements, certificates, or other documents delivered pursuant hereto or in connection with the transactions contemplated hereby, and no party hereto shall be bound by or liable for any alleged understanding, promise, inducement, statement, representation, warranty, covenant, or condition not so set forth.

 

7.4          Survival of Representations. All statements of fact (including financial statements) contained in the Schedules, the exhibits, the certificates, or any other instrument delivered by or on behalf of the Parties hereto, or in connection with the transactions contemplated hereby, shall be deemed representations and warranties by the respective party hereunder. All representations, warranties, agreements, and covenants hereunder shall survive the Closing and remain effective regardless of any investigation or audit at any time made by or on behalf of the Parties or of any information a party may have in respect hereto. Consummation of the transactions contemplated hereby shall not be deemed or construed to be a waiver of any right or remedy possessed by any party hereto, notwithstanding that such party knew or should have known at the time of Closing that such right or remedy existed.

 

7.5          Incorporated by Reference. The recitals, schedules, exhibits, and all documents (including, without limitation, all financial statements) delivered as part hereof or incident hereto are incorporated as a part of this Agreement by reference.

 

7.6         Remedies Cumulative. No remedy herein conferred upon the Parties is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

 

7.7         Execution Of Additional Documents. Each Party hereto shall make, execute, acknowledge, and deliver such other instruments and documents, and take all such other actions as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby.

 

7.8         Costs and Fees. Each of the Parties hereto is responsible for their own costs and fees incurred with respect to this Agreement or to any of the transactions contemplated hereby.

 

  

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7.9         Choice of Law. This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Nevada including all matters of construction, validity, performance, and enforcement and without giving effect to the principles of conflict of laws.

 

7.10       Jurisdiction. The parties submit to the jurisdiction of the Courts of the County of Clark State of Nevada or a Federal Court empanelled in the State of Nevada for the resolution of all legal disputes arising under the terms of this Agreement.

 

7.11       Attorneys' Fees. In the event any Party hereto shall commence legal proceedings against the other to enforce the terms hereof, or to declare rights hereunder, as the result of a breach of any covenant or condition of this Agreement, the prevailing party in any such proceeding shall be entitled to recover from the losing party its costs of suit, including reasonable attorneys' fees, as may be fixed by the court.

 

7.12       Binding Effect and Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective heirs, executors, administrators, legal representatives, and assigns.

 

7.13       Counterparts; Electronic or Facsimile Signatures. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The Parties agree that electronic or facsimile signatures of this Agreement shall be deemed a valid and binding execution of this Agreement.

 

 

(SIGNATURE PAGE IMMEDIATELY FOLLOWS)

 

  

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of the date first written hereinabove.

 

 

 

	BUYER: 

QUESTE CAPITAL, a Nevada corporation

	 	 	THE COMPANY: 

PHYHEALTH CORPORATION, a Delaware corporation

	 
	

	 	 	

	 
	
By: Richard Ham 

	 	 	
By: Robert Trinka

	 
	
Its: President

	 	 	
Its: President/CEO

	 

 

  

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EXHIBIT A

 

QUESTE CAPITAL - DISCLOSURE SCHEDULE

 

The items set forth below are exceptions to the representations and warranties of QUESTE CAPITAL, (the "Buyer") set forth in Section 2 of the Agreement. Any matter set forth herein as an exception to a section of the Agreement shall be deemed to constitute an exception to all other applicable sections of the Agreement. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Agreement.

 

 

Section                               Exception

 

  

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EXHIBIT B

 

PHYHEALTH CORPORATION, DISCLOSURE SCHEDULE

 

The items set forth below are exceptions to the representations and warranties of PHYHEALTH CORPORATION, (the "Company) set forth in Section 2 of the Agreement Any matter set forth herein as an exception to a section of the Agreement shall be deemed to constitute an exception to all other applicable sections of the Agreement. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Agreement.

 

Section                              Exception

 

 

 

 19

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