SETTLEMENT AGREEMENT AND RELEASE
This
SETTLEMENT AGREEMENT AND RELEASE (this
“Agreement”) is entered into as of the 8
th
day
of November 2007, by and among CLEAR SKIES GROUP, INC., a New
York corporation (the "Company") SUSTAINABLE PROFITABILITY
GROUP, INC a New York corporation (“SPG”) and
MAYUR V. SUBBARAO, an individual
(“Subbarao”).
WHEREAS,
SPG and the Company entered into a consulting agreement, dated
as of June 17, 2005 (the “Consulting Agreement”),
for certain services to be performed by SPG for certain
compensation; and
WHEREAS,
pursuant to the Consulting Agreement, SPG is entitled to
designate one member of the Board of Directors of the Company,
and has designated Subbarao who was then elected to the Board
of Directors and currently serves as a director of the
Company; and
WHEREAS,
SPG provided notice of termination of the Consulting Agreement
on or around February 16, 2007 and a disagreement exists
regarding compensation which may be due SPG under the
Consulting Agreement; and
WHEREAS,
SPG and the Company have made certain claims against each
other concerning the responsibilities, performance and
compensation under the Consulting Agreement, and Subbarao
wishes to resign his board position; and
WHEREAS,
the parties hereto desire to settle, compromise and terminate
forever all disputes among and between them, and to resolve
any and all claims, causes of action, disputes and
disagreements they may have against each other and to provide
for the return of all Company property, including without
limitation, documents, confidential information and trade
secrets in possession of SPG and Subbarao.
NOW
THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally
bound do hereby agree as follows:
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Immediate Payment. Simultaneously
with SPG’s execution and delivery of this Agreement and the
documents contemplated herein, the Company shall pay to SPG
$250,000 in immediately available funds, by check or wire transfer
in full settlement of any and all claims under the Consulting
Agreement against the Company. Payment by wire transfer shall be
made to Frydman LLC’s trust account with the following wire
instructions: Bank Name: ABA #: ; Acct Name: Acct. #: . The parties
acknowledge that $85,000 of the payments are in satisfaction of
cash fees claimed by SPG to be due to SPG under the Consulting
Agreement.
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Secured Promissory Note .
Upon execution and delivery of this Agreement, Ezra Green
(“Green”) shall deliver to SPG a promissory note in the
form attached hereto as
Exhibit A (the
“Green Note”) and the share pledge and escrow agreement
in the form attached hereto as
Exhibit B (the
“Pledge Agreement”) as payment in consideration of the
purchase by Green of the Subject Shares (as hereinafter defined).
Contemporaneously with the delivery of the Green Note, SPG and
Subbarao shall be deemed to have transferred, conveyed and assigned
their entire right, title and interest in and to all of the shares
of common stock, preferred stock or other securities, including any
and all rights to receive any securities through the exercise of
any warrant, option or other right, of which SPG and Subbarao own
or are entitled to, without any further action or agreement. SPG
and Subbarao represent and warrant that 140,000 shares of common
stock of the Company represent all of the shares of common stock of
the Company owned or controlled, directly or indirectly, by SPG
and/or Subbarao, or to which either of SPG and/or Subbarao claim
any right or interest in (collectively, the “Subject
Shares”). Transfer of ownership of the Subject Shares shall
be recorded on the stock transfer records of the Company to Green
or his designee as of the date of this Agreement and the secretary
of the Company is authorized to record such transfer in the
transfer records of the Company. The Subject Shares shall be
delivered to the “Agent” pursuant to the terms of the
Pledge Agreement and disposed of in accordance with the terms
thereof for the benefit of pledgee, provided, however, that neither
SPG nor Subbarao shall have any further claim or right, title or
interest in or to the Subject Shares or any other shares or
interests in or to any other securities of the
Company.
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The
Green Note shall be payable to SPG in the original principal
amount of $150,000 and shall accrue interest at the fixed rate
of eight (8%) percent per annum, simple interest. All unpaid
principal and any accrued interest on the Green Note shall be
due and payable on the date or dates set forth in the Green
Note (the “Maturity Date”);
provided, however, that
$50,000 of the original principal amount and accrued interest
thereon (the “First Payment Amount”) shall be due and
payable on January 2, 2008 (the “First Payment Date”).
In the event that the First Payment Amount is not paid on or before
the First Payment Date, then the full amount of unpaid principal
and accrued interest outstanding under the Green Note shall become
immediately due and payable five (5) days following written notice
received by Green of non-payment of the First Payment Amount. Green
may elect, in his sole discretion, to prepay all or any portion of
the outstanding principal and/or interest on the Green Note at any
time without premium or penalty. Upon payment in full of the Green
Note the Pledge Agreement shall terminate and the Subject Shares
remaining subject to the pledge, if any, shall be irrevocably
delivered to Green and neither Green nor Company shall have any
further obligation to SPG or Subbarao.
The
Pledge Agreement shall include terms providing for the
possible sale, from time to time, by an independent agent
named therein (who shall be selected by Green but shall be
reasonably acceptable to SPG, provided that Stewart Management
Company or Delaware Trust Company or its or their affiliates
shall be deemed acceptable) through any means without further
authorization of any person (including without any further
authorization by SPG or Subbarao) of the Subject Shares, but
shall not require such sale. The escrow agent shall have the
authority to liquidate all or any portion of the Subject
Shares pledged in any manner approved by Green, provided that
the proceeds from any sales shall first be paid to SPG within
five (5) days of receipt of funds by the agent to reduce the
outstanding principal amount (and following payment of all
principal, any accrued interest) under the Green Note. In the
event of a default in the payment, when due, of the Green
Note, either of interest payment on the Maturity Date or
following the First Payment Date, the unsold Subject Shares
pledged under the Pledge Agreement, if any, shall be delivered
to SPG for sale by SPG in satisfaction of the amounts due and
any excess returned to Green. Upon payment in full of the
Green Note, including all accrued interest thereon, all unsold
Subject Shares shall be immediately delivered to Green or his
designee.
The
descriptions of the Pledge Agreement and Green Note are by way
of summary only and the terms of the Pledge Agreement and
Green Note shall control. The Pledge Agreement and Green Note,
and the rights and obligations thereunder, are intended to be
wholly independent from and independently enforceable from any
provisions, performance or claim of nonperformance of this
Agreement.
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Cancellation of Warrant .
The Company shall have no obligation to issue or deliver any
warrants pursuant to the Consulting Agreement (the
“Warrants”). Any right of SPG or Subbarao to receive
any Warrants is hereby cancelled and of no force or effect. SPG and
Subbarao hereby waive any and all claims to entitlement to the
issuance of any warrants or options to receive any securities of
the Company.
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Representations, warranties and agreements of Subbarao and
SPG .
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4.1
Each
of Subbarao and SPG represent and warrant, jointly and
severally, that other than (i) 100,000 shares of common stock
of the Company held by SPG, (ii) 40,000 shares of common stock
of the Company held by Subbarao and (iii) any claim or
interest in the Warrants asserted by SPG, Subbarao and SPG
which have been released hereby they do not, directly or
indirectly, own any securities of the Company or any interest
therein. Subbarao and SPG agree that for a period of one (1)
year following the date of this Agreement they shall not own
or acquire, directly or indirectly, any securities of the
Company, directly or indirectly.
4.2
Each
of Subbarao and SPG represent and warrant, jointly and
severally, that, neither the Subject Shares, any claims or
rights to receive Warrants nor any interest in or to the
Subject Shares or the Warrants, nor any rights under the
Consulting Agreement have been transferred, assigned,
endorsed, pledged, hypothecated or otherwise encumbered in any
manner whatsoever, and no person or entity has any right,
claim or interest (legal, equitable or otherwise) in or to the
Subject Shares, the Warrants, any shares issuable upon
exercise of the Warrants or under the Consulting
Agreement.
4.3
SPG
represents and warrants that the execution and delivery of
this Agreement has been duly authorized and is the valid and
binding obligation of SPG, enforceable in accordance with its
terms.
4.4
The
representations and warranties of each of Subbarao and SPG set
forth in this Agreement shall survive the closing of this
Agreement.
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