Document:

CHAIRMAN EMPLOYMENT AGREEMENT

EXHIBIT 10.3

CHAIRMAN EMPLOYMENT AGREEMENT

XTX ENERGY, INC. 

This CHAIRMAN EMPLOYMENT AGREEMENT is made and entered into as of this [____] day of [______________], 2007, by and between XTX Energy, Inc., a Nevada corporation qualified to do business in the State of Florida (the “Company”), and Leigh M. Rothschild (“Chairman”).

WHEREAS, the Company desires to employ the Chairman, and to enter into an agreement embodying the terms of such employment (this “Agreement”) and Chairman desires to enter into this Agreement and to accept such employment, subject to the terms and provisions of this Agreement.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, the Company and Chairman hereby agree as follows:

Section 1.

Definitions.

(a)

“Accrued Obligations” shall mean (i) all accrued but unpaid Base Salary through the date of termination of Chairman’s employment, (ii) any unpaid or unreimbursed business expenses incurred in accordance with Section 8 below, (iii) any benefits provided under the Company’s benefit plans, in the event of a termination of employment, in accordance with the terms therein, if any, (iv) all of Chairman’s ownership interests in the Company that have vested as of the date of termination and those scheduled to vest within the next succeeding thirty (30) days, (v) relocation expenses and return relocation expenses in accordance with Section 5, below, (vi) Annual Bonuses earned in prior fiscal years but unpaid as of the date of termination, (vii) pro rata portion of Chairman’s Annual Bonus for the fiscal year during which termination occurs, and (viii) payments or benefits required to be provided Chairman by operation of applicable law.

(b)

“Base Salary” shall mean the salary provided for in Section 6(a), below, or any increased salary granted to Chairman pursuant to Section 6(a).

(c)

“Board” shall mean the Board of Directors of the Company.

(d)

“Cause” shall mean (i) acts of personal dishonesty, gross negligence or willful misconduct by Chairman in connection with Chairman’s employment duties; (ii) failure or refusal by Chairman to perform in any material respect his duties or responsibilities under this Agreement; (iii) misappropriation by Chairman of the assets or business opportunities of the Company or its affiliates; (iv) embezzlement or other financial fraud committed by Chairman, at his direction, or with his personal knowledge; (v) Chairman’s conviction of, admission to, or entry of pleas of no contest to any felony (except first offense DUI or DWI) or any crime involving moral turpitude; (vi) public or consistent drunkenness by Chairman or his illegal use of

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(e)

 narcotics which is, or could reasonably be expected to become, materially injurious to the reputation or business of the Company or its affiliates or which impairs, or could reasonably be expected to impair, the performance of Chairman’s duties hereunder; or (vii) Chairman’s breach of any material provision of this Agreement or violation of the Company’s practices or policies.

(f)

“Change In Control” shall mean the occurrence of any of the following: (1) the Sale of all or substantially all of the Company’s assets to any person or entity, provided that the sale or transfer of Company facilities to a real estate investment trust in a sale-leaseback transaction (or similar transaction) shall not be considered a sale of all or substantially all of the Company’s assets; (2) the merger or consolidation of the Company with another entity subsequent to which the shareholders of the Company do not own at least 51% of the Voting Stock of the surviving entity; or (3) any person or entity other than the beneficial owners as of the date of this Agreement, together with his, her or its Affiliates becoming, directly or indirectly, the beneficial owner of 51% or more of the Voting Stock of the Company.

(i)

“Affiliate” shall mean, with respect to any person or entity, any person or entity that directly or indirectly Controls, is Controlled by, or is under common Control with such person or entity; 

(ii)

“Control” shall mean, with respect to a person or entity, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person or entity, in any way.

(iii)

“Voting Stock” shall mean the outstanding shares of capital stock of the Company entitled to vote generally in elections for directors, considered as one class, provided that if any shares are entitled to more or less than one vote, the term Voting Stock shall refer to such proportion of the votes entitled to be cast by such shares. 

(g)

“Commencement Date” shall mean ________________, 2007.

(h)

“Company” shall mean XTX Energy, Inc., a Nevada corporation qualified to do business in the State of Florida, acting by and through its Chairman, or his designee.

(i)

“Competitive Activities” shall mean any business activities in which the Company or its subsidiaries are engaged or have plans to engage either (i) during the period of Chairman’s employment, or (ii) for purposes of Chairman’s obligations under Subsection 10(b) after the period of Chairman’s employment, at the time of termination of Chairman’s employment. 

(j)

“Confidential Information” shall have the meaning set forth in Subsection 10(a), below.

(k)

“Disability” shall mean any physical or mental disability or infirmity that prevents the performance of Chairman’s duties (despite reasonable accommodation) for a period of (i) one hundred twenty (120) consecutive days or (ii) one hundred eighty (180) non-consecutive days during any twelve (12) month period.  Any question as to the existence, extent or potentiality of Chairman’s Disability upon which Chairman and the Company cannot agree shall be determined 

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by a qualified, independent physician selected by the Chairman and approved by Company (which approval shall not be unreasonably withheld).  The determination of any such physician shall be final and conclusive for all purposes of this Agreement.

(l)

“Entity” shall mean any “person” other than an individual person.

(m)

“Good Reason” shall mean (i) the diminution of the Chairman’s authorities, responsibilities, powers or functions or directly reporting senior executives; (ii) the assignment to the Chairman of duties or responsibilities which are materially inconsistent with the Chairman’s authority, status, duties or titles as set forth in Section 3(a) (including office and reporting requirements); (iii) the Company’s requiring the Chairman to be based at any office or location more than twenty (20) miles from the Chairman’s current primary executive office; (iv) a reduction by the Company of the Chairman’s compensation; (iv) a Change In Control, or (v) the material breach by the Company of any provision of this Agreement.

(n)

“Gross Compensation” shall mean all forms of compensation, benefits, entitlements, payments and advantages provided to Chairman under this Agreement, including without limitation, Base Salary, Annual Bonus and Long-term Incentive Compensation and Sign-on Stock Options.   

(o)

“Long-term Incentive Plan” shall mean the XTX Energy, Inc. Long-term Incentive Plan, as the same may be established, amended, modified or supplemented from time to time in the sole discretion of the Company.

(p)

INTENTIONALLY LEFT BLANK

(q)

“Non-solicitation Restricted Period” shall mean the period commencing on the Commencement Date and extending through the (a) twelve (12) month anniversary of the date of Chairman’s termination of employment hereunder pursuant to Section 9 for any reason. 

(r)

“Sale” shall mean a transfer of all or substantially all of the interests of the Company, or a Change in Control of the Parent or the Company, or any transaction having a similar effect (including, without limitation, a merger, consolidation or business combination).  

(s) 

“Severance Amount” shall mean an amount equal to one year of Base Salary, or as otherwise specified in Subsection 9(c)(ii), below.

Section 2.

Acceptance; Term of Employment.

The Company agrees to employ Chairman and Chairman agrees to serve the Company on the terms and conditions set forth herein. Chairman’s employment shall be for an initial term (the “Term”) of two (2) years from the Commencement Date, subject to the provisions of Section 9 hereof regarding employment termination. The Term of this Agreement shall be deemed automatically renewed and extended for successive one (1) year periods unless either the Company or the Chairman shall, no later than ninety (90) days prior to the then-upcoming date of expiration, provide to the other a written notice of non-renewal and non-extension. A written notice of non-renewal and non-extension by the Company shall be deemed a Termination without Cause by the Company pursuant to Section 9(d).  

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Section 3.

Position, Duties and Responsibilities.

(a)

Position; Duties:  Throughout his period of employment, Chairman shall be employed and serve as the Chairman of the Board of Directors of the Company (together with such other position or positions consistent with Chairman’s title as the Company shall specify from time to time) and shall have such duties typically associated with such title and as may otherwise be assigned to him by the Company. 

(b)

Not Full Business Time: Chairman shall devote considerable business time, attention, skill and efforts to the performance of his duties under this Agreement, but shall  be free to engage in such other business or occupation during the period of his employment as he may choose (e.g., he will be serving as Managing Director of Rothschild Trust Holdings, LLC  which is an investment and intellectual property holding company), provided, however, that no such activity conflicts with the interests of the Company, interferes with the proper and efficient performance of his duties for the Company or interferes with the exercise of his judgment in the Company’s best interests. Notwithstanding the foregoing, nothing herein shall preclude Chairman from (i) serving as a member of the board of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of for-profit companies or charitable organizations, (ii) engaging in charitable activities and community affairs and (iii) managing personal and/or family investments and affairs; provided, however, that the activities set out in clauses (i), (ii) and (iii) shall be limited by Chairman so as not to materially interfere, individually, or in the aggregate, with the performance of his duties and responsibilities hereunder. 

(c)

Company Policies:  The Chairman shall comply with all Company practices, policies and procedures (including the Company’s conflict of interest policy) as in effect from time to time. 

Section 4.

Location; Relocation.

(a)

The location of Chairman’s employment by the Company shall be in the greater metropolitan area of North Miami, Florida or Fort Lauderdale, Florida, or within twenty (20) miles of such greater metropolitan area, except that Chairman may from time to time work from such other location or locations as he may choose.   

(b)

In the event that the Company shall request Chairman to relocate his principal residence, and the Chairman in his sole discretion agrees to such request, the Company shall reimburse Chairman for any reasonable relocation and temporary living expenses that are actually incurred by Chairman in connection with any such relocation, provided Chairman furnishes to the Company any documentation reasonably requested by the Company evidencing any such reasonable relocation and temporary living expenses.

(c)

In the event that the Chairman’s employment is terminated by the Company without Cause, or by him for Good Reason, pursuant to Section 9, then he shall be entitled to reasonable return relocation and temporary living expenses to the locale of his choice within the continental United States incurred within twelve months of his employment termination, provided the Chairman furnishes to the Company any documentation reasonably 

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requested by the Company evidencing any such reasonable return relocation and temporary living expenses. 

(d)

The Company’s obligations to Chairman under this Section 5 shall survive the termination and expiration of this Agreement. 

Section 5.

Intellectual Property Transfer.

(a)

As a material condition to the Company entering into this Agreement with Chairman, Chairman agrees to enter into a separate agreement with the Company by which he will obligate himself to take those steps and measures necessary to effectuate the assignment to the Company of all ownership and other rights to a pending patent titled “Leigh-10” (U.S. Appl. No. 11/373.322, filed March 10, 2006) (the “Leigh-10”) owned by Rothschild Trust Holdings, LLC, together with any intellectual property progeny of Leigh-10, associated trademarks, including but not limited to codes, domain names Pubmine.com, Pubmine.net, Pubmine.org, Pubmine.biz, Pubmine.info, Pubmine.us, Pubmine.mobi, Pubmine.tv, Pubmine.ws, Pubmine.name, Pubmineers.com, publute.com, publewt.com, moolahpub.com, moolapub.com, Atomicguppy.com, Atomicguppy.biz, Atomicguppy.net and Atomicguppy.org. 

(b)

As set forth in Section 5(a) above, during the term of his employment, Chairman will assign to the Company any and all patents, patent applications and other intellectual property associated with Leigh-10 that are directly related to the business of the Company. Notwithstanding, the Company acknowledges that Chairman has an extensive background and history as an inventor, and that during his employment by the Company, Chairman is and shall remain free to pursue such other patents and patent applications not directly related to the business of the Company he may, in his sole and absolute discretion, choose to pursue, and that the Company shall have no interest in or rights directly or indirectly related to such patents and patent applications. .  

Section 6.

Compensation.  

During the period of his employment, Chairman shall be entitled to the following compensation:    

(a)

Base Salary.  Chairman shall be paid an annualized Base Salary, payable in accordance with the regular payroll practices of the Company, of One Hundred Twenty Thousand dollars $120,000.00, with increases, if any, as may be approved in writing by the Board, in its sole discretion.

(b)

Bonus.  Chairman shall be eligible to receive for each calendar year (or ratably for partial calendar years) an annual cash bonus (the “Annual Bonus”) based upon the achievement of certain financial and non-financial performance goals which, from time to time, may be established by mutual agreement of Chairman and the Company’s Board of Directors.  The Board, in their sole discretion, shall determine the appropriateness and amount of any bonus to be paid to Chairman.  If a Bonus is awarded, such Bonus shall be paid to the Chairman within seventy-five (75) calendar days following the end of the fiscal year for which it is awarded, unless the Chairman shall elect to defer the receipt of such Bonus in accordance with a deferred compensation plan approved by the Company. 

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(c)

Long-term Incentive Plan.  If the Company establishes a Long-term Incentive Plan, Chairman will be eligible to participate in the Long-term Incentive Plan subject to the terms and provisions of such Plan.

(d)

Sign-On Stock Options.  Upon the commencement of Chairman’s employment under this Agreement, the Company shall award him Twenty-Five Thousand (25,000) stock options upon such terms, conditions and provisions as shall be determined by mutual agreement of the Chairman and the Board. 

Section 7.

Chairman’s Benefits, Vacation, Perquisites, etc.

(a) 

During the period of his employment, Chairman shall be entitled to participate in such health, welfare, insurance, retirement, thrift, equity, profit-sharing, medical coverage, pension, education, and other benefits generally provided to other members of the senior management team of the Company. Health insurance shall be provided on a full-family, no-cost basis to Chairman. 

(b)

During the period of his employment, Chairman shall be entitled to the same number of holidays, vacation, sick days and other employment policies and practices as are generally allowed to members of the senior management team of the Company in accordance with the Company policy in effect from time to time. Notwithstanding, Chairman shall be entitled to no less than three (3) weeks of paid vacation per year, ten (10) days of sick /personal days per year. .  

(c) 

During the period of his employment, Chairman shall be entitled to a monthly automobile allowance, as determined by mutual agreement of the Chairman and the Board, as well as payment of or reimbursement for all gasoline usage for his automobile in connection with his duties as Chairman.

(d) 

During the period of his employment, Chairman shall be provided the services of a full-time executive assistant of his choosing to assist him as he may so choose with regard to his daily business affairs.

(e)

During the period of his employment, Chairman shall be provided with a cellular telephone of his choice, and Company shall provide for all expenses related to use of such cellular telephone, including without limitation usage charges, provider fees and taxes, maintenance and accessories. 

(f) 

Company shall at all times maintain a comprehensive Directors and Officer Full-Indemnity (liability and defense) insurance policy for Chairman’s benefit in an amount no less than $2 million, and shall also indemnify Chairman for any and all loss, cost and expense he may suffer or face related to or arising from Chairman’s performance of his duties under this Agreement. 

(g)

During the period of his employment, the Company will maintain and pay the premiums on a term life insurance policy (the “Term Life Policy”) in which the executive shall name the Company as beneficiary during the term of Chairman’s employment with a death benefit of not less than $1,000,000.  Upon separation from the Company, the Chairman may 

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assume the Term Life Policy at Chairman’s sole expense and designate a beneficiary of Chairman’s choice.

Section 8.

Reimbursement of Business Expenses.

Chairman is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement and the Company shall promptly reimburse him for all reasonable business expenses incurred in connection with carrying out the business of the Company, subject to documentation in accordance with the Company’s policy, as in effect from time to time. Company shall provide Chairman with a Company credit card for such purposes. 

Section 9.

Termination of Employment.

(a)

General.  The Chairman’s employment hereunder shall terminate upon the earliest to occur of (i) Chairman’s death, (ii) a termination by reason of a Disability, (iii) a termination by the Company with Cause, (iv) a termination by the Company without Cause, (iv) a termination by the Chairman Without Good Reason, or (v) a termination by the Chairman With Good Reason. Upon any termination of Chairman’s employment for any reason, except as may otherwise be requested by the Company in writing, Chairman shall resign from any and all directorships, committee memberships or any other positions Chairman holds with the Company or any of its affiliates.  In conjunction with the other  provisions of this Agreement, the provisions of this Section 9 shall exclusively govern Chairman’s rights upon termination of employment with the Company, provided, however, that nothing contained in this Section 9 shall diminish Chairman’s rights with respect to the Long-term Incentive Plan, or the Sign-On Stock Options, should they provide him greater or more valuable interests in the event of termination, such terms and provisions of which shall continue to govern Chairman’s rights and interests following any termination. 

(i)

Termination due to Death or Disability.  Chairman’s employment shall terminate automatically upon his death.  The Company may terminate Chairman’s employment immediately upon the occurrence of a Disability (as defined in this Agreement), such termination to be effective upon Chairman’s receipt of written notice of such termination.  In the event Chairman’s employment is terminated due to his death or Disability, Chairman or his estate or his beneficiaries, as the case may be, shall be entitled to the Accrued Obligations. 

Following such termination of Chairman’s employment by the reason of death or Disability, except as set forth in this Subsection 9(b), Chairman shall have no further rights to any compensation or any other benefits under this Agreement.

(b)

Termination by the Company for Cause.

(i)

A termination for Cause shall not take effect unless the provisions of this Subsection are complied with. Chairman shall be given not less than sixty (60) days written notice by the Company of the intention to terminate him for Cause, which notice shall describe the particular act or acts, or failure or failures to act, that constitute the grounds on which the proposed termination for Cause is based.  If the nature of the alleged Cause is capable of cure, Chairman shall have thirty (30) days after the date that such written notice has been given to Chairman in which to cure such conduct. If he fails to cure such conduct within that 

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time period, the termination shall be effective on the date immediately following the expiration of the sixty (60) day notice period.  During any cure period provided hereunder, the Chairman may continue to occupy his office premises and otherwise perform his duties hereunder, unless his so doing constitutes a clear danger to the Company or conflicts with its best interests.   

(ii)

In the event the Company terminates Chairman’s employment for Cause, he shall be entitled only to the Accrued Obligations.  

Following such termination of Chairman’s employment for Cause, except as set forth in this Subsection 9(c), Chairman shall have no further rights to any compensation or any other benefits under this Agreement.

(c)

Termination by the Company without Cause.  The Company may terminate Chairman’s employment at any time without Cause, effective sixty (60) days after the Chairman’s receipt of written notice of such termination.  In the event Chairman’s employment is terminated by the Company without Cause (other than due to death or Disability), Chairman shall be entitled to:

(i)

The Accrued Obligations;

(ii)

Payment of a sum representing the One Year of salary (the “Severance Amount”) at Chairman’s election either (1) in “lump sum” fashion within sixty days of the effective date of his termination, or (2) in twelve (12) equal monthly installments, less applicable withholdings and deductions, including without limitation continuation of payments on his behalf for such period, subject in all events to Section 21 of this Agreement; 

(iii)

Should Chairman be eligible for and elect to continue his health insurance pursuant to COBRA following the date of such termination, payment of his family COBRA premiums in excess of the cost of such health insurance coverage for an active Chairman of the Company (or to apply same to the premiums of a different group health insurance policy) until the earlier of: (A) twelve (12) months or (B) the date Chairman commences employment with any person or entity and, thus, is eligible for health insurance benefits; and

Following such termination of Chairman’s employment by the Company without Cause, except as set forth in this Subsection 9(d), Chairman shall have no further rights to any compensation or any other benefits under this Agreement.

(d)

Termination by Chairman without Good Reason.  Chairman may terminate his employment without Good Reason by providing the Company sixty (60) days written notice of such termination.  In the event of a termination of employment by Chairman Without Good Reason under this Subsection 9(d), Chairman shall be entitled only to the Accrued Obligations. Following such termination of Chairman’s employment by Chairman, except as set forth in this Subsection 9(d), Chairman shall have no further rights to any compensation or any other benefits under this Agreement.  

(e)

Termination by the Chairman With Good Reason.   The Chairman shall be permitted to terminate his employment with the Company for Good Reason, as defined, by 

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providing the Company sixty (60) days’ notice of Termination With Good Reason which notice shall set forth the basis for the Chairman’s determination that Good Reason exists. Upon the Company’s receipt of such notice from the Chairman of his Termination With Good Reason, it shall have fifteen (15) days to provide him with written notice that it disputes the existence of Good Reason for his termination of employment, or the existence of Good Reason for his termination of employment shall be deemed conclusive and binding.  In the event of a termination of employment by the Chairman With Good Reason, he shall be treated in all respects as if his employment with the Company was terminated by the Company without Cause pursuant to Section 9(d).  

(f)

Release.  Notwithstanding any provision herein to the contrary, the Company may require that, prior to payment of any amount or provision of any benefit other than the Accrued Obligations, Chairman shall have executed a customary general release in favor of the Company and its affiliates and related parties in such form as is reasonably required by the Company, and any waiting periods contained in such release shall have expired. The general release required of the Chairman shall not limit his rights and entitlements under this Agreement, nor place upon him obligations not expressed in this Agreement.

(g)

Certain Additional Payments.  In the event that (i) Chairman would otherwise be entitled to the compensation and the benefits described in this Section 9 (“Compensation Payments”), and (ii) the Company determines, based upon the advice of tax counsel selected by the Company’s independent auditors acceptable to Chairman, that, as a result of such Compensation Payments and any other benefits or payments required to be taken into account under IRS Code Section 280G(b)(2) (“Parachute Payments”), any of such Parachute Payments would be reportable by the Company as “excess parachute payments,” such Compensation Payments shall be reduced to the extent necessary to cause Chairman’s Parachute Payments to equal 2.99 times the “base amount” as defined in Code Section 280G(b)(3) with respect to Chairman. However, such reduction in the Compensation Payments shall be made only if, in the opinion of such tax counsel, it would result in a larger Parachute Payment to the Chairman than payment of the unreduced Parachute Payment after deduction of tax imposed on and payable by Chairman under Section 4999 of the Code (“Excise Tax.”)  The value of any such non-cash benefits or any deferred payment or benefit for purposes of this paragraph shall be determined by the Company’s independent auditors.  

Section 10. 

Restrictive Covenants.  

Chairman acknowledges and agrees that (A) the agreements and covenants contained in this section are (i) reasonable and valid in geographical and temporal scope and in all other respects, and (ii) essential to protect the value of the Company’s business and assets, and (B) by his employment with the Company, Chairman will obtain knowledge, contacts, know-how, training and experience and there is a substantial probability that such knowledge, know-how, contacts, training and experience could be used to the substantial advantage of a competitor of the Company and to the Company’s substantial detriment.  For purposes of this Section 10, references to the Company shall be deemed to include its subsidiaries.

(a)

Confidential Information.  At any time during and after the end of the period of Chairman’s employment by the Company, without the prior written consent of the 

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Company, except to the extent required by an order of a court having jurisdiction or under subpoena from an appropriate government agency, in which event, Chairman shall use his best efforts to consult with the Company prior to responding to any such order or subpoena, and except as required in the performance of his duties hereunder, Chairman shall not disclose to or use for his benefit or the benefit of any third party any confidential or proprietary trade secrets, customer lists, drawings, designs, information regarding legislative initiatives, contract negotiations, vendor arrangements, product development, marketing plans, sales plans, manufacturing plans, management organization information, operating policies or manuals, business plans, financial records, packaging design or other financial, commercial, business or technical information (i) relating to the Company, or (ii) that the Company may receive belonging to suppliers, customers, or others who do business with the Company (collectively, “Confidential Information”).  Chairman’s obligation under this Subsection 10(a) shall not apply to any information which (i) is known publicly; or (ii) is in the public domain or hereafter enters the public domain without the breach of Chairman of this Subsection 10(a)..

(b)

Non-Solicitation; Non-Interference.  During the Non-solicitation Restricted Period, Chairman shall not, directly or indirectly, for his own account or for the account of any other person or entity, (i) encourage, solicit or induce, or in any manner attempt to encourage, solicit or induce, any person or entity employed by, as an agent of, or a service provider to, the Company to terminate (or, in the case of an agent or service provider, reduce) such person’s or entity’s employment, agency or service, as the case may be, with the Company; (ii) solicit or accept business from any individual or entity for whom the Company provided services or products within the one-year period immediately preceding the date of Chairman’s termination of employment; or (iii) solicit or accept business from any prospective customer or client of the Company who, within the one-year period immediately preceding the date of Chairman’s termination of employment, Chairman had directly solicited or where, directly or indirectly, in whole or in part, Chairman supervised or participated in the Company’s solicitation activities related to such prospective customer or client, nor shall he assist any person or entity to engage in any activity prohibited by this Subsection 10(c).

(c)

Return of Documents.  In the event of the termination of Chairman’s employment for any reason, Chairman shall deliver to the Company all of (i) the property of the Company, and (ii) the documents and data of any nature and in whatever medium of the Company, and he shall not take with him any such property, documents or data or any reproduction thereof, or any documents containing or pertaining to any Confidential Information.  Notwithstanding the above, in the event that the Chairman has transmitted information or documentation regarding the Company to his personal or home computer(s) to enable off-site work, upon his termination he will certify to the Company that any and all such information about the Company, if any, (i) has been delivered or transmitted to the Company, or (ii) has been permanently deleted from such personal computer(s), and the Company shall accept such certification as complete fulfillment of Chairman’s obligations in this regard.  

(d)

Blue Pencil.  If any court of competent jurisdiction shall at any time deem the duration or the geographic scope of any of the provisions of this Section entitled “Restrictive Covenants” unenforceable, the other provisions of this Section entitled “Restrictive Covenants” shall nevertheless stand and the duration and/or geographic scope set forth herein shall be deemed to be the longest period and/or greatest size permissible by law under the circumstances, 

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and the parties hereto agree that such court shall reduce the time period and/or geographic scope to permissible duration or size.

(e)

Foreign Corrupt Practices Act.  Chairman understands that the Company is subject to the Foreign Corrupt Practices Act as enacted in the United States which prohibits any U.S. company from offering monetary or other incentives to procure contracts to individuals, entities, or government employees to which the individuals, entities, or government employees would otherwise have no entitlement.  In recognition of this prohibition, Chairman promises to refrain from any activity which would violate this prohibition or give the appearance of a violation.  Further, Chairman agrees to indemnify and hold the Company harmless from any claims or damages resulting from an act or omission attributable to Chairman which would result in damages being imputed to, or assessed against the Company.

Section 11. 

Injunctive Relief.  

Without limiting the remedies available to the Company, Chairman acknowledges that a breach or threatened breach of any of the covenants contained this Section 10 hereof may result in material irreparable injury to the Company or its subsidiaries or affiliates for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction, without the necessity of proving irreparable harm or injury as a result of such breach or threatened breach of Section 10 hereof, restraining Chairman from engaging in activities prohibited by Section 10 hereof or such other relief as may be required specifically to enforce any of the covenants in Section 10 hereof.  Notwithstanding any other provision to the contrary, the Non-competition Restriction Period and the Non-solicitation Restriction Period shall be tolled during any period of violation of any of the covenants in Subsections 10(b) or (c) hereof and during any other period required for litigation during which the Company seeks to enforce such covenants against Chairman or another person or entity with whom Chairman is affiliated if it is ultimately determined that Chairman was in breach of such covenants.

Section 12. 

Representations and Warranties of Chairman.  

Chairman represents and warrants to the Company that:

(a)

Chairman is entering into this Agreement voluntarily and that his execution of this Agreement, his employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by him of any agreement to which he is a party or by which he may be bound; 

(b)

he has not, and in connection with his employment with the Company will not, violate any non-solicitation or other similar covenant or agreement by which he is or may be bound; 

(c)

in connection with his employment with the Company he will not use, disclose, divulge, share, make use of any confidential, proprietary or trade secret information, documentation or materials he may have obtained in connection with employment with any prior employer; or belonging to any other party, and

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(d)

the Company has suggested to the Chairman that he seek legal counsel of his choice to review this Agreement before he signs it, and he has been given full and ample opportunity to do so.

Section 13. 

Taxes.  

The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social security taxes, as shall be required by law or governmental regulation or ruling. .

Section 14. 

Set Off; No Mitigation.  

The Company’s obligation to pay Chairman the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Chairman to the Company or its affiliates. Chairman shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment or otherwise and, except as expressly provided for in this Agreement, the amount of any payment provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Chairman’s other employment or otherwise.

Section 15. 

Successors and Assigns; No Third-Party Beneficiaries.  

(a)

The Company. This Agreement shall inure to the benefit of, be binding  upon, and be enforceable by, the successors, assigns, heirs, estates and legal representatives of the Company and the Chairman, and may be assigned by the Company to any purchaser of all or substantially all of the Company’s business or assets, or an operating division thereof, any successor to the Company or any assignee thereof (whether direct or indirect, by stock purchase, asset purchase, merger, consolidation or otherwise).  The Company will require any such purchaser, successor or assignee to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such purchase, succession or assignment had taken place. Notwithstanding any such assignment by the Company, it shall remain obligated to the Chairman in all respects in the event and to the extent the Company’s assignees do not fulfill all of Company’s obligations to the Chairman.  However, notwithstanding any provisions to the contrary, upon a change of control, Chairman may terminate this Agreement with Good Reason and his termination will be treated in accordance with the terms contained in Section 9(d) above.

(b)

Chairman.  Chairman’s rights and obligations under this Agreement shall not be transferable by Chairman by assignment or otherwise, without the prior written consent of the Company; provided, however, that if Chairman shall die, all amounts then payable to Chairman hereunder shall be paid in accordance with the terms of this Agreement to Chairman’s estate, and if Chairman shall become Disabled, then in accordance with the instructions of his Guardian or legal representative.

(c)

No Third-Party Beneficiaries.  Other than as expressed herein, nothing  referred to in this Agreement will be construed to give any person or entity other than the Company and Chairman any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement.

-

Section 16. 

Waiver and Amendments.

Any amendment or modification of any of the terms of this Agreement shall be valid only if made in writing and signed by each of the parties hereto.  No waiver by either of the parties hereto of their rights hereunder or of compliance by the other party of any of the terms or conditions hereof shall be effective unless the party waiving its rights hereunder or compliance with the terms hereof shall have executed a written instrument setting forth the terms and conditions of such waiver.  In addition, no waiver by either of the parties hereto of their rights hereunder or of compliance by the other party of any of the terms or conditions hereof shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

Section 17. 

Severability and Governing Law.  

Without limiting the terms of Section 10 above, if any covenants or such other provisions of this Agreement are found to be invalid or unenforceable by a final determination of a court of competent jurisdiction: (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision hereof shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision hereof.  This Agreement shall be governed by and construed in accordance with the laws of the State of Florida (without  giving effect to the choice of law principles thereof) applicable to contracts made and to be performed entirely within such state and venue shall be exclusive to the State and Federal Courts located in Broward County, Florida.

Section 18. 

Costs of Disputes.

If any action at law or in equity (inclusive of appellate or bankruptcy proceedings) is or becomes necessary to enforce or interpret the terms and provisions of this Agreement, the prevailing party shall be entitled to reasonable costs thereof, including without limitation reasonable attorney’s fees.  

Section 19.

Notices.

Every notice, consent, demand, request, approval or other communication relating to this Agreement shall be in writing, and shall be (i) personally delivered, (ii) mailed by certified mail, prepaid return receipt requested, (iii) delivered by overnight express delivery service, to the addresses below, or to such other address as may be designated by the parties from time to time in accordance with this Section 19: 

If to the Company: 

XTX Energy, Inc., [[Address and telephone to be supplied]]. 

If  to the Chairman: 

Mr. Leigh M. Rothschild, 19333 Collins Avenue, # 2501, Sunny Isles Beach, FL 33160-2336 , with a copy sent simultaneously to

-

David A. Carter, Esq., David A. Carter, P.A., One Lincoln Place, 1900 Glades Road, Suite 401, Boca Raton, FL 33431, Telephone: (561) 750-6999.

Any notice so addressed shall be deemed to be given:  (i) if delivered by hand, on the date of such delivery; (ii) if mailed by overnight mail, on the first business day following the date of such mailing; and (iii) if mailed by registered or certified mail, on the third business day after the date of such mailing.

Section 20. 

Section Headings.  

The headings of the Sections and Subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof, affect the meaning or interpretation of this Agreement or of any term or provision hereof.

Section 21. 

IRS Code Section 409A

Notwithstanding any other provision of this Agreement to the contrary, if the Chairman is a “Specified Chairman” as defined in IRS Code (“the Code”) Section 409A, and if any amounts that the Chairman is entitled to receive pursuant to this Agreement are otherwise not exempt from Code Section 409A as a short-term deferral or otherwise, then to the extent necessary to comply with Code Section 409A, no payments may be made and no benefits may be provided under this Agreement before the date which is six (6) months after the Chairman’s “separation from service” within the meaning of Code Section 409A or, if earlier, the Chairman’s death.  Any payments which would have otherwise been required to be paid during such six (6) months or, if earlier, before the Chairman’s death, shall be paid to the Chairman in one lump sum payment as soon as administratively practical after the date which is six (6) months after the Chairman’s separation from service or, if earlier, the Chairman’s date of death. In such event, any and all such sums paid to the Chairman on a delayed basis shall bear interest at the rate of twelve percent (12%) per annum. The Chairman’s termination of employment under this Agreement shall be interpreted in a manner consistent with the definition of “Separation from Service” in Code Section 409A. To the extent this Agreement is subject to Code Section 409A, it is intended to comply with the applicable requirements of Code Section 409A and shall be construed and interpreted in accordance therewith. 

Section 22. 

Entire Agreement.  

This Agreement, together with any agreements executed by the Company and Chairman in respect of awards under any equity, benefit or welfare plan, constitutes the entire understanding and agreement of the parties hereto regarding the employment of Chairman.  This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement.

-

Section 23.

Survival of Operative Sections.  

Upon any termination of Chairman’s employment, the provisions of Sections 5, 9, 10, 11, 13, 14, 15, 16, 17, 18 and 23 of this Agreement (and any related definitions set forth in Section 1 hereof) shall survive to the extent necessary to give effect to the provisions thereof.

Section 24. 

Gender Neutrality.

Any use of the male or female pronouns in this Agreement, whether “he,” “she,” “him,” “her” or words or phrases to similar effect, shall have no significance in the interpretation and application of the terms, provisions and conditions of this Agreement, such use being solely for the sake of convenience. 

Section 25. 

Counterparts; Facsimile Signature.  

This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.  The execution of this Agreement may be by actual or facsimile signature.

IN WITNESS WHEREOF, the undersigned have executed this Employment Agreement as of the date first above written.

			
	 
	XTX ENERGY, INC.

	  

	 
	 

	  

	 
	 

	                                                                        

	By:

	 

	 
	Name: :

	 

	 
	Title:

	 

	  

	 
	 

	  

	 
	 

	  

	 
	 

	  

	 
	 

	 
	 
	Leigh M. Rothschild 

-Precision Aerospace Components, Inc. Exhibit 10.1 3/19/07

CONTRACT OF SALE

SECURITY AGREEMENT

(LOC Form 5)

This Contract of Sale and Security Agreement dated for purposes of reference March  13, 2007; is between the undersigned, Freundlich Supply Company, Inc., hereinafter called "CLIENT", and Greater Bay Business Funding, a division of Greater Bay Bank, NA hereinafter called "GBBF ", agree as follows:

PURPOSE OF AGREEMENT:

1.  CLIENT desires to obtain short-term financing by selling, to GBBF ALL Accounts receivable. GBBF agrees to Purchase CLIENT’s Accounts from time to time at a discount below face value, utilizing an advance formula for the purchase of ALL Accounts based upon advances against Acceptable/Eligible Accounts.  It is clearly understood by both parties that ALL Accounts of CLIENT are to be sold to GBBF.

DEFINITIONS:

2.  "Account" means any right of payment for goods sold, or leased, and delivered, or services rendered, any specific transaction, or any right of payment.

3.  "Advance Formula" means the maximum amount available to CLIENT from GBBF for the purchase of All Accounts will not exceed 80% of Acceptable/Eligible Accounts.

4.  "Acceptable/Eligible Account" means an Account conforming to the Warranties and terms set forth herein that has not been outstanding for more than 90 DAYS from the date of invoice, has been underwritten and approved by GBBF, and has not been reduced from the original amount billed by, credit memo, offset, adjustment of any kind, or partial payment subsequent to invoice date.

5.  "Customer" means CLIENT's Customer or the Account debtor.

6.  "CLIENT" means the seller of All Accounts.

7.  "Collateral" means the intangible or tangible property given as security to GBBF by CLIENT for any obligations and liabilities of CLIENT to GBBF under the Agreement.

8.  "Warrant" means to guarantee, as a material element of this Agreement.

9.  "Credit Problem" means Customer is unable to pay his debts because of problems or insolvency.

10. "Customer Dispute" means any claim by Customer against CLIENT, of any kind whatsoever, valid or invalid, that reduces the amount collectible from Customer by GBBF.

CLIENT COVENANTS:

11.  CLIENT agrees to sell to GBBF ALL Accounts Receivable, (Accounts) mechanic's lien(s), and rights to payment under any stop notice(s), or bonded stop notice(s) securing payment of those Accounts created by CLIENT in the course of its business, existing as of the date of this agreement or thereafter created during the term of this agreement, subject to approval and verification by GBBF. GBBF is not obligated to advance funds for the purchase of All Accounts from CLIENT.  When CLIENT notifies GBBF of it's Accounts, CLIENT shall provide a copy of the original  Assigned Account (Invoice)   a copy of the bill of lading contract, purchase order, purchase order number, and/or any other requisite supporting documentation corresponding to said Accounts and appropriate to the business of CLIENT, as requested by GBBF.

12.  CLIENT shall prepare and give to GBBF proper written assignments of Accounts, mechanic's lien(s) on forms provided by GBBF.  The execution of said assignments shall transfer to GBBF all of CLIENT’s right, title and ownership to ALL Accounts.  CLIENT or GBBF by this agreement will properly mark Accounts, as assigned and sold to GBBF, and GBBF is authorized to notify Customer of said sale and assignment.

13.  CLIENT represents and Warrants to GBBF that:

a. CLIENT is sole and absolute owner of any and all Accounts and mechanic's liens and rights to payment under any stop notices, or bonded stop notices, sold and assigned hereunder, and CLIENT has full legal right to make said sale, assignment, and/or transfer.

b. All Accounts sold to GBBF are an accurate statement of a bonafide sale, delivery and acceptance of merchandise, or performance of service by CLIENT to / for Account-debtor.  Accounts are not contingent upon the fulfillment by CLIENT and each Account-debtor's business is believed to be solvent.  The terms for payment of said Accounts are Net 30 days or as expressly set forth on the face of said sold and assigned Accounts, and 

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the payment of said Accounts are not contingent upon the fulfillment by CLIENT of any further performance of any nature whatsoever.  CLIENT shall accept no returns and shall grant no allowances or credits to any sold and Assigned Account of any Account-debtor without the prior written approval of GBBF.

c. There are no known setoffs, Customer Disputes, adverse claims, defenses, and/or liens whatsoever against the payment of Accounts, and Account's mechanic's liens have not been previously assigned or encumbered by CLIENT in any manner whatsoever.  CLIENT will, immediately upon sale of Accounts to GBBF make proper entries on its books and records disclosing the absolute sale of Accounts to GBBF and CLIENT will post no payment unless it is reflected in a payment report from GBBF.

d. CLIENT will promptly notify GBBF in writing of any proposed change in CLIENT'S place of business, name, legal entity, corporate structure, record-keeping location, and/or as to any additional place of business, or expiration of any special license(s), or transfer of assets, or technology, to a third party, or proposed change in ownership in excess of twenty five percent, (25%), of outstanding shares; 

e. CLIENT does not own, control, manage, participate in management, or have any involvement and/or association whatsoever with the business of any Account-debtor related to any Accounts sold and assigned hereunder; 

f. There are no financing statements now on file in any public office governing, any Account, Inventory or work in process of CLIENT in which CLIENT is named in or has signed as the debtor, except the financing statement or statements filed or to be filed in respect to this Agreement, or those statements now on file that have been disclosed in writing by CLIENT to GBBF.  CLIENT will not execute any financing statements pledging Accounts receivables, inventory or work in process,  in favor of any other person or entity, excepting GBBF, for the term of this Agreement;

g. CLIENT'S taxes are not delinquent nor has CLIENT been subject to a tax levy by any governmental entity nor are there now on file in any public office tax liens affecting CLIENT other than those delinquencies, levies and/or liens which have been disclosed by CLIENT to GBBF;

h. All records, statements, books, or other documents shown to GBBF by CLIENT at any time, either before, or after the signing of the Agreement are true and accurate;

i. CLIENT has served or caused to be served any and all preliminary 10-day notices required by law to perfect or enforce any mechanic's lien for All Accounts to insure perfection of ownership for GBBF and the information contained on those preliminary 10-day notices is true, correct, and properly recorded, to Seller's knowledge and belief;

j. Waivers and releases for all labor, services, equipment, or material of CLIENT and others will be submitted on GBBF’s form concurrent with Accounts.

14.  CLIENT and GBBF agree that GBBF will have FULL RECOURSE against CLIENT and CLIENT shall be liable to repay to GBBF any amount paid by GBBF to CLIENT in consideration for the sale, transfer, and assignment of Accounts.

15.  All Accounts shall be the sole property of GBBF, but if for any reason a payment owing on said Accounts shall be paid to CLIENT; CLIENT shall promptly notify GBBF of such payment, shall hold any check, draft or money so received in trust and for the benefit of GBBF, and shall pay over such check or draft in-kind, or money, to GBBF promptly and without delay.  All of CLIENT's invoices shall bear the address of a Lock Box acceptable to GBBF; as the "REMIT TO" address, and CLIENT agrees that ALL remittances for payment on ALL Accounts shall be made to the Lock Box or other repository authorized in writing by GBBF.

16.  CLIENT will furnish GBBF periodic statements, accounts receivable agings, journals, bank records, and other information as requested by GBBF from time to time.

17.  CLIENT will not pledge the credit of GBBF to any other person, or business for any purpose whatsoever.

18.  CLIENT is properly licensed and authorized to operate the business 

of Freundlich Supply Company, Inc., under the trade name of SAME, and CLIENT'S trade name has been properly filed and published as required by the laws of the State of Delaware.

19.  CLIENT'S business is solvent.

20.  CLIENT will not sell Accounts, or pledge Accounts to any party, except to GBBF for the period of this Agreement unless specific Accounts are subordinated and released by GBBF in writing.

21.  CLIENT will not transfer, pledge, or give a security interest of the Assets sold or Collateral granted to GBBF to any other party.

22.  CLIENT will not change, or modify the terms of the original sold and assigned Account with Customer unless 

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GBBF first consents to such change in writing. GBBF agrees to provide a prompt response to CLIENT request for modification or change with respect to an Assigned Account.   For example, CLIENT may not extend credit to a Customer beyond Net 30 days or the time set forth on the face of the sold and Assigned Account without prior written consent from GBBF.

23.  NOTICE OF DISPUTE: CLIENT must immediately notify GBBF of Customer Disputes greater than $400.00 in total for any one Customer.

24.  POWER OF ATTORNEY: In order to carry out this Agreement and avoid unnecessary notification of Customers. CLIENT irrevocably appoints GBBF, or any person designated by GBBF, as its special attorney in fact, or agent, with power to:

a. strike out CLIENT'S address on all Accounts mailed to Customers and put on GBBF 's address.

b. receive, direct and forward, open, and dispose of all mail addressed to CLIENT, or to CLIENT'S fictitious trade name via GBBF's address.

c. endorse the name of CLIENT, or CLIENT'S fictitious trade name on any checks or other evidences of payment that may come into the possession of GBBF on Accounts purchased by GBBF and on any other documents relating to any of the Accounts or to assigned Collateral.

d. in CLIENT'S name, or otherwise, demand, sue for, collect, and give release for any and all monies due, or to become due on Accounts sold and assigned hereunder.

e. do any and all things necessary and proper to carry out the purpose intended by this Agreement.

f. execute any documents necessary to perfect or to continue any Security Interest and without further authorization from CLIENT file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement

The authority granted GBBF shall remain in full force and effect until all Accounts are paid in full and any indebtedness of CLIENT to GBBF is discharged.

GBBF COVENANTS:

25. GBBF reserves the sum of ($1,000,000.00) One Million and  00/100 for the purchase of ALL of CLIENT's Accounts.  These funds are available daily at CLIENT'S option, subject to restriction as governed by the Advance Formula.  Daily availability will be communicated to CLIENT via GBBF'S Availability / Advance Request. 

26.  This Agreement shall have an initial term ending with the first full (12) Twelve calendar months and unless terminated by either party giving not less than thirty (30) days prior written notice.

27.  STATEMENT OF Acceptable/Eligible Accounts: GBBF shall identify in writing all Acceptable/Eligible Accounts and provide to CLIENT, upon request, a written statement thereof (Weekly Aging Report). 

ACCOUNTING & FEES:

28. Funds advanced by GBBF to CLIENT are subject to daily fee of Greater Bay Bank N.A. Prime Rate + 4.000% /360 (equivalent to a monthly discount fee of Greater Bay Bank N.A. Prime Rate + 4.000% /12) percent calculated on the daily balance (as reported on the CLIENT Liability Detail Report) owing to GBBF.  This period will usually be 1 calendar day except for weekends and or weeks where holidays or other non-operating days prevent the fee from being taken on a daily basis. 

29. GBBF will provide to the CLIENT daily, via fax, an advance and availability request.  This report must be acknowledged and returned, via fax, to GBBF no later than 11:30AM if a deposit or wire transfer is to be made the same date as the request form was issued to the CLIENT by GBBF.

30. PAYMENT PROCESSING:  All payments received by GBBF will be applied to CLIENT's Outstanding Balance daily following a 2 (Two) business day hold to allow for the application of collected funds. 

31.  DISPUTED ACCOUNT:  CLIENT will immediately notify GBBF of any Account subject to a Customer Dispute (See Paragraph 10 for definition) of any kind whatsoever and said Account shall be removed as an Acceptable/Eligible Account.

32.  INVOICING ERRORS:  Mistaken, incorrect and/or erroneous invoicing, submitted by CLIENT to GBBF may at GBBF’s discretion be deemed a Customer Disputed sold and Assigned Account and shall be removed as an Acceptable/Eligible Account.

COLLATERAL:

33.  
As Collateral for the payment of any indebtedness now owing, or in the future owing, by CLIENT to GBBF, CLIENT hereby grants to GBBF a security interest in the following property:

a. See Exhibit A attached.

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34.  CLIENT will maintain such insurance covering CLIENT'S business and/or the property of CLIENT's Customers as is customary for businesses similar to the business of CLIENT.

35.  
CLIENT shall complete any and all documents required to provide GBBF a perfected security interest/lien in the Collateral pledged to GBBF.

DEFAULT:

36. Any one or more of the following shall constitute an event of default:

a. If CLIENT shall fail to pay any amount of indebtedness to GBBF when owing;

b. If CLIENT shall be in breach of any term, provision, Warranty, or representation under this Agreement, or any other agreement related hereto;

c. If bankruptcy or insolvency proceedings shall be instituted by or against CLIENT.

d. If the Collateral shall be attached, levied upon, seized in any legal proceeding, and not released within 5 working days thereof;

e. If CLIENT shall cease doing business and there shall exist any indebtedness or commitments by CLIENT to GBBF;

f. Any Accounts, documents, statements, or other writings submitted by CLIENT to GBBF prove false or inaccurate in any material respect;

g. If CLIENT has contributed to, or aggravated Account debtor's problem, insolvency, and/or said Account debtor's ability and/or willingness to pay any Accounts;

h. If any unpaid judgment or tax lien exists against CLIENT;

i. If GBBF with reasonable cause and in good faith determines that it's purchased asset or collateral is impaired for any reason whatsoever;

j. Terminating prior to end of initial term;

k. Any change in CLIENT's place of business, name, legal entity, corporate structure, record-keeping location, and/or as to any additional place of business, or expiration of any special license(s), or transfer of assets, or technology, to a third party, or proposed change in ownership in excess of twenty five percent, (25%), of outstanding shares.

REMEDIES AFTER DEFAULT:  

37. In the event of any default GBBF may do any one or more of the following:

a.

 Declare any indebtedness secured hereby immediately due and payable; 

b.

Increase the daily fee by five percent / 360 (equivalent to an increase in the monthly discount fee of 5.000% / 12). 

c. Notify any and all Customers and take possession of the Accounts and Collateral and collect any receivables or funds paid to CLIENT all without judicial process;

d. Require CLIENT to assemble the Collateral and the records pertaining to receivables or other assets pledged as collateral, and make them available to GBBF, at a place designated by GBBF;

e. Enter the premises of CLIENT and take possession of the Collateral and of the records pertaining to the receivables and any other Collateral;

 

f. Grant extensions, compromise claims and settle receivables for less than face value, all without prior notice to CLIENT;

g. Use, in connection with any assembly or disposition of the Collateral, any trademark, trade name, trade style, copyright, patent right or technical process used or utilized by CLIENT;

h. Return any surplus realized to CLIENT after deduction of reasonable expenses, attorney’s fees, attorney's fees on appeal, collection costs, independent third party auditors, incurred by GBBF in resolving said default;

i. Hold CLIENT liable for any deficiency.

j. Establish a reserve from the collection of Accounts to meet reasonable legal expenses associated with a future defense resulting from an action brought against GBBF by CLIENT, CLIENT’s customer, or other third party, as a result of an action of default.

k. Injunction against CLIENT taking any action with regard to the Accounts or Collateral.

l. GBBF is authorized by CLIENT to receive, direct and forward, open, and dispose of all mail addressed to CLIENT at any address used by CLIENT to receive mail.

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GENERAL:

38.  After termination CLIENT remains fully responsible to GBBF for any indebtedness existing, or which may yet arise in connection with Accounts that remain unpaid.

39.   If during the term hereof CLIENT fails to make any payment required, GBBF may at its discretion pay the same and charge CLIENT therefore.

40.  CLIENT will not, under any circumstances, or in any manner whatsoever, interfere with any of GBBF's rights under this Agreement.

41.  TAX COMPLIANCE: CLIENT will furnish GBBF upon request satisfactory proof of payment and/or compliance with all Federal, State and/or Local tax requirements.

42.  NOTICE OF LEVY:  CLIENT will promptly notify GBBF of any attachment or any other legal process levied against CLIENT.

43.  LEGAL FEES:  The losing party will pay any and all legal expenses and reasonable attorney's fees, paralegal fees, staff overtime expense, travel costs, costs on appeal, or other reasonable collection costs, that the prevailing party may incur as a result of either CLIENT or GBBF enforcing this Agreement one against the other.

44.  HOLD HARMLESS:  CLIENT shall hold GBBF harmless against any liability, damages, loss, attorneys' fees and costs of any type due to any action by a Customer arising from GBBF'S collecting or attempting to collect any Accounts so long as these collections are performed in a commercially reasonable manner and in compliance with all applicable laws, rules and regulations.   CLIENT maintains the primary responsibility for collections efforts, until the occurrence of an event of default. 

45.  BINDING ON FUTURE PARTIES:  This Agreement inures to the benefit of and is binding upon the heirs, executors, administrators, successors and assigns of the parties thereto.

46.  CUMULATIVE RIGHTS:  All rights, remedies and powers granted to GBBF in this Agreement, or in any note, or other agreement given by CLIENT to GBBF, are cumulative and may be exercised singularly or concurrently with such other rights as GBBF may have.  These rights may be exercised from time to time as to all or any part of the pledged Collateral as GBBF in its discretion may determine.

47.  WRITTEN WAIVER: GBBF may not waive its rights and remedies unless the waiver is in writing and signed by GBBF.  A waiver by GBBF of a right, or remedy under this Agreement on one occasion is not a waiver of the right, or remedy on any subsequent occasion.

48.  WASHINGTON LAW:  This Agreement shall be governed by and construed in accordance with the laws of the State of Washington.  CLIENT hereby consents to the exclusive jurisdiction of the State of Washington in any dispute arising hereunder or related hereto.  Venue for any actions shall be in King Co. Washington. 

49.  INVALID PROVISIONS:  If any provision of this Agreement shall be declared illegal or contrary to law, it is agreed that such provision shall be disregarded and this Agreement shall continue in force as though such provision had not been incorporated herein.

50.  ENTIRE AGREEMENT:  This instrument contains the entire Agreement between the parties.  Any addendum or modification hereto will be signed by both parties and attached hereto.

51.  EFFECTIVE:  This Agreement becomes effective when it is accepted and executed by the authorized officers of GBBF.

52.  
Execution of this document may contain multiple signature pages; each shall be considered, when combined, as one signed and executed document.

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Executed the 13th day of March, 2007 at Staten Island, New York. 

Freundlich Supply Company, Inc.

  

By:_____________________________

Title: ___________________________

By:_____________________________

Title: ___________________________

Greater Bay Business Funding, a division of Greater Bay Bank, NA

Accepted this _____ day of _____________, 200_, at Bellevue, Washington

By:_________________________________________

Title: ____________________________

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CONTRACT OF SALE

SECURITY AGREEMENT

Freundlich Supply Company, Inc.

EXHIBIT "A"

All personal property, now owned or hereafter acquired, including without limitation accounts, contract rights, chattel paper, documents, instruments, deposit accounts, investment property, letters of credit, commercial tort claims, general intangibles, inventory, raw materials, work in progress, finished goods, equipment, accessions, substitutions and accessions, and proceeds (cash and non-cash) including, without limitation, insurance proceeds, thereof.

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