AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
VIA EDGAR ON _____ __, 2003
REGISTRATION NO. 333-__________
ENERTECK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5169 47-0929885
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S.Employer
of Incorporation ) Classification Code Number) I.D. Number)
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(ADDRESS, WITH ZIP CODE, AND TELEPHONE NUMBER, WITH AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS)
MR. DWAINE REESE
ENERTECK CORPORATION
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
(281) 240-1787
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
with a copy to:
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE FOLLOWING EFFECTIVENESS OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement in the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ]
(1) Represents shares of the Company's common stock that may be offered by
certain selling security holders. 4,025,650 represent shares that are issuable
upon the exercise of warrants that are currently outstanding.
(2) Estimated pursuant to Rule 457(c) for the purpose of calculating the
registration fee. Based on the average of the bid and asked prices per share of
the Company's common stock as reported on the OTC Bulletin Board on September
12, 2003.
(3) Pursuant to Rule 416 of the Securities Act of 1933, as amended, this
registration statement also includes additional shares of common stock issuable
upon stock splits, stock dividends or similar transactions.
(4) This amount is paid herewith.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine. The information in this prospectus is not complete
and may be changed. The selling security holders may not sell these securities
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED __________ ___, 2003
PRELIMINARY PROSPECTUS
ENERTECK CORPORATION
7,175,650 shares of common stock
The selling security holders identified in this prospectus are offering the 7,175,650 shares of common stock. We issued 3,150,000 of these shares in private transactions, and we will issue 4,025,650 of the shares upon the exercise of warrants that we also issued in private transactions. The selling security holders may sell all or a portion of their shares through public or private transactions at prevailing market prices or at privately negotiated prices.
We will not receive any part of the proceeds from sales of these shares by the selling security holders. However, we will receive the proceeds from any warrants that are exercised. We will use these proceeds, if any, for working capital.
Our common stock is traded on the OTC Bulletin Board under the symbol "____". The last reported per share bid and asked prices of our common stock on September 12, 2003 on the OTC Bulletin Board were $0.27 and $0.31, respectively.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR PASSED ON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this preliminary prospectus is _____ __, 2003.
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY 3
RISK FACTORS 4
USE OF PROCEEDS 10
MARKET FOR OUR COMMON STOCK AND 10
RELATED STOCKHOLDER MATTERS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN 11
OF OPERATION AND FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OUR BUSINESS 14
MANAGEMENT 27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 30
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL 31
OWNERS AND MANAGEMENT
DESCRIPTION OF SECURITIES 32
THE OFFERING 33
SELLING SECURITY HOLDERS 33
PLAN OF DISTRIBUTION 36
INDEMNIFICATION OF DIRECTORS AND OFFICERS 37
LEGAL MATTERS 37
EXPERTS 37
FINANCIAL STATEMENTS F-1
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
PROSPECTUS SUMMARY
ABOUT US
EnerTeck Chemical Corp. ("EnerTeck Sub") was incorporated in Texas on November 29, 2000. We are in the specialty chemical business marketing a fuel borne catalytic diesel engine treatment known as EnerBurn(TM). This product was introduced to the market and commercialized by Nalco/Exxon Energy Chemicals, L.P. ("Nalco/Exxon") during 1998. Nalco/Exxon was a joint venture between Nalco Chemical Corporation and Exxon Corporation. On January 9, 2003, EnerTeck Sub was acquired by Gold Bond Resources, Inc. ("EnerTeck Parent"), an inactive U.S. public company. Although EnerTeck Sub became a wholly owned subsidiary of EnerTeck Parent, for accounting purposes, this transaction is treated as if it were an acquisition of the parent by its own subsidiary.
Subsequent to this transaction on _______, 2003, we changed EnerTeck Parent's domicile from the State of Washington to the State of Delaware, changed its name from Gold Bond Resources, Inc. to EnerTeck Corporation and effected a one for 10 reverse common stock split. Unless we indicate otherwise, all our references herein to our common shares outstanding and common shares issued, our name or our state of domicile, give effect to these changes as if they had previously occurred. Hereinafter, unless we indicate otherwise such as by use of the terms "EnerTeck Sub" and "EnerTeck Parent", when we use the words "we", "us", "our" or other similar words or terms, or the "Company", we are referring to both EnerTeck Corporation (the parent) and EnerTeck Chemical Corp. (the subsidiary), collectively.
Today, there is worldwide concern over oil and fuel consumption and a movement is in place to try and reduce this consumption. Environmental, energy conservation and economic reasons drive this concern. The diesel engine partially addresses this issue because it is as much as 40% more fuel-efficient than gasoline engines. Thus, the increased use of diesel engines over gasoline engines is one way of reducing overall fuel consumption and thus reducing toxic CO2 emissions (carbon dioxide) caused by gasoline engines. However, diesel engines emit higher levels of two other toxic pollutants, i.e. particulates (microscopic airborne solid matter) and NOx (nitrogen oxide).
We market and distribute the EnerBurn product line of diesel fuel additives. The results of tests conducted by Southwest Research Institute in San Antonio, Texas ("SWRI") and actual customer usage has indicated that the use of EnerBurn has demonstrated the following advantages:
o increased fuel economy of 8-15%,
o between a 10-59% reduction in NOx emissions,
o between a 25-70% reduction in smoke,
o between a 30-50% reduction in engine wear, and
o up to a 4% increase in brake horsepower.
A third party, RubyCat Technology ("RubyCat") supplies this product line to us on an exclusive basis. RubyCat owns the technology, computer software and the Environmental Protection Agency ("EPA") registration for on-road-use in the United States in connection with EnerBurn. Pursuant to a memorandum of understanding with RubyCat, we have exclusive marketing rights to sell EnerBurn, and have to meet certain minimum sales volumes in order to maintain this exclusivity. In addition, the memorandum grants us a unilateral one-year option to purchase certain of the EnerBurn technology. With regard to this option arrangement, the memorandum calls for the subsequent execution of a definitive purchase option agreement.
The diesel fuel engine treatment and fuel additive business that we commenced with the acquisition of the EnerTeck Sub is new to us. Furthermore, the EnerTeck Sub itself was only formed in 2000. Accordingly, we are in the early stages of this, our only business, and have only generated minimal sales to date. We have sustained substantial losses, have very limited cash resources and are in need of substantial additional capital to execute our business plan.
Our principal executive offices are located at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477 and our telephone number is (281) 240-1787.
ABOUT THE OFFERING
This prospectus covers the public sale of up to 7,175,650 shares of common stock to be sold by the selling stockholders identified in this prospectus. Of this number, 4,025,650 shares are issuable upon the exercise of warrants we issued to various parties in 2003 including employees, consultants and our investment banker. If all of these warrants are exercised, we will receive approximately $3,206,280 of additional funding which we intend to use for working capital. Of the remaining 3,150,000 shares covered by this prospectus, 1,000,000 were issued as a result of a December 20, 2002 private placement of common stock from which we raised $500,000, and 2,150,000 were issued as a result of a May 28, 2003 private placement of common stock from which were raised an additional $1,075,000. The proceeds from the private placements have been and will be used for working capital, as will the proceeds from the exercise of the aforementioned warrants.
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING INFORMATION ABOUT CERTAIN OF THE RISKS OF INVESTING IN OUR COMMON STOCK, TOGETHER WITH OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU DECIDE TO PURCHASE OUR COMMON STOCK.
FORWARD LOOKING STATEMENTS
The words "may," "will," "expect," "anticipate," "believe," "continue,"
"estimate," "project," "intend," and similar expressions used in this prospectus
are intended to identify forward-looking statements within the meaning of
Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S.
Securities Exchange Act of 1934. You should not place undue reliance on these
forward-looking statements, which speak only as of the date made. We undertake
no obligation to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events. You should
also know that such statements are not guarantees of future performance and are
subject to risks, uncertainties and assumptions. Many of these risks and
uncertainties are set forth in the "RISK FACTORS" section of this prospectus.
Should any of these risks or uncertainties materialize, or should any of our
assumptions prove incorrect, actual results may differ materially from those
included within the forward-looking statements.
BUSINESS AND FINANCIAL RISKS
BASED ON OUR LIMITED WORKING CAPITAL, MINIMAL NET WORTH AND SUBSTANTIAL CURRENT LOSSES, THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE IN BUSINESS.
We have met our working capital requirements through financing transactions involving the private placement of our securities. We do not expect our current working capital to support our operations beyond January 2004 and we are in need of substantial additional capital to fund operations. Since our acquisition of EnerTeck Sub, which was formed in 2000, we have not generated any significant revenue and have experienced substantial losses, including a loss of $757,955 during 2002. We also have limited working capital and, as at June 30, 2003 recorded a net worth of only $1,091,324. For the immediate years preceding the acquisition, we were an inactive public shell corporation with no significant revenue and only losses. For the years ended December 31, 2002 and 2001, EnerTeck Sub, our recently acquired, wholly owned subsidiary, reported a substantial loss of $757,955 versus a gain of $333,236, respectively.
WE ARE AN EARLY STAGE COMPANY WITH REGARD TO OUR NEW BUSINESS OPERATION. ALTHOUGH WE HAVE GENERATED REVENUES, WE HAVE SUSTAINED SUBSTANTIAL OPERATING LOSSES. WE EXPECT LOSSES TO CONTINUE WHICH WILL REQUIRE US TO RAISE ADDITIONAL CAPITAL TO CONTINUE OPERATIONS.
In recent years we have been inactive and had not generated revenues
until we acquired EnerTeck Sub on January 9, 2003. EnerTeck Sub has recorded
significant cumulative losses since its inception in 2000 of $504,719. From our
inception through June 30, 2003, we (EnerTeck Sub and EnerTeck Parent) have
accumulated losses of $1,355,569. For the six months ended June 30, 2003, we
reported negative cash flow from operating activities of $554,017. As of June
30, 2003, we had working capital of $980,568 and a net worth of $1,091,324.
Since our acquisition of EnerTeck Sub, we have focused exclusively on the
marketing of a fuel borne catalytic engine treatment for diesel fuel engines,
i.e. an additive line known as Enerburn(TM). In order to generate revenue, we
will have to retain additional marketing personnel and incur substantial
marketing expenses. We cannot assure you that we will be able to secure these
necessary resources, that a significant market for our product will develop or
that we will be able to generate any significant revenues. For these reasons we
anticipate that net losses will continue.
WE NEED SUBSTANTIAL ADDITIONAL FINANCING TO EXECUTE OUR BUSINESS PLAN WHICH MAY NOT BE AVAILABLE. IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL, WE MAY NOT BE ABLE TO CONTINUE OPERATIONS.
We need substantial additional capital to expand our marketing and sales efforts. Our current resources are insufficient to fund operations beyond January 2004. We believe that we will need an additional $3,000,000 to $7,000,000 to execute our business plan and support operations through 2005. Although we expect current warrant holders to provide approximately $ 3,206,280 of additional funding through the exercise of the Warrants, this is conditioned upon events outside of our control, including the trading price of our common stock exceeding the various warrant exercise prices. For these reasons, we intend to obtain additional financing through the issuance of debt or equity securities. We have not and cannot assure you that we will ever be able to secure any such financing on terms acceptable to us. If we cannot obtain such financing, we will not be able to execute our business plan or continue operations.
THE EXERCISE OF THE WARRANTS WILL CAUSE A DILUTION TO OUR SHAREHOLDERS
AND A SIGNIFICANT NEGATIVE EFFECT ON THE TRADING PRICE OF OUR COMMON STOCK.
If the Warrants are exercised, we can expect that they will be exercised when the public trading prices of our securities are significantly higher than the exercise price, causing a dilution to those of our shareholders who may have purchased our shares at prices above the exercise price. In addition, the sale of up to 4,025,650 shares acquired through the exercise of the Warrants could have a significant negative effect on the public trading price of our common shares.
THE ENERBURN TECHNOLOGY HAS NOT GAINED MARKET ACCEPTANCE, NOR DO WE KNOW WHETHER A MARKET WILL DEVELOP FOR IT IN THE FORESEEABLE FUTURE TO GENERATE ANY MEANINGFUL REVENUES.
The EnerBurn technology has received only limited market acceptance. This technology is a relatively new product to the market place and we have not generated any significant sales. Although ever growing concerns and regulation regarding the environment and pollution has increased interest in environmentally friendly products generally, the engine treatment and fuel additive market remains an evolving market. The EnerBurn technology competes with more established companies such as Lubrizol Corporation, Chevron Oronite Company (a subsidiary of Chevron Corporation), Octel Corp., Clean Diesel Technologies, Inc. and Ethyl Corporation, as well as other companies whose products or services alter, modify or adapt diesel engines to increase their fuel efficiency and reduce pollutants. Acceptance of EnerBurn as an alternative to such traditional products and/or services depend upon a number of factors including:
o favorable pricing vis a vis projected savings from increased
fuel efficiency
o the ability to establish the reliability of EnerBurn products
relative to available fleet data
o public perception of the product
For these reasons, we are uncertain whether our technology will gain acceptance in any commercial markets or that demand will be sufficient to create a market large enough to produce any meaningful revenue or earnings. Our future success depends upon customers' demand for our products in sufficient amounts.
OUR TECHNOLOGY MAY BE ADVERSELY AFFECTED BY FUTURE TECHNOLOGICAL
CHANGES AND ENVIRONMENTAL REGULATORY REQUIREMENTS
Although diesel engines are now being manufactured that have reduced dangerous emissions, this has not satisfied governmental regulators and legislators. We believe that diesel engines themselves may soon be required to adhere to stringent guidelines that produce nearly zero tailpipe emissions. Research in this area is currently being sponsored by governmental agencies, major engine companies, truck manufacturers, automobile makers, catalyst producers, oil refining companies and their technology suppliers.
If such research is successful, it could eventually reduce the need for diesel fuel additives such as EnerBurn as they relate to pollution control.
SINCE WE MARKET A RANGE OF PRODUCTS WITHIN ONLY ONE PRODUCT LINE, WE ARE ENTIRELY DEPENDENT UPON THE ACCEPTANCE OF ENERBURN IN THE MARKET PLACE FOR OUR SUCCESS
Our business operations are not diversified. If we do not generate sufficient sales of the EnerBurn product, we will not be successful, and unlikely to be able to continue in business. We cannot assure you that we will be able to develop other product lines to hedge against our dependency on EnerBurn, or if our EnerBurn sales will be sufficient for us to generate revenue or be profitable.
WE HAVE NOT DEVELOPED ANY EFFECTIVE DISTRIBUTION CHANNELS FOR OUR
PRODUCT WHICH ARE NECESSARY TO GENERATE REVENUE
We market our product through in house sales personnel, independent sales consultants and through exclusive and non-exclusive arrangements known as agency agreements. In most instances, we utilize proof of performance demonstrations as part of our sales process. This process is the gathering of historical fleet data during a trial period when EnerBurn was not used and comparing it with data over a similar period when EnerBurn was used.
In addition, our future marketing plans include:
o establishing of product brand recognition through customers
with large trucking, railroad and maritime fleets
o active participation in industry trade shows
o extensive public relations efforts directed at target market
trade press
Our success will depend upon our marketing efforts effectively generating sales. While we have commenced this marketing effort, we have not developed any effective distribution channels and may not have the resources or ability to sustain these efforts or generate any meaningful sales.
WE FACE INTENSE COMPETITION AND MAY NOT HAVE THE FINANCIAL AND HUMAN RESOURCES NECESSARY TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES WHICH MAY RESULT IN OUR TECHNOLOGY BECOMING OBSOLETE.
The diesel fuel additive business and related anti-pollutant businesses are subject to rapid technological change, especially due to environmental protection regulations, and subject to intense competition. We compete with both established companies and a significant number of startup enterprises. We face competition from producers and/or distributors of other diesel fuel additives (such as Lubrizol Corporation, Chevron Oronite Company, Octel Corp., Clean Diesel Technologies, Inc. and Ethyl Corporation), from producers of alternative mechanical technologies (such as Algae-X International, Dieselcraft, Emission Controls Corp. and JAMS Turbo, Inc. and from alternative fuels (such as bio-diesel fuel and liquefied natural gas) all targeting the same markets and claiming increased fuel economy, and/or a decrease in toxic emissions and/or a reduction in engine wear. Most of our competitors have substantially greater financial and marketing resources than we do and may independently develop superior technologies which may result in our technology becoming less competitive or obsolete. We may not be able to keep pace with this change. If we cannot keep up with these advances in a timely manner, we will be unable to compete in our chosen markets.
OUR SUPPLIER NEEDS TO MAINTAIN ENERBURN'S EPA REGISTRATION.
In accordance with the regulations promulgated under the US Clean Air Act, manufacturers (including importers) of gasoline, diesel fuel and additives for gasoline or diesel fuel, are required to have their products registered with the EPA prior to their introduction into the market place. Currently, EnerBurn has such a registration (EPA # 5805A). However, unforeseen future changes to the registration requirements may be made, and EnerBurn may not be able to qualify for registration under such new requirements. The loss of EnerBurn's EPA registration or restrictions on its current registration could have an adverse affect on our business and plan of operation.
The blender, formulator and supplier of EnerBurn, RubyCat, has registered this product with the US Environmental Protection Agency. This registration permits us, pursuant to the aforementioned memorandum of understanding, to sell EnerBurn for domestic on-road use. However, there are provisions in the Environmental Protection Act that could require further testing. In addition, we currently sell our product outside of the United States and intend to further expand our sales efforts internationally. Accordingly, EnerBurn is registered in the United States only, and we are considering its registration in other countries. Further testing could be needed in these or other countries. We cannot assure you that EnerBurn will pass any future testing that may be required. The failure of EnerBurn to maintain or obtain registration in countries or areas where we would like to market it would have a materially adverse effect on our business and plan of operation.
Our business is favorably effected by stricter air quality regulations and regulations regarding emission controls. If these regulations are withdrawn or determined to be invalid, our prospects would be adversely affected.
WE DEPEND ON OUR EXECUTIVE OFFICERS AND NEED ADDITIONAL MARKETING AND TECHNICAL PERSONNEL TO SUCCESSFULLY MARKET OUR PRODUCT. WE CAN NOT ASSURE YOU THAT WE WILL BE ABLE TO RETAIN OR ATTRACT SUCH PERSONS.
Since we are a small company, a loss of one or more of our current officers and/or significant employees could severely and negatively impact our operations. Except for our interim president, Parrish Ketchmark, we have employment contracts with all of our current officers and significant employees.
Although these employment contracts do not prevent such persons from resigning, they do contain non-compete clauses that are intended to prevent these persons from working for a competitor within two years after leaving our Company. The market for such persons remains competitive and our limited financial resources may make it more difficult for us to recruit and retain qualified persons.
As mentioned above, we do not have an employment agreement with our interim president, Parrish Ketchmark. He is providing his services to us pursuant to an amendment to our consulting agreement with Parrish Brian Partners, Inc. ("Partners"). Mr. Ketchmark is a principal of Partners. Although he has indicated that he will remain as president until a qualified replacement has been retained, he may resign at any time with reasonable notice. If he were to resign before a replacement is hired, it may have a materially adverse effect upon our business.
WE HAVE ONLY ONE SUPPLIER AND WE ARE DEPENDENT UPON IT TO PROVIDE US
WITH THE ENERBURN PRODUCT THAT WE MARKET ON AN EXCLUSIVE BASIS.
Presently, one supplier, RubyCat, provides us our entire EnerBurn product line. If it were not able to provide us with sufficient quantities of the product, or not provide us the product at all (for any reason), our business could be adversely effected. Although we have identified alternate suppliers of the product, we cannot assure you that the replacement products will be comparable in quality, or that we will be able to contract with these alternate suppliers on terms acceptable to us.
In addition, we are dependent upon RubyCat for statistical analysis of fleet data gathered from customers and potential customers in on-road use applications in the United States. This data is important in that it serves to demonstrate our products' proof of performance to customers and potential customers. If this service were not supplied to us, our sales efforts and ability to maintain existing customers could be negatively effected. Although we believe that we can find a replacement provider of such services to adequately analyze the data, we cannot assure you that we can be successful in retaining such a provider on reasonably acceptable terms to us.
Our arrangement with RubyCat requires us to meet certain annual minimum purchase levels in order to maintain our global exclusivity. Based upon our sales volume to date, it is unlikely that we will achieve these required minimum levels. If we were to lose this exclusivity, it may have a material adverse effect on our business and planned operations.
RISKS RELATED TO OUR COMMON STOCK
WE HAVE ISSUED A SUBSTANTIAL NUMBER OF WARRANTS TO PURCHASE OUR COMMON STOCK WHICH WILL RESULT IN SUBSTANTIAL DILUTION TO THE OWNERSHIP INTERESTS OF OUR EXISTING SHAREHOLDERS.
Up to an additional 4,025,650 shares of our common stock are issuable upon the exercise of the warrants held by certain of Selling Security Holders described herein, all of which are covered by this prospectus. The exercise of these warrants will result in a significant increase in the number of outstanding shares and substantially dilute the ownership interests of our existing shareholders.
THE TRADING PRICE OF OUR COMMON STOCK AND OUR ABILITY TO RAISE ADDITIONAL FINANCING MAY BE ADVERSELY EFFECTED BY THE INFLUX INTO THE MARKET OF THE SUBSTANTIAL NUMBER OF SHARES COVERED BY THIS PROSPECTUS.
This prospectus covers the public sale of 7,175,650 shares of our common stock. This significant increase in the number of shares available for public sale may have a negative impact on the trading price of our shares. The exercise of the Warrants will provide us with up to approximately $3,206,280 in additional working capital. The Warrants are exercisable at varying prices per share. To the extent that this influx of shares into the public market or other factors reduce the trading price of our common stock to below the exercise prices, it is unlikely that the Warrants would be exercised. In such event, we would not be receiving the aforementioned approximate up to $3,206,280 for our working capital needs. We cannot assure you that we will be able to secure alternate financing on satisfactory terms, or at all.
APPLICABLE SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" LIMITS THE TRADING AND LIQUIDITY OF OUR COMMON STOCK THAT MAY ADVERSELY AFFECT THE TRADING PRICE OF OUR COMMON STOCK.
Our common stock currently trades on the OTC Bulletin Board. Since our common stock continues to trade below $5.00 per share, our common stock is considered a "penny stock" and is subject to SEC rules and regulations that impose limitations upon the manner in which our shares can be publicly traded. These regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale. These regulations have the effect of limiting the trading activity of our common stock and reducing the liquidity of an investment in our common stock.
WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We have never declared or paid a dividend on our common stock. We intend to retain earnings, if any, for use in the operation and expansion of our business and, therefore, do not anticipate paying any dividends in the foreseeable future.
THE TRADING PRICE OF OUR COMMON STOCK MAY BE VOLATILE.
The trading price of our shares has, from time to time, fluctuated widely and in the future may be subject to similar fluctuations. The trading price may be affected by a number of factors including the risk factors set forth in this prospectus as well as our operating results, financial condition, announcements of innovations or new products by us or our competitors, general conditions in the market place, and other events or factors. Although we believe that approximately 10 registered broker dealers currently make a market in our common stock, we cannot assure you that any of these firms will continue to serve as market makers or have the financial capability to stabilize or support our common stock. A reduction in the number of market makers or the financial capability of any of these market makers could also result in a decrease in the trading volume of and price of our shares. In recent years, broad stock market indices, in general, and the securities of technology companies, in particular, have experienced substantial price fluctuations. Such broad market fluctuations may adversely affect the future trading price of our common stock.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the selling security holders. We will receive the exercise price of the Warrants held by certain of the selling security holders on those Warrants that are exercised. We expect to use the proceeds of any such sales for general working capital purposes.
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock currently trades on the OTC Bulletin Board under the symbol "______". The following table sets forth the range of high and low bid prices per share of our common stock for each of the calendar quarters identified below as reported by the OTC Bulletin Board. These quotations represent inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions. These prices do not reflect the subsequent _______, 2003 one from 10 reverse common stock split, but the actual prices existing at the times indicated.
Year Ended December 31, 2001
High Low
First Quarter $0.07 $0.02
Second Quarter 0.25 0.07
Third Quarter 0.30 0.17
Fourth Quarter 0.35 0.21
Year ended December 31, 2002
First Quarter $0.84 $0.16
Second Quarter 0.20 0.16
Third Quarter 0.21 0.13
Fourth Quarter 0.36 0.12
10
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Year ended December 31, 2003 First Quarter $0.43 $0.33 Second Quarter 0.40 0.31 |
The closing bid and asked prices of our common stock as reported on the OTC Bulletin Board on September 12, 2003 was $0.27 and $0.31 per share, respectively.
HOLDERS
As of September 12, 2003, there were approximately 900 holders of record of the Company's Common Stock.
DIVIDENDS
We have not paid any cash dividends to date, and we have no intention of paying any cash dividends on our common stock in the foreseeable future. The declaration and payment of dividends is subject to the discretion of our Board of Directors and to certain limitations imposed under the Delaware corporation law. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
PLAN OF OPERATION
This Management's Discussion and Analysis of Financial Condition and Plan of Operation and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this prospectus are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in "RISK FACTORS" and elsewhere in this prospectus. The following should be read in conjunction with the audited consolidated financial statements of the Company included elsewhere herein.
OVERVIEW
We were incorporated in the State of Washington on July 30, 1935 under the name of Gold Bond Mining Company for the purpose of acquiring, exploring, and developing and, if warranted, the mining of precious metals. We subsequently changed our name to Gold Bond Resources, Inc. in July 2000. We acquired EnerTeck Chemical Corp. ("EnerTeck Sub") as a wholly owned subsidiary on January 9, 2003. For a number of years prior to our acquisition of EnerTeck Sub, we were an inactive, public "shell" corporation seeking to merge with or acquire an active, private company. As a result of this acquisition, we are now acting as a holding company, with EnerTeck Sub as our only operating business.
Our subsidiary was formed in Texas in November 2000 with the name EnerTeck Chemical Corp. to develop and market a fuel borne catalytic engine treatment for diesel engines known as EnerBurn(TM) and its associated products. We believe, based upon extensive testing conducted by Southwest Research Institute ("SWRI") and actual customer usage, that the EnerBurn diesel fuel additive formulation improves fuel economy, reduces engine wear and increases engine horsepower. We have an exclusive supply arrangement with RubyCat Technology, the blender, formulator and supplier of the EnerBurn product line. In addition, we own the trademark rights to the EnerBurn name. Our strategy is
to establish EnerBurn as a diesel engine treatment technology with strong brand identity. Our targeted markets include industries that are heavy users of diesel engines such as the trucking industry, the railroad industry and the maritime shipping industry.
The majority of domestic diesel fuel consumption is found in freight transportation applications, such as large trucking fleets, and the railroad and maritime shipping industries, all areas where diesel fuel costs represent a disproportionate share of operating expenses. Accordingly, our marketing approach includes a proof of performance demonstration that is a monitored trial period that proves to a potential customer that our product will produce the desired advantages to that customer's specific application. Specifically, we utilize RubyCat's proprietary fleet monitoring protocol system for on-road applications to analyze customer and potential customer diesel fuel consumption and provide hard data to prove the exact improvement in fuel economy that has resulted from the use of EnerBurn. In addition, we utilize volumetric proportioning injectors supplied by third parties that delivers the appropriate dosage ratio of EnerBurn to diesel fuel, applicable to the customer's specific needs.
We utilize our own employees to sell our product along with independent sales agents inside and outside the US.
RESULTS OF OPERATIONS
Since the inception of EnerTeck Sub in 2000, we have had limited operations. Accordingly, we believe that a comparison of the results of operations of the year ended December 31, 2001 to the same period ended December 31, 2002, and a comparison of the results of operations of the six month period ended June 30, 2003 to the same period ended June 30, 2002 has limited value for evaluating trends and/or as a basis for predicting future results.
On a consolidated basis, we incurred a net loss of $850,850 for the six-month period ending June 30, 2003, versus a net income of $132,414 for the same period of 2002. The resulting losses in the first six months were primarily due to our expansion of sales and marketing efforts, and a non cash charge of $490,000 in stock warrant expenses booked pursuant to Accounting Practice Bulletin ("APB") Opinion No.25, i.e. "Accounting for Stock issued to Employees". In addition, an increase in general and administrative expenses were incurred that were associated with our increased activities.
For the year ending December 31, 2002 we recorded a net loss of $757,955 versus a net profit of $333,236 for the year ending December 31, 2001. The resulting losses in the first six months were primarily from the loss of our largest customer who filed for bankruptcy protection during that year. Total revenue for the year ended December 31, 2002 was $981,244, a decrease of $448,620 over the year ended December 31, 2001. Total revenue for the six months ending June 30, 2003 was $513,346, a decrease of $282,629 over the same period ending June 30, 2002. The primary source of revenue for the year ended December 31, 2002 is from the sale of EnerBurn to the trucking industry, with a small component of the revenues being derived from the maritime industry. The primary sources of revenue for the six-month period ending June 30, 2003 were derived equally from the trucking and maritime industry, with a small component from the offshore drilling industry.
We expect future revenue trends to initially come from the trucking and maritime industries, and subsequently expect revenues to also be derived from the railroad, mining and offshore drilling industries. We expect this to occur as we continue to increase our sales and implement our sales and marketing strategies into the targeted markets and create understanding and awareness of our technology through proof of performance demonstrations with potential customers.
Our future growth is significantly dependent upon our ability to generate sales from trucking companies with fleets of 1,000 trucks or more, and barge and tugboat companies with large maritime fleets, and railroad, mining and offshore drilling and genset applications. Our main priorities relating to revenue are: (1) increase market awareness of our EnerBurn product through our strategic marketing plan, (2) growth in the number of customers and vehicles or vessels per customer, (3) accelerating the current sales cycle, and (4) providing extensive customer service and support.
COSTS AND EXPENSES
During the six month period ended June 30, 2003, we recorded cost of goods sold of $104,746, a decrease of $276,432 over the same period the previous year primarily due to reduced sales. Other costs and expenses for that period in 2003 were $1,259,450, an increase of $977,070 over the same period the previous year. Similarly, during the year ended December 31, 2002, we recorded cost of goods sold of $623,088, an increase of $69,069 over the year ended December 31, 2001. Other costs and expenses for the year ended December 31, 2002 were $1,117,991, an increase of $571,943 over the other costs and expenses in the year ended December 31, 2001.
The increase in other costs and expenses in the six months ended June 30, 2003 from the same six-month period the previous year is the result of a $490,000 non cash compensation charge for stock compensation, $116,000 in sales commissions, and increases in selling and general and administrative expenses of $371,070. The increase of these same costs during the year ended December 31, 2002 from the year ended December 31, 2001 is attributed to: the issuance of stock (non-cash compensation) to one of our officers in 2002 as part of a commission arrangement, of a $420,000 non cash compensation charge for stock issued to executive employees, $85,714 in impairment of asset expenses, and increases in selling and general and administrative expenses of $66,229.
LIQUIDITY AND CAPITAL RESOURCES
We had cash and cash equivalents of $822,777 as of June 30, 2003, and $98,919 at June 30, 2002, and working capital of $980,568 and $270,286 at the same dates, respectively. For the six months ended June 30, 2003, we used cash in our operating activities and investing activities totaling $653,820 and provided cash from the same activities for the six months ended June 30, 2003 of $77,389. We had cash and cash equivalents of $31,097 as of December 31, 2002, and $101,530 at December 31, 2001, and a deficit in working capital of $31,971 as of December 31, 2002 and working capital of $231,689 as of December 31, 2001. For the year ended December 31, 2002, we used cash in our operating activities and investing activities totaling $70,433 and provided cash from the same activities of $100,529 for the year-end December 31, 2001.
We financed our operations and capital requirements primarily through equity offerings. During the six months ended June 30, 2003, we received $1,445,500 and $0 during the six months ended June 30, 2002, from the sale of common stock. Similarly, during the year ended December 31, 2002, we received $80,000 that was offset by a distribution of $80,000 to shareholders and $0 during the year ended December 31, 2001 from the sale of common stock.
The following information gives effect to our ______ 2003 one from 10 reverse common stock split as if it had already been effected. During the year ended December 31, 2001, we sold 320,000 shares of our restricted common stock at $.05 per share, or $16,000. 140,000 of those shares were sold to a then officer of the Company. During the year ended December 31, 2002, we sold 25,000 shares of our restricted common stock at $1.00 per share, or $25,000. 5,500 of these shares were sold to our then current officers. On December 20, 2002, we began a private offering of 1,000,000 shares of common stock at $.50 per share to accredited investors only and raised $500,000 receiving net proceeds of $495,000. Similarly, on May 28, 2003, we commenced another private offering also to accredited investors only. In this offering, we sold 2,150,000 shares at $.50 per share for $1,075,00, with net proceeds of $945,485. The funds raised in this offering have been and will be used for working capital. Our investment banker, Maxim Group, LLC ("Maxim"), a New York based broker-dealer, acted as our selling agent and received a commission of 10% ($107,500), a non accountable expense reimbursement of 2% ($21,500) and a warrant to purchase 200,000 shares at $.50 per share. The shares issued in these last two private offerings are among the shares covered by this prospectus. In addition, we have issued warrants to certain employees, consultants and our investment banker to purchase up to 4,025,650 shares of our common stock at varying exercise prices per share. If all the warrants are exercised, we will receive approximately $3,206,280 for working capital. The shares underlying these warrants are among the shares covered by this prospectus.
On April 30, 2003, we retained Maxim to provide a broad range of investment banking, strategic and financial advisory services for an initial term of 12 months. We paid this firm $50,000 as a retainer fee and pay it $6,000 per month, and have issued it warrants to purchase an additional 2,500 shares at a price of $3.40 per share.
In January 2003, we executed a Memorandum of Understanding ("MOU") with RubyCat Technology. This MOU is comprised of two components: a Supply and Marketing Agreement and a Purchase Option Agreement. This arrangement is more fully discussed below in "Our Business".
We cannot give you any assurance that we will be able or willing to exercise this option. Accordingly, it is not a commitment on our part. We currently have no material commitments for capital requirements.
We cannot be sure that we will be able to obtain additional financing that we believe we need to satisfy our cash requirements or to implement our growth strategy on acceptable terms, or at all. If we cannot obtain such financing on acceptable terms, the ability to fund the planned business expansion and to fund the on-going operations will be materially adversely affected. Presently, our management is pursuing a variety of sources of debt and equity financing. If debt is incurred, the financial risks associated with the business and with owning our common stock could increase. If enough capital is raised through the sale of equity securities, the percentage ownership of the current stockholders will be diluted. In addition, any new equity securities may have rights, preferences, or privileges senior to those of the common stock.
OUR BUSINESS
Except for historical information, the following description of our business contains forward-looking statements based on current expectations that involve risks and uncertainties. Our actual results could differ materially from those set forth in these forward-looking statements as a result of a number of factors, including those set forth in this prospectus under the heading "Risk Factors."
OVERVIEW
We, through our wholly owned subsidiary, specialize in the sales and marketing of a fuel borne catalytic engine treatment for diesel engines known as EnerBurn(TM). We utilize a sales process that includes detailed proprietary customer fleet monitoring protocols in on-road applications that quantify data and assists in managing certain internal combustion diesel engine operating results while utilizing EnerBurn. Test data prepared by Southwest Research Institute and actual customer usage has indicated that the use of EnerBurn in diesel engines improves fuel economy, lowers smoke, and decreases engine wear and the dangerous emissions of both Nitrogen Oxide (NOx) and microscopic airborne solid matter (particulates). Our principal target markets are the trucking, railroad and maritime shipping industries. Each of these industries share certain common financial characteristics, i.e. i) diesel fuel represents a disproportionate share of operating costs; and ii) relatively small operating margins are prevalent. Considering these factors, we believe the use of EnerBurn and the corresponding 8 to 15% derived savings in diesel fuel costs can positively effect the operating margins of our customers while contributing to a cleaner environment.
Since we are currently a sales and marketing organization, we have not spent any funds on research and development activities. We own the EnerBurn trademark and, pursuant to a memorandum of understanding, have its exclusive, global marketing rights from its formulator, blender and supplier, RubyCat, and an option to purchase the EnerBurn technology and associated assets by December 31, 2003 for $6.6 million. With regard to this option arrangement, the memorandum calls for the subsequent execution of a definitive purchase option agreement.
To date, we have engaged in limited marketing of the EnerBurn technology and have generated minimal sales, principally to the trucking industry. We compete in an evolving market with a significant number of competitors that include both established businesses and new entries into the field.
HISTORY
On , 2003, Gold Bond Resources, Inc. merged with and into EnerTeck Corporation, a wholly owned Delaware subsidiary, with EnerTeck being the surviving entity. This resulted in us becoming a Delaware corporation, changing our name to EnerTeck Corporation and effecting a one from 10 reverse common stock split.
EnerTeck Parent was incorporated in the State of Washington in 1935 as Gold Bond Mining Company. After a number of years of inactivity, with no recurring source of revenue, an accumulated deficit and operating losses, we made a strategic business decision during 2000 to sell our mineral properties, change our name to Gold Bond Resources, Inc. and reorganize our capital structure in order to position ourselves to identify and acquire or merge with a viable private entity. On January 9, 2003, we acquired all 1,000,000 issued and outstanding shares of EnerTeck Chemical Corp. ("EnerTeck Sub"), a private company focused on combustion enhancement and emission reduction technology in the diesel fuel applications additive business in exchange for 5,000,000 of our shares of common stock. Accordingly, as a result of this acquisition, we have entered the diesel fuel engine treatment and additive business operating through our wholly owned subsidiary, EnerTeck Sub.
EnerTeck Sub, our wholly owned operating subsidiary, was incorporated in the State of Texas on November 29, 2000. It was formed for the purpose of commercializing a diesel fuel specific combustion catalyst, known as EnerBurn (TM) as well as other combustion enhancement and emission reduction technologies. EnerBurn was commercially introduced in 1998 by Nalco/Exxon Energy Chemicals, L.P. ("Nalco/Exxon L.P."), a joint venture between Nalco Chemical
Corporation and Exxon Corporation. When Nalco/Exxon L.P. went through an ownership change in 2000, EnerTeck Sub was formed by its founder, Dwaine Reese. It acquired the EnerBurn trademark and related assets and took over the Nalco/Exxon L. P. relationship with the EnerBurn formulator and blender, and our supplier, RubyCat Technology. The decision to form EnerTeck Sub and acquire the EnerBurn business was motivated by Mr. Reese's conclusions that:
o EnerBurn was clearly beginning to gain market acceptance;
o the gross margins associated with EnerBurn sales would support
the business model, since existing customers would likely
continue to buy the product due to the significant impact on
diesel fuel savings and reduced emissions;
o EnerBurn had been professionally tested extensively in field
applications as well as in the laboratory, clearly
demonstrating its effectiveness in increasing fuel economy and
reducing emissions and engine wear;
o use of the product in diesel applications has a profound
impact on a cleaner environment.
On January 22, 2001, the US Environmental Protection Agency issued registration number EC 5805A pursuant to the Environmental Protection Act (40 CFR 79.23) permitting the use of EnerBurn for highway use in all diesel applications in the United States of America.
OUR INDUSTRY
General Discussion of Diesel Fuel and Diesel Fuel Additives
As crude oil is heated, various components evaporate at increasingly higher temperatures. First to evaporate is butane, the lighter-than-air gas used in cigarette lighters, for instance. The last components of crude oil to evaporate, and the heaviest, include the road tars used to make asphalt paving. In between are gasoline, jet fuel, heating oil, lubricating oil, bunker fuel (used in ships), and of course diesel fuel. The fuel used in diesel engine applications such as trucks and locomotives is a mixture of different types of molecules of hydrogen and carbon and include aromatics and paraffin.
Diesel fuel cannot burn in liquid form. It must vaporize into its gaseous state. This is accomplished by injecting the fuel through spray nozzles at high pressure. The smaller the nozzles and the higher the pressure, the finer the fuel spray and vaporization. When more fuel vaporizes, combustion is more complete, so less soot will form inside the cylinders and on the injector nozzles. Soot is the residue of carbon, partially burned and unburned fuel.
Sulfur is also found naturally in crude oil. Sulfur is a slippery substance and it helps lubricate fuel pumps and injectors. It also forms sulfuric acid when it burns and is a catalyst for the formation of particulate matter (one of the exhaust emissions being regulated). In an effort to reduce emissions, the sulfur content of diesel fuel is being reduced through the refinery process, however, the result is a loss of lubricity.
Diesel fuel has other properties that affect its performance and impact on the environment as well. The main problems associated with diesel fuel include:
o Difficulty getting it to start burning
o Difficulty getting it to burn completely
o Tendency to wax and gel
o With introduction of low sulfur fuel, reduced lubrication
o Soot clogging injector nozzles
o Particulate emissions
o Water in the fuel
o Bacterial growth
Diesel fuel additives have been developed to address the variety of problems associated with diesel fuel performance.
Diesel Fuel and the Environment
The diesel fuel industry is at a critical juncture. Today, diesel fuel is the most cost effective fuel/engine technology available for heavy-duty industrial and vehicle service. However, environmentally it needs dramatic improvement. Governments worldwide are legislating specifications regarding the fuel itself and diesel engine design.
Today's advanced diesel engines are far cleaner than the smoke-belching diesels of recent decades. Unfortunately, even smokeless diesel engines are not clean enough to meet current stricter air pollution regulations.
While diesel engines are the only existing cost-effective technology making significant inroads in reducing "global warming" emissions from motor vehicles, it is not sufficient to satisfy regulators and legislators. Diesel engines will soon be required to adhere to stringent regulatory/legislative guidelines that meet near "zero" tailpipe emissions, especially on smog-forming nitrogen oxides (NOx), particulate matter (PM) and "toxins"; the organic compounds of diesel exhaust.
Diesel engines can become ultra-clean. Meeting the environmental challenges will require extensive research on clean-diesel technology. Research in this area is currently being sponsored by government agencies, major engine companies, truck manufacturers, automobile makers, catalyst producers and, for fuels, oil refining companies and their technology suppliers.
The search for ultra-clean diesel is far from over. Discoveries and breakthroughs will continue to prevail. In the past several months, new developments have appeared on the horizon for combined PM/NOx traps, non-thermal plasma/catalyst exhaust treatment systems, and new refinery desulfurization technologies. Large Fortune 500 companies, as well as small, emerging technology companies are investing hundreds of millions of dollars in research and development worldwide on these and other clean-diesel technologies.
Today, there is no economic alternative to diesel engines for most industrial applications. This is true for ocean vessels, tug boats, commercial/recreational vessels, locomotive, trucking, bus transport, construction, mining, agriculture, logging, distributed power generation, and, in many parts of the world, personal transportation. In short, diesel fuel does the world's heavy work.
Fuel Additive Registration and Regulation
Typically, there are registration and regulation requirements for fuel additives in each country in which they are sold. In the United States, fuel and fuel additives are registered and regulated pursuant to Section 211 of the Clean Air Act. 40 CFR Part 79 and 80 specifically relates to the registration of fuels and fuel additives
In accordance with the Clean Air Act regulations at 40 CFR 79, manufacturers (including importers) of gasoline, diesel fuel and additives for gasoline or diesel fuel, are required to have their products registered by the EPA prior to their introduction into commerce. Registration involves providing a chemical description of the fuel or additive, and certain technical, marketing, and health-effects information. The health-effects research is divided into
three tiers of requirements for specific categories of fuels and additives. Tier 1 requires a health-effects literature search and emissions characterization. Tier 2 requires short-term inhalation exposures of laboratory animals to emissions and screened for adverse health effects, unless comparable data are already available. Alternative Tier 2 testing can be required in lieu of standard Tier 2 if EPA concludes that such testing would be more appropriate. Certain small businesses are exempt from some or all the Tier 1 and Tier 2 requirements. Tier 3 provides for follow-up research, if necessary.
OUR PRODUCTS AND SERVICES
Our Diesel Fuel Additive Product Line
EnerBurn is a liquid, chemical formulation, presently sold in bulk quantities to fleet and vessel operators, under four product codes differentiated by market application and product concentration, as indicated below:
Product Application ------- ----------- EnerBurn 5805A U.S. On-Road Market EnerBurn 5891 U.S. Off-Road Market EnerBurn 5931 International Market EnerBurn 5805C International Market |
Although added to diesel fuel and generally referred to as a diesel fuel additive within our industry, EnerBurn functions as an engine treatment application by removing carbon deposits from the combustion surfaces of the engine and greatly reducing further carbon deposit buildup. It also provides for an increased rate of combustion. By adding EnerBurn to diesel fuel in accordance with proprietary methodology, it forms a non-hazardous catalytic surface in the diesel engine combustion chambers and on the surface of the piston heads. This surface is visible in the form of a mono-molecular film that develops after initiation of treatment and remains active for a period of time after cessation of treatment.
The buildup of carbon within the combustion chambers of a diesel engine can generate greater exhaust opacity, and increase engine wear. These carbon deposits can cause piston rings to stick and reduce compression resulting in decreased engine efficiency with extended use.
The unique chemical formulation of EnerBurn, when applied in accordance with proprietary methodology, has been shown to produce the following benefits (See "Product Testing", below):
----------------------------------------- ------------------------------------ MEASUREMENT PERCENTAGE IMPROVEMENT ----------------------------------------- ------------------------------------ Fuel Economy 8-15% Improvement ----------------------------------------- ------------------------------------ NOx Formation 10-59% Reduction ----------------------------------------- ------------------------------------ Smoke 25-70% Reduction ----------------------------------------- ------------------------------------ Brake Horsepower Up to a 4% increase ----------------------------------------- ------------------------------------ Engine Wear 30-50% Reduction ----------------------------------------- ------------------------------------ |
Volumetric proportioning injection equipment is used to deliver proper dosage ratios of EnerBurn to the diesel fuel, and are typically offered to our customers in support of an EnerBurn sale. Two equipment vendors supply us our additive injection equipment which is either installed at a bulk fueling depot or onboard the vehicle or vessel.
Product Testing
The Southwest Research Institute ("SWRI") of San Antonio, Texas has extensively tested the EnerBurn technology. This institute is an independent, nonprofit, applied engineering and physical sciences research and development organization with 11 technical divisions using multidisciplinary approaches to problem solving. The Institute occupies 1,200 acres and provides nearly two million square feet of laboratories, test facilities, workshops, and offices for more the 2,700 employees who perform contract work for industry and government clients.
The extensive testing of EnerBurn conducted by SwRI confirmed product claims of lower highway smoke, reduced NOx emissions, a significant reduction in engine wear and an increase in horsepower. Actual customer usage data has also confirmed our claim that EnerBurn usage reduces fuel consumption.
An integral part of our sales process is to conduct proof of performance demonstrations for potential customers wherein we accumulate historical fleet data that documents the effects of the use of EnerBurn (i.e. advantages in terms of increased fuel economy, a decrease in engine wear and reductions in toxic emissions) on that customer's specific vehicles. In connection with these proof of performance demonstrations, we provide fleet monitoring services and forecasts of fuel consumption for purposes of the prospective customer's own analysis. We have completed proof of performance demonstrations for a large number of prospective and existing customers. A sampling of such trials include: (1) a fleet of over 3,000 long haul trucks, (2) a fleet of 24 three-year old Morrison Knudson 1500 locomotives with Caterpillar 3512 diesel engines, and (3) a sampling of eight maritime push boats.
o An EnerBurn proof of performance demonstration of a long haul truck fleet began in August of 1998. The number of trucks treated with EnerBurn exceeded 3,000-Century Class Freightliners, most of that were equipped with Caterpillar or similar type engines. This company's measurable fuel savings averaged 10.4% over a 3 plus year period while using EnerBurn, resulting in annual fuel savings in excess of $6.5 million. In addition, the company's maintenance department observed significant reductions in metal loss in crankcase wear-parts, although they did not attempt to quantify the value of this phenomenon.
o A fleet of 24 three-year-old 1400 horsepower Morrison Knudson MK1500 locomotives with Caterpillar 3512 diesel engines were used for a 12-month proof of performance demonstration of the effectiveness of EnerBurn. This demonstration started on July 1, 1999 and clearly documented a 10.8% reduction in fuel consumption and a 9.5% reduction in Brake Specific Fuel Consumption ("BSFC"). The demonstration also reflected a significant reduction in engine wear, confirmed by a 56% reduction in copper content of the lube oil.
o Three maritime vessels were selected from a large fleet, based on size and typical routes for accessibility of regular fueling at this company's bulk fueling barge. A proof of performance protocol was developed under the guidance and supervision of this company's management. The base line demonstration commenced on July 11, 2001 and the final demonstration was performed on February 28, 2002. One of the three demonstration vessels represented an untreated placebo; two were treated with EnerBurn. The two treated vessels exhibited a measured reduction in fuel consumption of 7% and 9.9%, while the untreated placebo experienced nearly a 10% increase in fuel consumption. Additionally five vessels with different diesel engines were selected for proof of performance under the same protocols yielding results in excess of 10% in fuel savings, significant reductions in opacity, from 33%-86%, reductions of NOx emissions between 11% and 50% and reduced hydrocarbons of up to 18%.
OUR TARGET MARKET
Overview of Worldwide Diesel Fuel Consumption
The U.S. Department of Energy, Energy Information Administration ("EIA") estimates that worldwide annual consumption of diesel fuel approximates 210 billion U.S. gallons. A breakdown of this estimate is summarized as follows:
Annual consumption of
Diesel Fuel - Billion USG/Year
------------------------------
United States 60
Europe 60
Pacific Rim 50
Rest of the World 40
----
Total Gallons Consumption 210
|
Domestic Diesel Fuel Consumption
Based on further EIA published data, the following table* depicts domestic distillate fuel oil consumption by energy use for 2001:
---------------------------------- ------------------------------------------- ENERGY USE 2001 (THOUSAND GALLONS) ---------------------------------- ------------------------------------------- U.S. Total 58,971,486 ---------------------------------- ------------------------------------------- Residential 6,263,440 ---------------------------------- ------------------------------------------- Commercial 3,505,057 ---------------------------------- ------------------------------------------- Industrial 2,323,797 ---------------------------------- ------------------------------------------- Oil Company 820,321 ---------------------------------- ------------------------------------------- Farm 3,427,343 ---------------------------------- ------------------------------------------- Electric Power 1,510,273 ---------------------------------- ------------------------------------------- Railroad 2,951,831 ---------------------------------- ------------------------------------------- Vessel Bunkering 2,093,252 ---------------------------------- ------------------------------------------- On-Highway Diesel 33,215,320 ---------------------------------- ------------------------------------------- Military 346,060 ---------------------------------- ------------------------------------------- Off-Highway Diesel 2,514,791 ---------------------------------- ------------------------------------------- |
* Sources: Energy Information Administration's Form EIA-821, "Annual Fuel Oil and Kerosene Sales Report," for 1997-2001 and "Petroleum Supply Annual," Volume 1, 1997-2001. Totals may not equal sum of components due to independent rounding.
Diesel Fuel Consumption in Strategic Geographic Target Markets
The following table* depicts diesel fuel consumption for transportation use only and excludes other such industries to include mining, farm, and electric power. We have active sales efforts in each of these three International markets.
--------------------------------------- -------------------------------------- COUNTRY/REGION 1999 CONSUMPTION (MILLION GALLONS) --------------------------------------- -------------------------------------- Western Europe 44,457 --------------------------------------- -------------------------------------- Japan 9,198 --------------------------------------- -------------------------------------- Brazil 7,665 --------------------------------------- -------------------------------------- |
* Source: EIA "International Energy Annual, 1999."
Our Primary Domestic Target Markets by Energy Users
Our primary domestic target markets by energy users include the trucking industry, railroad industry, and the maritime shipping industry, all responsible for transporting freight. Combined, these three industries consume approximately 38 billion gallons of diesel fuel, or over 50% of annual domestic consumption.
According to information compiled by Charles River Associates, between 1960 and 1998, the amount of freight moved each year for each American increased by 50%, while the average cost of moving a ton of freight one mile (adjusted for inflation) fell by 12.5%. For trucking, railroad, and maritime shipping companies, diesel fuel accounts for a disproportionate share of total operating costs. Furthermore, each of these industries typically experiences relatively small operating margins. Because of these financial factors, we believe that the ability to reduce fuel consumption, even by a small amount, could have a dramatic effect on our customers' competitive viability.
The domestic trucking industry employs over 9 million people, including over 3 million truck drivers and contributes about five percent to our Gross National Product. During 2000, according to the American Trucking Association, excluding government and farm, 173 billion miles were logged by all trucks used for business purposes and consumed 30.3 billion gallons of diesel fuel.
The trucking industry typically measures its costs by the mile, with fuel representing one of the largest variable cost items for truck operators. According to a publication prepared by Newport Communications, which profiled the Heavy Duty and Commercial Truck Market, annual Class 8 Truck (heavy duty) mileage ranged from 121,000 annual miles per truck for truck load carriers to 140,000 annual miles per truck for the owner-operator carrier. Annual operator mileage for Class 6-7 Trucks (medium duty) was significantly lower, ranging from 40,000 to 56,000 miles per truck. Trucking industry analyst, Martin Labbe Associates, calculates that in mid-1998, LTL truckers were spending an average 17.8 cents per mile for fuel. In mid-2001, the average cost had risen to 25 cents a mile for fuel. Unfortunately for trucking companies, the prices of delivering freight have not kept pace with rising costs.
According to Transportation Technical Services, the average profit margin for truckers since the late 1970's is about 2%. In 2000, revenues of public truckload carriers rose 5.9%, representing a 40% increase in tonnage and 60% in surcharges and higher rates. However, profits were down almost 22%. Market analysts at A.G. Edwards & Sons noted 3,670 bankruptcies among companies with five or more trucks in 2000. Another 1,000 closed down in the first quarter of 2001. In previous years, when fuel prices were low, the bankruptcy rate was under 300 per quarter.
We believe this analysis clearly supports the significant impact of fuel costs on the profitability and viability of trucking companies, particularly in a slow economy with less freight being moved.
According to the Association of American Railroads, more than 600 freight railroads operate in Canada, Mexico, and the United States with over 173,000 million miles of track and generate $42 billion in annual revenues. These railroads account for more than 40 percent of all freight transportation.
Currently, the active locomotive fleets in the North American market number approximately 33,000 units, including heavy-haul freight locomotives, commuter locomotives and lower-horsepower, short-haul and terminal locomotives. The average number of new locomotives delivered in the past 10 years was 1,000 annually.
On average, locomotives are three times more fuel-efficient than trucks. Moreover, locomotive fuel efficiency is continually improving. In 2001, locomotives moved a ton of freight 403 miles on average per gallon of diesel, up from 235 miles in 1980. In 2001 alone, U.S. freight locomotives consumed 2.6 billion fewer gallons of diesel fuel than they would have if their fuel efficiency had remained constant since 1980.
Based on revenue per ton-mile, on average it costs 29% less to move freight by locomotive in 2001 than it did in 1981. Additionally, diesel fuel expenditures typically represent between six and 10 percent of operating budgets for domestic locomotive lines. Canada's railways, for instance, have been improving their fuel efficiency at an annual rate of about 1.9 percent per year.
Because of these factors, locomotives, as demonstrated, are keenly aware of the positive impact fuel savings can have on their ability to remain competitive.
The domestic maritime shipping industry transports freight around our Nation's inland waterways and along our Nation's coasts. Our primary marketing efforts are presently directed at those companies that operate vessel fleets throughout our Nation's inland and inter-coastal waterways.
Inland water freight transportation is comprised of approximately 5000 tugboats and towboats and over 25,000 barges. These vessels move 15% of the Nation's freight representing nearly 800 million tons annually, over a 25,000-mile waterway system, contributing about $5 Billion a year to the U.S. economy. Because of the enormous cargo capacity of a barge, this industry represents the most economical mode of transporting commercial freight.
Our Secondary Domestic Target Markets by Energy Users
To a lesser extent, we market EnerBurn to other domestic industries that are reliant upon diesel fuel. Those industries include electric power, oil and gas production (both onshore and offshore), mining, and agricultural. However, at the present time we have limited our efforts in these industries to specific customer applications wherein we have a personal relationship.
SALES AND MARKETING STRATEGY
Our Sales Process
The fuel additive industry has historically been mired by a myriad of technically dubious products and potential customers are usually wary of promotional claims by product manufacturers or "snake oil" peddlers as they are sometimes labeled.
Prospective customers in all target sectors and geographic locations are primarily concerned about the potential business risks associated with the adoption of any new fuel or engine treatment. Thus, the first resistant barrier to adoption of a fleet proof of performance demonstration is dispelling fear about impact on engine warranties and any potential business risk associated with a fleet shutdown caused by our product. The potential EnerBurn fuel and maintenance savings are strong motivators but are secondary to risk avoidance. The SWRI fitness for use testing and customer testimonials are paramount in assisting us in addressing these fears.
Potential customers have a strong predisposition to accept only demonstrable proof-of-benefit in their own fleet as justification for any new expenditure. After risk avoidance, the ability to demonstrate and prove results is the primary obstacle for market adoption of our product.
Our sales process begins with a thorough analysis of the potential customer, to include fleet type, size, and opportunity. This is followed with sales presentations at both the executive level and maintenance level. Executive level sales presentations emphasize return on investment ("ROI"), while maintenance level sales presentations emphasize our technology and why it does not impact engine warranties and any potential business risk associated with a fleet shutdown.
The current sales cycle from inception to full customer implementation is typically six to 12-months from initial customer contact.
Our International Marketing Partners
We presently market EnerBurn in Western Europe, the Asian nations of Japan, South Korea, Taiwan, Singapore, Malaysia, Vietnam, Cambodia, Thailand and Indonesia and the Mercusor Nations of Brazil, Argentina, Uruguay, Paraguay, Peru and Chile though partnerships with entities that have an established presence in these areas. Our marketing partners include Bond International, Ltd. ("Bond") in Western Europe, Mitsubishi International Corporation ("MIC") in the Asia and EchemTrade Energy & Petrochemicals, Ltda. ("Echem") in the Mercusor Nations.
Bond is an independent marketing corporation organized in the United Kingdom. Although we do not have a formal written agreement with them, Bond is acting as our sales agent in 19 European countries, including the United Kingdom, Austria, Germany, Spain, Italy and Switzerland. We are currently in the process of negotiating a formal written agreement with Bond. To date, Bond has had $ 297,000 (US) in EnerBurn sales on our behalf. Our current arrangement calls for us and Bond to share equally in the operating margins of the products sold in Bond's territory until such time that a definitive agreement is executed between the parties.
On March 15, 2003, WaxTech International, Inc. assigned to EnerTeck its December 15, 2002 agreement with MIC, its exclusive distributor of EnerBurn products in the aforementioned Asian nations. The term of the Distributorship Agreement is for five years with renewable one-year options. In order for MIC to maintain its geographic exclusivity, MIC must meet certain minimum annual sales volume requirements. Under this agreement, MIC's compensation is entirely commission based. To date, MIC has not sold any of our product pursuant to this agreement. However, certain proof of performance demonstrations will begin in the fourth quarter of 2003 in these geographical areas.
On February 15, 2003, we entered into a Sales Agency Agreement with Echem, a Brazilian corporation that was amended on September 1, 2003. Pursuant to this agreement, as amended, Echem acts as our exclusive sales agent for the sale of EnerBurn products in the Mercusor Nations. The term of the agreement is for five years with renewable one-year options. In order to maintain its geographic exclusivity, Echem must meet certain minimum annual sales volume requirements. Under this agreement, Echem's compensation is entirely commission based, with advance commission payments to be drawn against future commissions permitted if agreed upon by the parties.
To date, Echem has not sold any of our products pursuant to this agreement. However, large railroad and certain government contracts are under negotiation at this time.
COMPETITION
The market for products and services that increase diesel fuel economy, reduce emissions and engine wear is rapidly evolving and intensely competitive and we expect it to increase due to the implementation of stricter environmental standards. Competition can come from other fuel additives, fuel and engine treatment products and from producers of engines that have been modified or adapted to achieve these results. In addition, we believe that new technologies, including additives, will further increase competition.
Our primary current competitors include Lubrizol Corporation, Chevron Oronite Company (a subsidiary of Chevron Corporation), Octel Corp., Clean Diesel Technologies, Inc. and Ethyl Corporation.
Many of our competitors have been in business longer than us, have significantly greater financial, technical, and other resources, or greater name recognition. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements. Competition could negatively impact our business. Competitive pressures could cause us to lose market share or to reduce the price of our products, either of which could harm our business, financial condition and operating results.
We believe that the principal competitive factors in our market include the:
* effectiveness of the product;
* cost;
* proprietary technology;
* ease of use; and
* quality of customer service and support.
GOVERNMENT REGULATION
We need to comply with registration requirements for each geographic jurisdiction in which we sell EnerBurn. On January 21, 2001, the US Environmental Protection Agency, pursuant to the Environmental Protection Act (the "Act") (40 CFR 79.23) issued permit number EFC 5805A in connection with the use of EnerBurn. This registration allows EnerBurn to be used anywhere in the United States for highway use in all over-the-road diesel applications. Under this registration, we have pass through rights from the formulator, blender and supplier to sell EnerBurn. However, there are provisions in the Act under which the EPA could require further testing. The EPA has not exercised these provisions yet for any additive. Internationally, we intend to seek registration in other countries as we develop market opportunities.
Our business is impacted by air quality regulations and other regulations governing vehicle emissions as well as emissions from stationary engines. If such regulations were abandoned or determined to be invalid, our prospects may be adversely effected. As an example, if crude oil and resulting diesel prices were to reach or approach historical lows, the emphasis for fuel efficiency would be diminished, potentially impacting sales velocity of our products, consequently adversely effecting the Company's performance.
OUR SUPPLY ARRANGEMENTS
Our Relationship with RubyCat Technology
In January 2003, we executed a Memorandum of Understanding ("MOU") with RubyCat Technology. This MOU is comprised of two components: a Supply and Marketing Agreement and a Purchase Option Agreement.
Under the Supply and Marketing component of the MOU, EnerTeck will collaborate with and purchase EnerBurn(TM) products and services exclusively from RubyCat and RubyCat will collaborate with and sell EnerBurn diesel products exclusively to EnerTeck. Accordingly, for EnerTeck to maintain annual, global exclusivity, it is required to purchase certain minimum quantities of EnerBurn as indicated below:
Year One ending December 31, 2003 180,000 gallons Year Two ending December 31, 2004 270,000 gallons Year Three ending December 31, 2005 400,000 gallons And Each Year thereafter 500,000 gallons |
Under the Purchase Option component of the MOU, EnerTeck has been granted a unilateral one-year option to purchase certain technology from RubyCat for a sum of up to $6.6 million.
During December of 2002, RubyCat expressed an interest in selling its technology to EnerTeck for a non-negotiable sum of up to $6.6 million. As a result of negotiations between the parties, EnerTeck, in addition to securing exclusive global marketing rights subject to minimum purchase requirements from RubyCat, elected to pursue this acquisition with payment due no later than December 31, 2003. However, should EnerTeck elect not to exercise the purchase option and yet meet the annual minimum purchase requirements, EnerTeck maintains its global exclusivity.
If the supplier is not able to provide us with sufficient quantities of the product, or not provide us the product at all (for any reason), our business could be adversely effected. Although we have identified alternate suppliers of the products, we cannot assure you that the replacement products will be comparable in quality to the product presently supplied to us by RubyCat, or that, if comparable, that it can be acquired under terms and conditions acceptable to us.
In addition, we are dependent upon RubyCat for statistical analysis of fleet data gathered from customers and potential customers in on-road applications. This data is important in that it serves to demonstrate our products' proof of performance to customers and potential customers. If this service were not supplied to us, our sales efforts and ability to maintain existing customers could be negatively effected. However, we believe that we can adequately analyze the data ourselves.
Our arrangement with RubyCat Technology, Inc. requires that we meet certain annual minimum purchase levels in order to maintain our global exclusivity. If we were to lose this exclusivity, it could have a material adverse effect on our business and planned operations.
EMPLOYEES
We currently employ nine individuals on a full-time basis; five of whom provide services to both EnerTeck Parent and EnerTeck Sub. The remaining four provide services to EnerTeck Sub only. Two of the individuals, namely, James Mullen (Executive Vice President, General Counsel, Secretary and Director) and Parrish Ketchmark (President and Director) provide their services pursuant to consulting agreements. Parrish Brian Partners, Inc., with whom we have a consulting agreement, employs our president. We anticipate retaining additional sales and marketing (as employees or consultants) and clerical personnel within the next 12 months, if our financial resources permit.
PROPERTY
We do not own any real estate. We conduct our operations from leased premises in Stafford, Texas. We lease approximately 2,692 square feet of space at 10701 Corporate Drive, Suite No. 150 under a three-year lease, which terminates on March 31, 2006 and currently provides for monthly rent of $3,687.75 which increases ratably over the term of the lease to $3,911.25. We believe that our current facility is adequate for the foreseeable future.
LITIGATION
We are not a party to any pending material legal proceeding nor are we aware of any proceeding contemplated by any individual, company, entity or governmental authority involving the Company.
MANAGEMENT
DIRECTORS EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following sets forth certain information regarding each of our directors, executive officers and key employees. Unless otherwise indicated, these individuals hold the same positions listed below for both EnerTeck Corporation and our wholly owned subsidiary, EnerTeck Chemical Corp.
NAME AGE POSITIONS HELD
---- --- --------------
Dwaine Reese 61 Chief Executive Officer, and Chairman
of the Board of Directors
Parrish B. Ketchmark 37 President and Director
James J. Mullen 67 Executive Vice President, General Counsel,
Secretary and Director
V. Patrick Keating* 54 Executive Vice President/Business Development
Leon van Kraayenburg 48 Executive Vice President/Finance, Chief
Financial Officer and Treasurer
Roy Stern* 57 Vice President/Fleet Sales (USA)
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*These individuals are key employees and not corporate officers and maintain their positions only with our subsidiary, EnerTeck Chemical Corp.
The following is a brief summary of the business experience of each of the above-named individuals:
DWAINE REESE. He has been the Chairman of the Board and our Chief Executive Officer of EnerTeck Sub since 2000 and of EnerTeck Parent since 2003. From approximately 1975 to 2000, Mr. Reese held various executive, management, sales and marketing positions in the refining and specialty chemical business with Nalco Chemical Corporation and later Nalco/Exxon Energy Chemicals, LP. In 2000, he founded EnerTeck Chemical Corp., and has been its President and chief executive officer since that time. Mr. Reese has been and will continue to devote his full-time to our business. Mr. Reese has B.S. degree in Biology and Chemistry from Lamar University and a M.S. degree in Chemistry from Highland New Mexico University.
PARRISH B. KETCHMARK. He has been our President and a Director since May 15, 2003. He has over 14 years experience in the business development and financing of small, emerging businesses. He is the founder, president and chairman of Parrish Brian Partners, Inc., a venture capital business incubation firm, in operation since 2000. In addition, Mr. Ketchmark is the President of Parrish Brian & Co., Inc., an asset management, and investment and merchant-banking firm founded in 1995. From 1997 to 1999, Mr. Ketchmark served as the Secretary, Treasurer and a Director of World Cyberlinks Corp. From 1993 to 1995, Mr. Ketchmark served as the President of Performance Capital Corporation, an investment firm that managed and serviced a portfolio of investments in early stage growth companies. Prior to 1993, Mr. Ketchmark was employed as a Vice President at American Network Capital Corporation, a financial public relations firm, where he was responsible for investor relations and the financing of emerging companies. Mr. Ketchmark has attended Bernard Baruch College and Fordham University, and has studied finance and investments at Penn State University. He served in the U.S. Marine Corps from 1984 until his honorable discharge in 1989 attaining the rank of Sergeant. Mr. Ketchmark will devote such time to our business as he believes is necessary for us to be successful.
JAMES J. MULLEN. Mr. Mullen is our Executive Vice President - General Counsel, Secretary and a Director. He has over 40 years of legal experience primarily in the areas of intellectual property rights (patents and trademarks), trade regulation, business law, environmental matters, product liability and litigation. Since 1992, Mr. Mullen has been General Patent Counsel -Intellectual Property for Celanese Ltd. Mr. Mullen will continue this relationship with Celanese, until such time that we will be able to compensate him at a level commensurate with full-time employment. Until such time, Mr. Mullen will devote, as much of his time to our business as he believes is necessary for us to be successful. Mr. Mullen has his J.D. degree from Texas A &M University Law Center/South Texas College of Law, and a B.Ch.E. Georgia Technical Institute.
V. PATRICK KEATING. Mr. Keating is an Executive Vice President - Business Development of our wholly owned subsidiary, EnerTeck Chemical Corp. only. Mr. Keating has approximately twenty-eight years of refining/petrochemical management experience with fully integrated oil companies. For the most recent five years, he has been engaged in the management of start-up refining and petrochemical ventures. He is the founder and Chief Executive Officer of WaxTech International, Inc., a firm that has in the past provided consulting and sales services to EnerTeck Sub. Although Mr. Keating intends to devote substantially all of his business time to our business operations, he will still maintain his position with WaxTech. Mr. Keating has a B.S. Degree in Chemical Engineering from McNeese State University.
LEON VAN KRAAYENBURG. Mr. van Kraayenburg is our Executive Vice President - Finance, who has over 20 years of financial corporate reporting, tax, finance and treasury experience, serving the private and public sector. From 1993 until 1999, he served as Manager of Corporate Reporting for the U.S. holding companies of BTR, Plc., a UK public reporting company and BTR Nylex Ltd., an Australian public reporting company. During 1998, he managed the consolidation of the Amatek Holdings Group, a division of BTR Nylex, Ltd., a reporting entity comprising of over 60 companies and $900 million (USD) in revenues. He first served as the Chief Financial Officer and Treasurer of Westlake Styrene Corporation, with total assets of over $120 million (USD), a wholly owned subsidiary of BTR Nylex Ltd. before he joined corporate BTR Plc. Mr. van Kraayenburg is a graduate of Witwaters Rand College in South Africa.
ROY K. STERN. Mr. Stern is our Vice President - Fleet Sales (USA) of our wholly owned subsidiary, EnerTeck Corp. He has over 30 years experience in transportation, real estate and facilities logistics management. Most recently, from 1996 until 2002, he was Director of Purchasing and Fuel Management for Consolidated Freightways, a national trucking firm that filed for Chapter 11-bankruptcy protection in 2002 and is currently in liquidation. Mr. Stern has a B.S. degree in Biology from the University of Wisconsin and an M.B.A. degree Finance /Management from Redlands College.
BOARD OF DIRECTORS AND OFFICERS
All directors hold office until the next annual meeting of shareholders and the election and qualification of their successors. Officers are elected annually by the Board of Directors and serve at the discretion of the Board.
DIRECTORS COMPENSATION
Directors who are also officers of the Company receive no additional compensation for serving on the Board of Directors, other than reimbursement of reasonable expenses incurred in attending meetings.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its Chief Executive Officer whose total annual salary and bonus exceeded $100,000 during the past three calendar years. Except as set forth below, no officer or Executive Officer of the Company received compensation in excess of $100,000 during the past three calendar years. However, two of our employees are currently being compensated at a rate in excess of $100,000 per year. They are Dwaine Reese and Roy Stern ($150,000 and $110,000 per year, respectively). All of this information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any.
SUMMARY COMPENSATION TABLE
COMPENSATION IN
NAME AND PRINCIPAL FISCAL THE FORM
POSITION YEAR SALARY($) BONUS($) OF EQUITY ($)
--------- ---- --------- -------- --------------
Dwaine Reese 2000 0 0 0
Chief Executive Officer 2001 $125,000 0 0
Chairman (1) 2002 $150,000 0 $420,000 (2)
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(1) Mr. Reese has served in these positions with both companies since shortly
after we acquired EnerTeck Sub on January 9, 2003. Prior thereto, from
EnerTeck Sub's inception on November 29, 2000, Mr. Reese served as the
President and Chief Executive Officer of EnerTeck Sub. The compensation
that is indicated here is his compensation from EnerTeck for the periods
indicated as its officer and director.
(2) In September 2002, EnerTeck issued 420,000 shares of its common stock to
Mr. Reese. This issuance was valued at a $1.00 per share as non-cash
compensation in 2002.
On _______, 2003, we established an employee stock option plan authorizing the issuance of options to purchase up to 1,000,000 shares of our common stock. The adoption of the plan is intended to give us greater ability to attract, retain, and motivate our officers, key employees, directors and consultants; and is intended to provide us with the ability to provide incentives more directly linked to the success of the Company's business and increases in shareholder value. To date no options have been issued under the plan.
In addition to the stock option plan, all of the officers and significant employees (or their affiliates) have been issued warrants to purchase shares of our common stock. (See "Certain Relationships and Related Transactions" immediately below.) To date, none of these previously issued warrants to purchase our securities have been exercised. The shares underlying these warrants are among the shares covered by this prospectus.
EMPLOYMENT AGREEMENTS - EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES
All of the officers and key employees, with the exception of Mr. Ketchmark and Mr. Mullen, have entered into employment agreements. Mr. Ketchmark is acting as the president of the Company and its subsidiary pursuant to a May 15, 2003 amendment to the January 9, 2003 consulting agreement between his firm, Parrish Brian Partners, Inc and us. He is compensated on a consulting basis at the rate of $72,000 per year. Mr. Mullen has a consulting agreement with both our parent and subsidiary. He is also compensated at the rate of $72,000 per year. All of the remaining officers and significant employees have entered into employment agreements with both our Company and its subsidiary except Messrs. Keating and Stern who have employment agreements with our subsidiary only. All employment agreements contain non-compete provisions. Messrs. Reese and Stern are compensated at the rate of $150,000 and $110,000 per year, respectively. The remaining officers and key employees are compensated at the rate of $72,000 per year. In addition, we will pay Mr. Stern a 1% commission on sales that he generates.
Copies of these agreements and any amendments thereto are included in the Form SB-2 Registration Statement of which this prospectus is a part, which registration statement has been filed with the Securities and Exchange Commission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 1, 2003, we issued to Dwaine Reese, our principal shareholder, Chairman and Chief Executive Officer, a warrant to purchase 1,000,000 shares of our restricted common stock at $.01 per share or $10,000 in connection with his employment agreement. In addition, we have issued another warrant to purchase 498,150 of our restricted shares at $1.20 per share or $597,780 to Allan F. Dow and Associates, a management consulting firm for consulting services previously rendered to EnerTeck Sub. We have also issued to J.D. McGraw, a consultant who previously rendered services to us, a warrant to purchase 150,000 shares of our restricted common stock at $1.20 per share or $180,000. Similarly, we have issued another warrant to purchase 175,000 shares of our restricted common stock at $1.20 per share or $210,000 to WaxTech International, Inc. in consideration for services also rendered to EnerTeck Sub. V. Patrick Keating, a significant employee of EnerTeck Sub, is a principal of WaxTech. In addition, we have a three year commission agreement under which we will pay WaxTech 0.6% of all EnerTeck Sub gross revenues during that period commencing on August 15, 2003.
Our president, Parrish B. Ketchmark, is presently compensated on a consulting basis through his firm, Parrish Brian Partners, Inc. ("Partners"). Prior to him becoming president on May 15, 2003, we entered into a January 9, 2003 financial consulting and business development agreement with Partners, an affiliate to Mr. Ketchmark. He is providing his services as president pursuant to a May 15, 2003 amendment to this consulting agreement. In connection with this agreement, we issued a warrant to Partners to purchase 1,500,000 shares of our shares of common stock at $1.00 per share or $1,500,000 and have paid Partners $18,000 to date for services rendered by Mr. Ketchmark.
In addition to the above, we have issued warrants to purchase our common stock to the following officers and employees as follows:
o Leon van Kraayenburg - a warrant to purchase 200,000 shares at
$1.20 per share.
o James J. Mullen - a warrant to purchase 100,000 shares at
$1.20 per share.
o Roy Stern - a warrant to purchase 100,000 shares at $1.20 per
share.
o Deborah Tenney - a warrant to purchase 100,000 shares at $1.20
This prospectus covers the shares underlying all of the warrants referred to in this section as well as the 202,500 shares underlying the warrants issued to our investment banker. See "Management Discussion and Analysis of Financial Condition and Plan of Operation - Liquidity and Capital Resources", above. Accordingly, the total number of shares covered by this prospectus underlying warrants is 4,025,650.
On _____ ___, 2003, we effected a one from 10 reverse stock split and a change of domicile merger whereby we changed our name from Gold Bond Resources, Inc. to EnerTeck Corporation and our state of domicile from the State of Washington to the State of Delaware. All references to shares contained herein give effect to the aforementioned reverse common stock split as if it had occurred previously to the transactions cited.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as indicated below, the following table sets forth the stock ownership of each of our directors and officers, and each beneficial owner of greater than 5% of the outstanding shares of the Company, as of September 12, 2003, after giving effect to the ______ ___, 2003 one from 10 reverse common stock split.
Name and Address of Amount and Nature Beneficial Owner Title of Class of Beneficial Ownership Percent of Class ---------------- -------------- ----------------------- ---------------- Dwaine Reese (1) (2) Common 3,550,000 32.89% 206 Country Creek Way Richmond, Texas 77469 Parrish B. Ketchmark (1)(3) Common 1,500,000 13.28% 75 Oak Street Norwood, NJ 07648 James J. Mullen (1)(4) Common 100,000 01.00% 802 Campodolcino Drive Corpus Christi, Texas 78414 Leon van Kraayenburg (1)(5) Common 200,000 02.00% 14826 Cedar Point Drive Houston, TX 77070 Tom Himsel Common 575,000 5.87% 2177 Willow Lake Drive Greenwood, Indiana 46143 Stan Crow Common 500,000 5.11% 1410 Andover Livingston, Texas 77351 Leo Long Common 1,000,000 10.21% 14600 W. 107th Street Lenexa, KS 66215 All directors and executive officers as a group (4 persons) Common 5,350,000 42.49% |
(1) Holds these positions (officer and director) with both Companies.
(2) This includes the shares underlying the warrant we have issued to this shareholder to purchase an additional 1,000,000 shares at $.01 per share in connection with his employment agreement. The percent of class assumes the exercise of this shareholder's warrants only.
(3) This includes the shares underlying the warrant we have issued to an affiliate of this shareholder, Parrish Brian Partners, Inc., to purchase 1,500,000 shares of our common stock for $1.00 per share. The percent of class assumes the exercise of this shareholder's warrants only.
(4) This includes the shares underlying the warrant we have issued to this shareholder in connection with his consulting agreement. This is a warrant to purchase 100,000 shares at $1.20 per share. The percent of class assumes the exercise of this shareholder's warrants only.
(5) This includes the shares underlying the warrant we have issued to this shareholder in connection with his employment agreement. This is a warrant to purchase 200,000 shares at $1.20 per share. The percent of class assumes the exercise of this shareholder's warrants only.
Unless otherwise noted above, this table has been prepared based on 9,791,999 shares of common stock being outstanding. If all of the aforementioned warrants are exercised, we will have 13,817,649 shares outstanding.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common stock, $.001 par value per share, of which 9,791,999 are outstanding as of the date of this prospectus.
Holders of common stock have equal rights to receive dividends when, as and if declared by the Board of Directors, out of funds legally available therefor. Holders of common stock have one vote for each share held of record and do not have cumulative voting rights.
Holders of common stock are entitled, upon liquidation of the Company, to share ratably in the net assets available for distribution, subject to the rights, if any, of holders of any preferred stock then outstanding. Shares of common stock are not redeemable and have no preemptive or similar rights. All outstanding shares of common stock are fully paid and non-assessable.
DIVIDEND POLICY
The Company has never paid cash dividends on its common stock. The Board of Directors does not anticipate paying cash dividends in the foreseeable future as it intends to retain future earnings, if any, to finance the growth of the business. The payment of future dividends will depend on such factors as earnings levels, anticipated capital requirements, the operating and financial condition of the Company and other factors deemed relevant by the Board of Directors.
TRANSFER AGENT
The transfer agent for the company's common stock is Columbia Stock Transfer Company, P.O. Box 2196, Coeur d'Alene, Idaho 83816-2196. Its telephone number is 208-664-354.
THE OFFERING
The Prospectus covers the public resale of a total of 7,175,650 shares of our common stock that is made up of the following:
o In April 2003, we completed our December 20, 2002 private offering of 1,000,000 shares of our common stock at $.50 per share for a total of $500,000 to be used for working capital. We included with these shares the right to have them registered with the Securities and Exchange Commission ("SEC"). This prospectus covers the public resale of these 1,000,000 shares.
o On May 28, 2003, we completed our May 28, 2003 private offering of 2,150,000 shares of our common stock at $.50 per share for a total of $1,075,000 to be used for working capital. We included with these shares the right to have them registered with the SEC. This prospectus covers the public resale of these 2,150,000 shares.
o During 2003, we issued warrants to officers, employees, consultants, and our investment banker/selling agent, in private transactions, for the purchase up to 4,025,650 shares of our common stock at varying exercise prices. These warrant holders have the right to have us register the underlying 4,025,650 shares with the SEC. This prospectus covers the public resale of the shares of common stock underlying the warrants.
We cannot prevent the holders from immediately reselling all shares after this registration becomes effective with the SEC.
SELLING SECURITY HOLDERS
The selling security holders identified in the following table are offering for sale 7,175,650 shares of common stock. All shares are issuable upon the exercise of a privately negotiated and issued warrant or common stock previously issued to the selling security holders in a private placement transaction.
The following table sets forth as of September 12, 2003:
o The number of shares being held of record or beneficially by each selling
security holder and any material relationship between the Company and each
selling security holder based upon information currently available to the
Company.
o The percentage ownership of each selling security holder prior to the
offering.
o The number of shares offered hereunder by each selling security holder.
o The number of shares held of record or beneficially and the percentage
ownership of each selling security holder after the offering.
This calculation assumes the exercise of all the warrants, of which there can be no assurance, and that all shares are sold pursuant to this offering and that no other shares of common stock are acquired or disposed of by the selling security holder prior to the termination of this offering.
Beneficial Beneficial
Ownership of Ownership of
Selling Security Selling Security
Holder Prior to Holder After
Offering (1): Offering (1):
Number of
Name of Selling Shares Offered
Security Holder Number Percent Hereby Number Percent
------------------------------------------------------------------------------------------------------------
Parrish Brian
Partners, Inc. (2)(3) 1,500,000 10.86% 1,500,000 0 0
WaxTech
Int'l Inc. (3) (4) 175,000 1.27% 175,000 0 0
James Etter (5) 50,000 * 50,000 0 0
John Coghlan(5) 50,000 * 50,000 0 0
Jack Cowles (5) 50,000 * 50,000 0 0
Jack Manning (5) 50,000 * 50,000 0 0
Anthony Scorpio (5) 50,000 * 50,000 0 0
William Taylor (5) 50,000 * 50,000 0 0
Dan Ice (5) 50,000 * 50,000 0 0
Mary Martin (5) 30,000 * 30,000 0 0
Paul Lodi (5) 50,000 * 50,000 0 0
Paul and Edith Lodi (5) 30,000 * 30,000 0 0
David Crocker (5) 50,000 * 50,000 0 0
John Roglieri (5) 50,000 * 50,000 0 0
Christopher Walker (5) 100,000 * 100,000 0 0
Vincent Vallario (5) 5,000 * 5,000 0 0
Lola Carson (5) 45,000 * 45,000 0 0
Dean Dennecio (5) 50,000 * 50,000 0 0
Daniel Luchansky(5) 25,000 * 50,000 0 0
Margaret Murray (5) 20,000 * 20,000 0 0
Edward Pegram (5) 50,000 * 50,000 0 0
Jose Pietri, Jr. (5) 25,000 * 25,000 0 0
Jacobs Pond (5) 20,000 * 20,000 0 0
Rirkdiyifel Ltd.
Partnership(5) 100,000 * 100,000 0 0
Leo Long (6) 1,000,000 7.24% 1,000,000 0 0
Park City
Investors, L.P.(6) 400,000 2.89% 400,000 0 0
Carlsbad Industrial
Association L.P.(6) 200,000 1.45% 200,000 0 0
Carrie A.
Corporation (6) 200,000 1.45% 200,000 0 0
34
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William Sherman
Corp.(6) 200,000 1.45% 200,000 0 0
Joel Jonezyk (6) 50,000 * 50,000 0 0
James Singleton (6) 50,000 * 50,000 0 0
Everyone
Counts, Inc.(6) 50,000 * 50,000 0 0
Leon van
Kraayenburg (3)(7) 200,000 1.45% 200,000 0 0
James J. Mullen (3)(7) 100,000 * 100,000 0 0
Roy Stern (3)(7) 100,000 * 100,000 0 0
Deborah Tenney (3)(7) 100,000 * 100,000 0 0
Dwaine Reese (3)(7) 1,000,000 7.24% 1,000,000 0 0
J.D. McGraw (3)(8) 150,000 1.09% 150,000 0 0
Maxim
Group LLC (3)(9) 202,500 1.47% 202,500 0 0
Allan F. Dow
& Associates (3)(10) 498,150 3.61% 498,150 0 0
7,175,650
==========
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*Represents less than 1% of the outstanding shares of common stock either before or after the exercise of any of the warrants.
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations promulgated under the Securities Exchange Act of 1934 and,
accordingly, may include securities owned by or for, among others, the
spouse and/or minor children of an individual and any other relative who
has the same home as such individual, as well as, other securities as to
which the individual has or shares voting or investment power or which each
person has the right to acquire within 60 days through the exercise of
options or otherwise. Beneficial ownership may be disclaimed as to certain
of the securities. Unless otherwise indicated, this table has been prepared
based on 13,817,649 shares of common stock outstanding as of September 12,
2003, assuming the exercise of all the outstanding warrants.
(2) Parrish Brian Partners, Inc. is a financial and business development
consultant with whom we negotiated the terms and conditions of the warrants
as a means of financing our operations. It is an affiliate of our
President, Parrish B. Ketchmark.
(3) Represents shares issuable upon exercise of warrants to purchase shares of
common stock.
(4) WaxTech International, Inc. provided consulting services to EnerTeck Sub
prior to its acquisition by us. It was compensated with warrants to
purchase 175,000 shares at $1.20 per share. V. Patrick Keating, a current
significant employee of EnerTeck Sub, is a principal of WaxTech
International. Inc.
(5) An investor in our December 20, 2002 private placement.
(6) An investor in our May 28, 2003 private placement.
(7) An officer and/or director or employee of the Company.
(8) Mr. McGraw rendered consulting and marketing services to us during 2002 and
early 2003. These warrants were part of his compensation for these
services.
(9) Maxim Group LLC received these warrants as partial compensation for
participating in our May 28, 2003 private placement, and pursuant to its
investment banking agreement with us.
(10) Allan F. Dow & Associates, Inc. provided consulting and marketing services
to us during late 2002 early 2003.
Under agreements with the selling security holders, we will pay all offering expenses except the fees and expenses of any counsel and other advisors that the selling security holders may employ to represent them in connection with the offering and except for all brokerage or underwriting discounts or commissions paid to broker-dealers in connection with the sale of the shares.
PLAN OF DISTRIBUTION
The selling security holders have not advised us of any specific plan for distribution of the shares offered hereby, but it is anticipated that the shares will be sold from time to time by the selling security holders or by pledgees, donees, transferees or other successors in interest on a best efforts basis without an underwriter. Such sales may be made on the OTC Bulletin Board, or any exchange upon which our shares may trade in the future, over-the-counter, or otherwise, at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The shares may be sold by one or more of the following methods:
o ordinary brokerage transactions and transactions in which the broker
solicits purchases; block trades in which the broker or dealer so
engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
o purchases by a broker or dealer for its account pursuant to this
prospectus;
o in privately negotiated transactions;
o through a combination of any such methods of sale;
o in accordance with Rule 144 under the Securities Act, rather than
pursuant to this prospectus; or
o any other method permitted pursuant to applicable law.
The selling security holders may sell their shares directly to purchasers or may use brokers, dealers, underwriters or agents to sell their shares. Brokers or dealers engaged by the selling security holders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions, discounts or concessions from the selling security holders, or, if any such broker-dealer acts as agent for the purchaser of shares, from the purchaser in amounts to be negotiated. The selling security holders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Broker-dealers may agree with a selling security holder to sell a specified number of shares at a stipulated price per share, and, to the extent the broker-dealer is unable to do so acting as agent for a selling security holder, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment to the selling security holder. Broker-dealers who acquire shares as principal may thereafter resell the shares from time to time in transactions, which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above, in the over-the counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions. In connection with resales of the shares, broker-dealers may pay to or receive from the purchasers of shares, commissions as described above.
The selling security holders and any broker-dealers or agents that participate with the selling security holders in the sale of the shares may be deemed to be "underwriters" within the meaning of the U.S. Securities Act of 1933. In that event, any commissions received by broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
From time to time the selling security holders may engage in short sales, short sales against the box, puts and calls and other hedging transactions in our securities, and may sell and deliver the shares in connection with such transactions or in settlement of securities loans. These transactions may be entered into with broker-dealers or other financial institutions. In addition, from time to time to the extent permitted by existing regulations, a selling security holder may pledge its shares pursuant to the margin provisions of its customer agreements with its broker-dealer. Upon delivery of the shares or default by a selling security holder, the broker-dealer or financial institution may offer and sell the pledged shares from time to time.
The selling security holders have been advised that they are subject to the prospectus delivery requirements of the U.S. Securities Act of 1933 and subject to the applicable provisions of the U.S. Securities and Exchange Act of 1934, including without limitation, Rules 10b-5 and Regulation M thereunder. Regulation M may limit the timing of purchases and sales of Company common stock by the Selling Security Holders. Regulation M may also restrict the ability of any person engaged in the distribution of the shares to engage in market making activities with respect to Company common stock. These regulations may affect the marketability of the shares.
We will not receive any proceeds from the sale of the shares. We will pay the expenses of preparing this prospectus and the related registration statement.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Certificate of Incorporation provides for the elimination of the personal liability of our officers, directors, corporate employees and agents to the fullest extent permitted by the provisions of Delaware General Corporation Law. Under such provisions, the director, officer, corporate employee or agent who in his capacity as such is made or threatened to be made, party to any suit or proceeding, shall be indemnified if it is determined that such director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of our company. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and persons controlling our company pursuant to the foregoing provision, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
LEGAL MATTERS
Certain legal matters, including the validity of the shares being issued, will be passed upon for the company by Danzig Kaye Cooper Fiore and Kay, LLP, P.O. Box 333, 30A Vreeland Road, Florham Park, New Jersey 07932, (973) 443-0600.
EXPERTS
The financial statements for EnerTeck Sub, our wholly owned subsidiary, as of December 31, 2002 and for each of the two years in the period ended December 31, 2002, included in this prospectus, have been audited by Malone & Bailey, PLLC, independent auditors, as stated in their report appearing herein (which report expresses an unqualified opinion) and have been included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The unaudited consolidated financial statements for the six months ending June 30, 2003 and 2002 are also included in this prospectus, and have been reviewed by Malone & Bailey, PLLC, independent auditors.
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
On March 14, 2003, the client-auditor relationship between EnerTeck Corporation ("EnerTeck Parent") and DeCoria, Maichel & Teague P.S. ("DeCoria") ceased as DeCoria was dismissed as EnerTeck Parent's auditor by an action of its Board of Director's of the same day. The decision to use another accounting firm was made due to the recent acquisition of EnerTeck Sub. To the knowledge of our current Board of Directors, DeCoria's report of the financial statements for fiscal years ended July 31, 2002 and 2001 did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles, except for our ability to continue as a going concern.
During the audit of EnerTeck Parent's financial statements for the years ended July 31, 2002 and 2001 and any subsequent interim period through the date of dismissal, DeCoria did not have any disagreements with us on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure and there were no "reportable events" with DeCoria as described in Items 304 (a) (1) (iv) and (v) of Regulation S-K, respectively.
In December 2002, EnerTeck Chemical Corp. engaged Malone & Bailey, PLLC, as its independent accountant for the years ended December 31, 2002 and 2001. On March 14, 2003, EnerTeck Corporation's board of directors engaged Malone & Bailey, PLLC, as its independent accountant for the year ended December 31, 2003. During the most recent calendar year and any subsequent interim period prior to engaging Malone & Bailey, PLLC, we did not consult with Malone & Bailey, PLLC regarding either (i) the application of accounting principals to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on our financial statements; or (ii) any matter that was either the subject matter of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K). Malone & Bailey, PLLC has reviewed this disclosure required by Item 304(a) before it was filed with the Commission and has been provided an opportunity to furnish the Company with a letter addressed to the Commission containing any new information, clarification of our expression of its views, or the respects in which it does not agree with the statements made by us in response to Item 304(a). Malone & Bailey, PLLC did not furnish a letter to the Commission.
DeCoria provided us with a letter addressed to the SEC that was attached as an exhibit to our Form 8-K/A which was filed with the SEC on March 18, 2003. The letter does not contain any disagreements regarding the disclosure included in this section about our change in accountants.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the United States Securities and Exchange Commission. You should rely only on the information provided in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The selling security holders are offering to sell, and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock. Applicable SEC rules may require us to update this prospectus in the future. This preliminary prospectus is subject to completion prior to this offering.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any reports, statement or other information that we file with the Commission at the Commission's public reference rooms in Washington, D.C. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. These Commission filings are also available to the public from commercial document retrieval services and at the Internet World Wide Web site maintained by the Commission at http://www.sec.gov. This prospectus is part of a registration statement we filed with the Securities and Exchange Commission. The prospectus and any accompanying prospectus supplement do not contain all of the information included in the registration statement. We have omitted a few parts of the registration statement according to the rules and regulations of the Securities and Exchange Commission. For further information, we refer you to the registration statement, including its exhibits and schedules. Statements contained in this prospectus and any accompanying prospectus supplement about the provisions or contents of any contract, agreement or any other document referred to are not necessarily complete. For each of these contracts, agreements or documents filed as an exhibit to the registration statement, we refer you to the actual exhibit for a more complete description of the matters involved. You should not assume that the information in this prospectus or any supplement is accurate as of any date other than the date on the front of those documents. We do not intend to distribute annual reports or audited financial statements to our shareholders. This information may be found in our filings with the Securities and Exchange Commission.
7,175,650 SHARES
[LOGO]
ENERTECK CORPORATION
COMMON STOCK
P R O S P E C T U S
_________, 2003
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
EnerTeck Chemical Corporation
Houston, Texas
We have audited the accompanying balance sheet of EnerTeck Chemical Corporation as of December 31, 2002, and the related statements of operations, stockholders' equity (deficit), and cash flows for the two years then ended. These financial statements are the responsibility of EnerTeck's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EnerTeck Chemical Corporation as of December 31, 2002, and the results of its operations and cash flows for the two years then ended, in conformity with accounting principles generally accepted in the United States of America.
Malone & Bailey, PLLC
www.malone-bailey.com
Houston, Texas
March 10, 2003, except for Note 9
dated September 2, 2003
ENERTECK CHEMICAL CORPORATION
BALANCE SHEET
December 31, 2002
ASSETS
Current assets:
Cash $ 31,097
Accounts receivable, trade - no allowance for
doubtful accounts 18,060
Inventory 87,192
---------
Total current assets 136,349
Property and equipment, net of accumulated
depreciation of $4,819 28,253
---------
$ 164,602
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 68,320
Accrued liability 100,000
---------
Total current liabilities 168,320
---------
Commitments and contingencies (Note 5)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, no par value, 1,000,000 shares
authorized, 1,000,000 shares issued and outstanding 501,001
Retained deficit (504,719)
---------
(3,718)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DIFICIT) $ 164,602
=========
|
See accompanying summary of accounting policies and notes to financial statements.
ENERTECK CHEMICAL CORPORATION
STATEMENTS OF OPERATIONS
Years Ended December 31, 2002 and 2001
2002 2001
---------- ----------
Revenues $ 981,244 $1,429,864
Cost of goods sold 623,088 554,019
---------- ----------
Gross profit 358,156 875,845
---------- ----------
Costs and expenses:
Salaries 317,047 278,042
General and administrative 295,230 268,006
Non-cash compensation 420,000 --
Provision for asset impairment 85,714 --
---------- ----------
1,117,991 546,048
---------- ----------
Income (loss) from operations (759,835) 329,797
---------- ----------
Other income 1,880 3,439
---------- ----------
Net income (loss) $ (757,955) $ 333,236
========== ==========
Net income (loss) per share:
Basic and diluted $ (.97) $ .67
========== ==========
Weighted average shares outstanding:
Basic and diluted 780,164 500,000
========== ==========
|
See accompanying summary of accounting policies and notes to financial statements.
ENERTECK CHEMICAL CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended December 31, 2002 and 2001
Common Stock Retained
----------------------- Earnings
Shares Amount (Deficit) Total
--------- --------- --------- ---------
Balances, December 31, 2000 500,000 $ 1,001 $ -- $ 1,001
Net income -- -- 333,236 333,236
--------- --------- --------- ---------
Balances, December 31, 2001 500,000 1,001 333,236 334,237
Issuance of common stock
for services 420,000 420,000 -- 420,000
Sale of common stock 80,000 80,000 -- 80,000
Distributions to
stockholders -- -- (80,000) (80,000)
Net loss -- -- (757,955) (757,955)
--------- --------- --------- ---------
Balances, December 31, 2002 1,000,000 $ 501,001 $(504,719) $ (3,718)
========= ========= ========= =========
|
See accompanying summary of accounting policies and notes to financial statements.
ENERTECK CHEMICAL CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2002 and 2001
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITES:
Net income (loss) $(757,955) $ 333,236
Adjustments to reconcile net income
(loss) to cash provided by (used in) operating activities:
Depreciation 11,682 17,160
Provision for asset impairment 85,714 --
Common stock issued for
services 420,000 --
Changes in operating assets and
liabilities:
Accounts receivable 193,668 (209,728)
Inventory (87,192) --
Accounts payable (11,249) 75,569
Accrued expenses 100,000 --
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (45,332) 216,237
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25,101) (115,708)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 80,000 --
Distributions to stockholders (80,000) --
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -- --
NET INCREASE (DECREASE) IN CASH (70,433) 100,529
Cash, beginning of period 101,530 1,001
--------- ---------
Cash, end of period $ 31,097 $ 101,530
========= =========
|
See accompanying summary of accounting policies and notes to financial statements.
ENERTECK CHEMICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND BASIS OF PRESENTATION
EnerTeck Chemical Corporation ("EnerTeck") was incorporated in Texas on November 29, 2000 and is a Houston-based corporation specializing in combustion enhancement and emission reduction technology for diesel fuel. EnerTeck's primary product is EnerBurn, and is registered for highway use in all USA diesel applications. The products are used primarily in on-road vehicles, locomotives and diesel marine engines throughout the United States.
INVENTORY
Inventory consists of EnerBurn. Inventory is valued at the lower of cost or market using the average cost method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed over the estimated useful lives of the assets using the straight-line method for financial reporting purposes. Maintenance and repairs are charged to operations as incurred.
Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of, sets forth guidance as to when to recognize an impairment of long-lived assets and how to measure such impairment. The standards require certain assets be reviewed for impairment whenever events or circumstances indicate the carrying amount may not be recoverable. Based on application of SFAS No. 121, EnerTeck recognized an $85,714 impairment during fiscal 2002 related to certain equipment (see note 8 for additional information).
REVENUE RECOGNITION
EnerTeck recognizes revenue for products sold when the customer receives the product.
INCOME TAXES
EnerTeck has received approval from the Internal Revenue Service to be treated as an S Corporation in accordance with Internal Revenue Code section 1362. Accordingly, EnerTeck's income is taxed directly to the shareholders, and no provision for federal income taxes is recorded by EnerTeck.
INCOME PER COMMON SHARE
The basic net income (loss) per common share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding.
Diluted net income (loss) per common share is computed by dividing the net income applicable to common stockholders, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities.
During 2002 and 2001 EnerTeck did not have any dilutive securities outstanding.
MANAGEMENT'S ESTIMATES AND ASSUMPTIONS
The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
EnerTeck does not expect the adoption of recently issued accounting pronouncements to have a significant impact on EnerTeck's results of operations, financial position or cash flow.
NOTE 2 - LOSS OF CUSTOMER
In October 2002, EnerTeck's largest customer filed for bankruptcy and ceased operations. As a result, EnerTeck's cash flows decreased significantly
EnerTeck has taken steps to increase sales to other customers and as of March 10, 2003 has raised $400,000 in equity funding (see note 9). Although no assurances can be given, EnerTeck expects that the continued support of EnerTeck's creditors and shareholders combined with capital raised will provide EnerTeck the ability to continue with its current operations.
NOTE 3 - PROPERTY AND EQUIPMENT
At December 31, 2002, property and equipment consisted of the following:
Useful Lives Amount
------------ -----------
Computer equipment 5 $ 6,215
Furniture and fixtures 7 19,988
Equipment 7 6,869
-----------
33,072
Less: accumulated depreciation 4,819
-----------
$ 28,253
===========
|
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock - In November 2000, EnerTeck issued 500,000 shares of common stock to its founder and original shareholders for $1,001. In September 2002, EnerTeck issued an additional 420,000 shares of its common stock to EnerTeck's President and Chief Executive Officer. The issuance has been recorded as non-cash compensation expense at $1 per share in 2002.
In October 2002, EnerTeck sold 80,000 shares of common stock for $1 per share.
Distributions to Stockholders - In January 2002 the Company made a cash distribution to its stockholders totaling $80,000.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
RubyCat Technology Agreement- Effective September 7, 2001, EnerTeck entered into an Exclusive Market Segment Development Agreement (the "Agreement") with RubyCat Technology, Inc. The Agreement gives EnerTeck exclusive rights to market RubyCat products, which includes EnerBurn, to on-highway diesel large fleet truck market, small engine marine (<7,000 horsepower) market, railroad diesel and the international diesel fuel market. In addition, EnerTeck was able to obtain approval from the Environmental Protection Agency to sell the product through its Agreement with RubyCat.
Under the Agreement, EnerTeck is required to purchase minimum quantities for the diesel truck fleet market each calendar year as follows:
Year ending December 31, Gallons
---------
2003 180,000
2004 270,000
2005 400,000
Thereafter 500,000
|
If EnerTeck fails to purchase the quantities noted above, the products and technologies will still be available to EnerTeck for purchase, but without exclusive market segment rights. EnerTeck was required to purchase 90,000 gallons in 2002 and only purchased approximately 40,000 gallons, resulting in EnerTeck being in default under the purchase commitment. As a result, on February 3, 2003 EnerTeck agreed to pay RubyCat $100,000 for the default and an amended agreement. The amended agreement extends the exclusive rights through December 31, 2003. In addition, the new agreement has a purchase option allowing EnerTeck to purchase the EnerBurn Technology for $6,000,000 to $6,600,000 depending on when the option would be exercised in 2003. The purchase option is from January 2003 through December 2003. The one time charge of $100,000 is included in cost of good sold in 2002 and in accrued liabilities as of December 31, 2002.
RubyCat has the right to review the price it charges EnerTeck quarterly. If the parties are unable to reach an agreement on the price increase, the agreement will terminate.
Office Lease - EnerTeck leases office space under a non-cancelable operating lease. Future minimum rentals due under non-cancelable operating leases with an original maturity of at least one-year are approximately as follow:
December 31, Amount
-----------
2003 $ 9,747
2004 3,250
|
Rent expense for the years ended December 31, 2002 and period from inception through December 31, 2001 totaled approximately $10,000 and $11,000, respectively.
NOTE 6 - CONCENTRATION OF CREDIT RISK
For the years ended December 31, 2002 and 2001, EnerTeck purchased 100% of its products from RubyCat (see note 5).
Financial instruments that potentially subject EnerTeck to concentration of credit risk are accounts receivable. EnerTeck performs ongoing credit evaluations as to the financial condition of its customers. Generally, no collateral is required. Two customers accounted for 100% of accounts receivable balance at December 31, 2002.
NOTE 7 - REVENUE FROM MAJOR CUSTOMERS
A summary of EnerTeck's revenues from major customers for the years ended December 31, 2002 and 2001 was approximately:
2002 2001
---------- ----------
Customer A $ 646,000 $ 956,000
Customer B 156,000 166,000
---------- ----------
Totals $ 802,000 $1,122,000
========== ==========
|
NOTE 8 - PROVISION FOR ASSET IMPAIRMENT
During fiscal 2002 EnerTeck recorded an asset impairment charge of $85,714. The equipment impaired by EnerTeck was equipment located at various locations of its largest customer. Because of the bankruptcy of the customer, EnerTeck will not receive any future cashflows from the equipment resulting in management impairing all assets associated with this customer. These assets have been historically depreciated over seven years. There was no such charge in fiscal 2001.
NOTE 9 - SUBSEQUENT EVENTS
On January 8, 2003, EnerTeck merged with Gold Bond Resources, Inc. ("Gold Bond"), a U.S. public company. EnerTeck stockholders' received 5,000,000 shares of Gold Bond common stock in exchange for 100% of EnerTeck's common stock or approximately 75% of the combined entity.
For accounting purposes this transaction was be treated as an acquisition of Gold Bond and a recapitalization of EnerTeck.
After the merger, Gold Bond sold 3,150,000 shares of common stock for $1,500,000. In addition, Gold Bond issued warrants and options to acquire 4,025,650 shares of common stock at prices ranging from $.01 to $1.20 per share to various consultants and employees.
On September 2, 2003, the stockholders and directors of Gold Bond approved a 10:1 reverse stock split which is reflected in the share amounts noted above and changed the name of Gold Bond to EnerTeck Corporation.
ENERTECK CORPORATION
(Formerly Gold Bond Resources, Inc.)
CONSOLIDATED BALANCE SHEET
June 30, 2003
(Unaudited)
ASSETS
Current assets
Cash $ 822,777
Accounts receivable, net of allowance for doubtful accounts of $0 412,098
Inventory 82,191
-----------
Total current assets 1,317,066
Property and equipment, net 110,756
-----------
Total assets $ 1,427,822
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 179,997
Accrued expenses 156,501
-----------
Total current liabilities 336,498
-----------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 100,000,000 shares authorized, 9,791,899
shares issued and outstanding 9,792
Additional paid-in capital 2,437,101
Accumulated deficit (1,355,569)
-----------
Total Stockholders' Equity 1,091,324
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,427,822
===========
|
ENERTECK CORPORATION
(Formerly Gold Bond Resources, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2003 and 2002
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues $ 437,341 $ 332,740 $ 513,346 $ 795,965
Cost and expenses:
Cost of revenues 66,251 168,254 104,746 381,178
Sales commission 116,000 -- 116,000 --
Non-cash stock compensation 490,000 -- 490,000 --
General and administrative 342,960 159,946 653,450 282,373
----------- ----------- ----------- -----------
1,015,211 328,200 1,364,196 663,551
----------- ----------- ----------- -----------
Net income (loss) $ (577,870) $ 4,540 $ (850,850) $ 132,414
=========== =========== =========== ===========
Net income (loss) per share:
Basic and diluted $ (0.07) $ -- $ (0.11) $ .02
=========== =========== =========== ===========
Weighted average shares outstanding:
Basic and diluted 8,125,233 5,700,000 7,916,900 5,700,000
=========== =========== =========== ===========
|
ENERTECK CORPORATION
(Formerly Gold Bond Resources, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three and Six Months Ended June 30, 2003 and 2002
(Unaudited)
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (850,850) $ 132,414
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation 17,300 --
Non-cash stock compensation 490,000 --
Changes in assets and liabilities:
Accounts receivable (394,038) (44,392)
Other current assets 5,001 (6,669)
Accounts payable 111,677 (667)
Accrued expenses 66,893 11,606
----------- -----------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES (554,017) 92,292
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (99,803) (14,903)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution to stockholders' -- (80,000)
Sale of common stock, net of $129,500 cost of fundraising 1,445,500 --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES 1,445,500 (80,000)
----------- -----------
NET INCREASE IN CASH 791,680 (2,611)
Cash, beginning of period 31,097 101,530
----------- -----------
Cash, end of period $ 822,777 $ 98,919
=========== ===========
|
ENERTECK CORPORATION
(Formerly Gold Bond Resources, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: PRESENTATION
The consolidated balance sheet of Gold Bond Resources, Inc., dba Enerteck Corporation ("Enerteck") as of June 30, 2003, the related consolidated statements of operations for the three and six months ended June 30, 2003 and 2002 and the consolidated statements of cash flows for the three and six months ended June 30, 2003 and 2002 included in the financial statements have been prepared by Enerteck without audit. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal, recurring adjustments) necessary to summarize fairly Enerteck's financial position and results of operations. The results of operations for the three months periods are not necessarily indicative of the results of operations for the full year or any other interim period. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2002 as reported in Form 8-K/A, have been omitted.
Stock Options:
Enerteck accounts for its stock-based compensation plans under Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees. Statement of Financial Accounting Standard ("FAS") No. 148,
Accounting for Stock-Based Compensation-Transition and Disclosure, issued in
December 2002 requires pro forma net income (loss) and pro forma net income
(loss) per share to be disclosed in interim financial statements.
During the quarter ended June 30, 2003, Enerteck's board of directors approved the issuance of options to acquire 1,100,000 shares of common stock to two employees. 1,000,000 options had an exercise price of $.001 per share resulting in $490,000 of compensation expense during the quarter ended June 30, 2003 under the intrinsic value method. The fair value on the date issued was determined based on the stock sold during the quarter (see note 2 below).
100,000 options were issued to an employee exercisable at $.12 per share. The options vested immediately and have a five year life.
The following table illustrates the effect on net income and earnings per share if Enerteck had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
Three Months Ended Six Months Ended
June 30, June 30,
------- -------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net income (loss), as reported $ (577,870) $ 4,540 $ (850,850) $ 132,414
============ ============ ============ ============
Deduct: Total stock-based employee compensation
expense determined under the fair value based
method for all awards (32,000) -- (32,000) --
------------ ------------ ------------ ------------
Pro forma net income (loss) $ (609,870) $ 4,540 $ (882,850) $ 132,414
============ ============ ============ ============
Income (Loss) per share:
Basic and diluted - as reported $ (0.01) $ -- $ (0.01) $ --
============ ============ ============ ============
Basic and diluted - pro forma $ (0.01) $ -- $ (0.01) $ --
============ ============ ============ ============
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The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield $0, expected volatility of 100%, risk-free interest rate of 3.5%, and expected life of 5 years.
NOTE 2: COMMON STOCK
During the six months ended June 30, 2003, Enerteck sold 2,500,000 shares of common stock for $.05 per share, or $1,250,000. Enerteck received $945,485 after expenses of $129,500 which were recorded as a reduction of additional paid in capital.
NOTE 3: SUBSEQUENT EVENT
On September 2, 2003, the stockholders and directors approved a 10:1 reverse stock split whereby each stockholder of Gold Bond will receive one share of Gold Bond's common stock in exchange for each ten shares of Gold Bond common stock. In addition, the stockholders and directors approved changing the name of the corporation to EnerTeck Corporation.
All per share information included in the unaudited interim financials statements have been adjusted to reflect the stock split.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides for broad indemnification of officers and directors. In this regard, our Certificate of Incorporation provides in its Sixth Article that:
"No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. Any repeal or modification of this paragraph by
the stock holders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification."
Section 174 of the General Corporation Law referred to above in item iii of the Sixth Article indicates what the liability of directors is for unlawful payment of a dividend or unlawful stock purchase or redemption.
Because the Certificate of Incorporation of the Company provides for such indemnification, the foregoing provisions of Delaware law together with the above mentioned articles of our certificate of incorporation are broad enough to permit the Company to indemnify its officers and directors from liability that may arise under the Securities Act of 1933, as amended.
We have not sought or obtained any director or officer insurance coverages or made any other arrangements for the funding of any indemnification obligations it might incur under the terms of its Certificate of Incorporation and Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by any one of our directors, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted against us by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
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ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a list of the estimated expenses to be incurred by the Registrant in connection with the preparation and filing of this Registration Statement.
SEC Registration Fee $ 168.35
Printing and Engraving $ 5,000.00
Accountants' Fees and Expenses $ 7,500.00
Legal Fees and Expenses $ 15,000.00
Miscellaneous Expenses $ 5,000.00
-----------
Total $ 32,668.35
===========
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ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
The references below to the number of shares and warrants issued, and stock purchase prices or warrant exercise prices have been adjusted to reflect the ______2003, one from 10 reverse common stock split as if it had occurred prior thereto.
1. Between August 1, 2000 and July 31, 2001, the Company sold 320,000 shares of its common stock at $.05 per share for a total of $16,000 in a private placement offering exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof directly by the Company without engaging in any advertising or general solicitation of any kind and without payment of underwriting discounts or commissions to any person.
2. Between August 1, 2001 and July, 31, 2002, the Company sold 25,000 shares of its common stock at $1.00 per share for a total of $25,000 in a private placement offering exempt from the registration requirements of the Securities Act pursuant Rule 506 of Regulation D under Section 4(2) thereof directly by the Company without engaging in any advertising or general solicitation of any kind and without payment of underwriting discounts or commissions to any person.
3. Between December 20, 2002 and June 1, 2003, the Company sold a total of 3,150,000 shares of its common stock at $.50 per share for gross proceeds of $1,575,000 in two separate private placement offerings to accredited investors only. These offerings were exempt from the registration requirements of the Securities Act pursuant Rule 506 of Regulation D under Section 4(2) thereof. These securities were sold both directly by the Company with regard to some sales and through a NASD registered broker-dealer ("Selling Agent") with regard to others. The offerings were conducted without engaging in any advertising or general solicitation of any kind and without payment of underwriting discounts or commissions to any person except commissions to the Selling Agent on sales effected by it. The sales agents were paid $134,000 in fees and commissions.
4. During 2003, the Company issued 500,000 shares of its common stock to one shareholder for services rendered and issued warrants to purchase up to 4,025,650 shares of common stock at varying exercise prices to a total of 10 warrant holders. The shares underlying these warrants are covered in this Registration Statement. The warrants are immediately exercisable. All of the securities issued in 2003 were issued in private transactions exempt from the registration requirements of the Securities
II-2
Act of 1933, as amended, pursuant to Section 4(2) thereunder without payment of underwriting discounts or commissions.
The foregoing transactions are exempt from the registration provisions of the Securities Act of 1933, as amended, by reason of exemptions from registration afforded by Section 4 (2) thereof as constituting private transactions not involving a public offering. The transfer thereof has been appropriately restricted by the Company. The offers and sales should not be integrated with the public offering herein in reliance upon the safe harbor interpretation of Rule 152 under which it is the view of the Staff of the SEC that the filing of a registration statement following an offering otherwise exempt under Section 4 (2) does not vitiate the exemption in that Section.
ITEM 27. EXHIBITS
THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS REGISTRATION STATEMENT:
Exhibit No. Exhibit Method of Filing
----------- ------- ----------------
2.1 Share Exchange Agreement Incorporated by reference to
Exhibit 10.1 to Registrant's
Report on Form 8-K
filed on January 23, 2003
2.2 Plan of Merger To be filed by Amendment
2.3 Articles of Merger (Delaware) To be filed by Amendment
2.4 Articles of Merger (Washington) To be filed by Amendment
3.1 Articles of Incorporation Filed herewith
(July 8, 2003 filing date)
3.2 Bylaws To be filed by Amendment
4.1 Specimen of Common Stock Certificate To be filed by Amendment
5.1 Opinion on Legality Filed herewith.
10.1 Employment Agreement by and between Filed herewith
Dwaine Reese and the Registrant
dated July 1, 2003
10.2 Employment Agreement by and between Filed herewith
Dwaine Reese and the Registrant's Subsidiary
dated July 1, 2003
10.3 Employment Agreement by and between Filed herewith
V. Patrick Keating and the Registrant's Subsidiary
dated August 1, 2003
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10.4 Employment Agreement by and between Filed herewith
Leon van Kraayenburg and the Registrant
dated August 1, 2003
10.5 Employment Agreement by and between Filed herewith
Leon van Kraayenburg and the Registrant's
Subsidiary dated August 1, 2003
10.6 Consulting Agreement by and between Filed herewith
James J. Mullen and the Registrant
dated January 15, 2003
10.7 Employment Agreement by and between Filed herewith
Roy Stern and the Registrant's Subsidiary
dated August 1, 2003
10.8 Consulting Agreement by and between Filed herewith
Parrish Brian Partners, Inc. and the
Registrant dated January 9, 2003
10.9 Amendment to Consulting Agreement by Filed herewith
and between Parrish Brian Partners, Inc.
and the Registrant dated May 15, 2003
10.10 Commission Agreement by and between To be filed by Amendment
WaxTech International, Inc. and the
Registrant dated August 15, 2003
10.11 Warrant to purchase 15,000,000 shares Filed herewith
issued to Parrish Brian Partners, Inc.
dated August 1, 2003 filed herewith
10.12 Warrant to purchase 10,000,000 shares Filed herewith
issued to Dwaine Reese
dated August 1, 2003
10.13 Warrant to purchase 1,000,000 shares Filed herewith
issued to James Mullen
dated August 1, 2003
10.14 Warrant to purchase 2,000,000 shares Filed herewith
issued to Leon van Kraayenburg
dated August 1, 2003
10.15 Warrant to purchase 1,750,000 shares Filed herewith
issued to WaxTech International, Inc.
dated August 1, 2003
II-4
|
10.16 Warrant to purchase 1,000,000 shares Filed herewith
issued to Debbie Tenney
dated August 1, 2003
10.17 Warrant to purchase 1,000,000 shares Filed herewith
issued to Roy Stern
dated August 1, 2003
10.18 Warrant to purchase 4,981,500 shares Filed herewith
issued to Allan F. Dow & Assoc., Inc.
dated August 1, 2003
10.19 Warrant to purchase 1,500,000 shares Filed herewith
issued to JD McGraw
dated August 1, 2003
10.20 Warrant to purchase 25,000 shares Filed herewith
issued to Maxim Group LLC
dated April 30, 2003
10.21 Warrant to purchase 2,000,000 shares Filed herewith
issued to Maxim Group LLC
dated June 6, 2003
10.22 Memorandum of Understanding by and between Filed herewith
the Registrant's Subsidiary and
RubyCat Technology dated February 1, 2003
10.23 Office Lease dated February 1, 2001 Filed herewith
10.24 Office Lease Amendment dated March 31, 2003 Filed herewith
10.25 Distribution Agreement by and between Filed herewith
WaxTech International, Inc. and
Mitsubishi International Corporation ("MIC")
dated December 15, 2002
10.26 March 15, 2003 letter from Filed herewith
WaxTech International, Inc. to Registrant's
Subsidiary assigning Distribution Agreement
10.27 March 26, 2003 letter from Filed herewith
WaxTech International, Inc. to MIC-re:
assumption of Distribution Agreement
10.28 Agency Agreement by and between Filed herewith
EchemTrade Energy & Petrochemical, Ltda.
and the Registrant's Subsidiary dated
February 15, 2003
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10.29 Amendment to Agency Agreement by and between To be filed by Amendment
EchemTrade Energy & Petrochemical, Ltda.
and the Registrant's Subsidiary dated
September 1, 2003
10.30 Sales Agreement by and between Filed herewith
Allan F. Dow & Associates, Inc.
and the Registrant's Subsidiary dated
May 1, 2003
10.31 Consulting Agreement by and between Filed herewith
Allan F. Dow & Associates, Inc.
and the Registrant's Subsidiary dated
October 10, 2002
10.32 Amendment to the October 10, 2002 Filed herewith
Consulting Agreement by and between
Allan F. Dow & Associates, Inc. and the
Registrant's Subsidiary dated
March 18, 2003
10.33 Investment Banking Agreement by and between Filed herewith
Maxim Group, LLC and the Registrant
dated March 26, 2003
21.1 Subsidiaries of the Registrant Filed herewith
23.1 Consent of Malone & Bailey, PLLC Filed herewith
23.2 Consent of Danzig, Kaye, Cooper, Filed herewith in
Fiore & Kaye, LLP Exhibit 5.1
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ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, an effective amendment to this registration statement to: (i) include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; (ii) reflect in the prospectus any facts or events arising after the effective date of the registration statement which, individually or together, represent a fundamental change in the information in the registration statement; and (iii) include any additional or changed material information on the plan of distribution.
2. For the purpose of determining liability under the Securities Act of 1933, as amended, treat each post-effective amendment as a new registration statement relating to the securities offered, and the offering of such securities at that time to be the initial bona fide offering thereof.
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3. To file a post-effective amendment to remove from registration any of the securities being registered that remain unsold at the termination of the offering.
4. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in a successful defense of any action, suit or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has reasonable grounds to believe that it meets all of the requirements for filing SB-2 and authorized this amendment to the registration statement to be signed on its behalf in the City of Stafford, State of Texas, on September 16, 2003.
ENERTECK CORPORATION
By: /s/ Dwaine Reese ----------------------------- Dwaine Reese Chief Executive Officer |
In accordance with the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Dwaine Reese Chief Executive Officer September 16, 2003
----------------
Dwaine Reese Chairman of the Board
Principal Operating Officer
/s/ Leon van Kraayenburg Executive Vice President/Finance September 16, 2003
------------------------
Leon van Kraayenburg Chief Financial Officer & Treasurer
Principal Accounting Officer
/s/ Parrish B. Ketchmark President September 16, 2003
------------------------
Parrish B. Ketchmark Director
/s/ James J. Mullen Executive Vice President September 16, 2003
---------------------------
James J. Mullen Director
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II-8
EXHIBIT INDEX
Exhibit No. Exhibit Method of Filing
----------- ------- ----------------
2.1 Share Exchange Agreement Incorporated by reference to
Exhibit 10.1 to Registrant's
Report on Form 8-K
filed on January 23, 2003
2.2 Plan of Merger To be filed by Amendment
2.3 Articles of Merger (Delaware) To be filed by Amendment
2.4 Articles of Merger (Washington) To be filed by Amendment
3.1 Articles of Incorporation Filed herewith
(July 8, 2003 filing date)
3.2 Bylaws To be filed by Amendment
4.1 Specimen of Common Stock Certificate To be filed by Amendment
5.1 Opinion on Legality Filed herewith.
10.1 Employment Agreement by and between Filed herewith
Dwaine Reese and the Registrant
dated July 1, 2003
10.2 Employment Agreement by and between Filed herewith
Dwaine Reese and the Registrant's Subsidiary
dated July 1, 2003
10.3 Employment Agreement by and between Filed herewith
V. Patrick Keating and the Registrant's Subsidiary
dated August 1, 2003
41
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10.4 Employment Agreement by and between Filed herewith
Leon van Kraayenburg and the Registrant
dated August 1, 2003
10.5 Employment Agreement by and between Filed herewith
Leon van Kraayenburg and the Registrant's
Subsidiary dated August 1, 2003
10.6 Consulting Agreement by and between Filed herewith
James J. Mullen and the Registrant
dated January 15, 2003
10.7 Employment Agreement by and between Filed herewith
Roy Stern and the Registrant's Subsidiary
dated August 1, 2003
10.8 Consulting Agreement by and between Filed herewith
Parrish Brian Partners, Inc. and the
Registrant dated January 9, 2003
10.9 Amendment to Consulting Agreement by Filed herewith
and between Parrish Brian Partners, Inc.
and the Registrant dated May 15, 2003
10.10 Commission Agreement by and between To be filed by Amendment
WaxTech International, Inc. and the
Registrant dated August 15, 2003
10.11 Warrant to purchase 15,000,000 shares Filed herewith
issued to Parrish Brian Partners, Inc.
dated August 1, 2003 filed herewith
10.12 Warrant to purchase 10,000,000 shares Filed herewith
issued to Dwaine Reese
dated August 1, 2003
10.13 Warrant to purchase 1,000,000 shares Filed herewith
issued to James Mullen
dated August 1, 2003
10.14 Warrant to purchase 2,000,000 shares Filed herewith
issued to Leon van Kraayenburg
dated August 1, 2003
10.15 Warrant to purchase 1,750,000 shares Filed herewith
issued to WaxTech International, Inc.
dated August 1, 2003
42
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10.16 Warrant to purchase 1,000,000 shares Filed herewith
issued to Debbie Tenney
dated August 1, 2003
10.17 Warrant to purchase 1,000,000 shares Filed herewith
issued to Roy Stern
dated August 1, 2003
10.18 Warrant to purchase 4,981,500 shares Filed herewith
issued to Allan F. Dow & Assoc., Inc.
dated August 1, 2003
10.19 Warrant to purchase 1,500,000 shares Filed herewith
issued to JD McGraw
dated August 1, 2003
10.20 Warrant to purchase 25,000 shares Filed herewith
issued to Maxim Group LLC
dated April 30, 2003
10.21 Warrant to purchase 2,000,000 shares Filed herewith
issued to Maxim Group LLC
dated June 6, 2003
10.22 Memorandum of Understanding by and between Filed herewith
the Registrant's Subsidiary and
RubyCat Technology dated February 1, 2003
10.23 Office Lease dated February 1, 2001 Filed herewith
10.24 Office Lease Amendment dated March 31, 2003 Filed herewith
10.25 Distribution Agreement by and between Filed herewith
WaxTech International, Inc. and
Mitsubishi International Corporation ("MIC")
dated December 15, 2002
10.26 March 15, 2003 letter from Filed herewith
WaxTech International, Inc. to Registrant's
Subsidiary assigning Distribution Agreement
10.27 March 26, 2003 letter from Filed herewith
WaxTech International, Inc. to MIC-re:
assumption of Distribution Agreement
10.28 Agency Agreement by and between Filed herewith
EchemTrade Energy & Petrochemical, Ltda.
and the Registrant's Subsidiary dated
February 15, 2003
43
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10.29 Amendment to Agency Agreement by and between To be filed by Amendment
EchemTrade Energy & Petrochemical, Ltda.
and the Registrant's Subsidiary dated
September 1, 2003
10.30 Sales Agreement by and between Filed herewith
Allan F. Dow & Associates, Inc.
and the Registrant's Subsidiary dated
May 1, 2003
10.31 Consulting Agreement by and between Filed herewith
Allan F. Dow & Associates, Inc.
and the Registrant's Subsidiary dated
October 10, 2002
10.32 Amendment to the October 10, 2002 Filed herewith
Consulting Agreement by and between
Allan F. Dow & Associates, Inc. and the
Registrant's Subsidiary dated
March 18, 2003
10.33 Investment Banking Agreement by and between Filed herewith
Maxim Group, LLC and the Registrant
dated March 26, 2003
21.1 Subsidiaries of the Registrant Filed herewith
23.1 Consent of Malone & Bailey, PLLC Filed herewith
23.2 Consent of Danzig, Kaye, Cooper, Filed herewith in
Fiore & Kaye, LLP Exhibit 5.1
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CERTIFICATE OF INCORPORATION
OF
ENERTECK CORPORATION
FIRST: The name of the Corporation is EnerTeck Corporation (the "Corporation").
SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware.
FOURTH: The authorized capital stock of the corporation shall consist of two (2) classes of stock, designated as Common Stock and Preferred Stock.
The total number of shares of Common Stock that the corporation will have authority to issue is one hundred million (100,000,000) shares. The shares shall have par value of $.001 per share. All of the Common Stock authorized herein shall have equal voting rights and powers without restrictions in preference.
The total number of shares of Preferred Stock that the corporation will have authority to issue is ten million (10,000,000) shares. The Preferred Stock shall have no stated value and par value of $.001 per share. The Preferred Stock shall be entitled to preference over the Common Stock with respect to the distribution of assets of the corporation in the event of liquidation, dissolution, or winding-up of the corporation, whether voluntarily or involuntarily, or in the event of any other distribution of assets of the corporation among its stockholders for the purpose of winding-up its affairs. The authorized but unissued shares of Preferred Stock may be divided into and issued in designated series from time to time by one or more resolutions adopted by the Board of Directors. The Directors in their sole discretion shall have the power to determine the relative powers, preferences, and rights of each series of Preferred Stock.
FIFTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal from time to time the By-laws of the Corporation in any manner not inconsistent with the laws of the State of Delaware or the Certificate of Incorporation of the Corporation.
SIXTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of this paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.
SEVENTH: The Corporation reserves the right at any time and from time to time to amend, alter or repeal any provision contained in this Certificate of Incorporation in the manner now or as hereafter prescribed by law, and all rights, preferences, and privileges conferred upon stockholders, directors, and officers by or pursuant to this Certificate of Incorporation in its present form or as hereafter amended are subject to the rights reserved in this Article.
EIGHTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-laws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws of the Corporation.
NINTH: The corporation is authorized to indemnify, agree to indemnify or obligate itself to advance or reimburse expenses incurred by its Directors, Officers, employees or agents to the full extent of the Delaware General Corporation Law as may now or hereafter exist.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Incorporation to be signed by its Incorporator on July 7, 2003.
ENERTECK CORPORATION
By: /s/ Gregory B. Lipsker
--------------------------------------
Gregory B. Lipsker, Incorporator
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DANZIG KAYE COOPER FIORE & KAY, LLP
30A Vreeland Road
PO Box 333
Florham Park, New Jersey 07932
FORM OF EXHIBIT 5.1
[CONFORMED COPY TO BE FILED BY AMENDMENT]
-----------------------, 2003
EnerTeck Corporation
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
You have requested our opinion as counsel for EnerTeck Corporation, a Delaware corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, of 7,175,650 shares of the Company's common stock currently outstanding or which may be acquired upon exercise of warrants (the "Shares").
In connection therewith, and arriving at the opinion as expressed below, we have examined and relied upon originals or copies, certified or otherwise identified to our satisfaction, of the Company's Certificate of Incorporation as amended, By-laws of the Company, the Registration Statement on Form SB-2 in the form to be filed with the Securities and Exchange Commission (the "Registration Statement") and such other documents as we have deemed necessary or appropriate as a basis for the opinion expressed herein.
In connection with our examination, we have assumed the genuineness of the signatures, the authenticity of all documents tendered to us as originals, the legal capacity of natural persons and the conformity to original documents of all documents submitted to us as certified, conformed, photostatic or facsimile copies.
EnerTeck Corporation
---------------------, 2003
Based on the foregoing, and subject to the qualifications and limitations set forth herein, we are of the opinion that (i) the Shares subject of the Registration Statement which are currently outstanding are, and (ii) the Shares subject of the Registration Statement issuable upon exercise of warrants, when issued, delivered and paid for as contemplated in the prospectus forming a part of the Registration Statement, will be, legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement.
We are furnishing this opinion to the Company solely for its benefit in connection with the Registration Statement. It is not to be used, circulated, quoted or otherwise referred to for any other purpose. Other than the Company, no one is entitled to rely on this opinion.
Very truly yours,
DANZIG KAYE COOPER FIORE & KAY, LLP
EMPLOYMENT AGREEMENT
Between
GOLD BOND RESOURCES, INC.
And
DWAINE REESE
This Employment Agreement (the "Agreement") is made and entered into to be effective the 1st day of July, 2003 (The "Effective Date") by and between Gold Bond Resources, Inc., a Texas corporation, (the "Company") and Dwaine Reese ("Employee").
WITNESSETH:
WHEREAS, Employee is an experienced professional whose educational background, experience, skill and expertise in the field of manufacturing, marketing, business development, engineering, management and the like render him valuable to the Company as an employee,
WHEREAS, the Company desires to employ the Employee and the Employee desires to be employed by the Company; and
WHEREAS, Employee and the Company desire to set forth the terms and conditions of Employee's employment with the Company.
NOW, THEREFORE, and in consideration of the promises and of the full and faithful performance of the respective agreements herein contained, the parties hereto do mutually covenant and agree with each other as follows:
1. Employment. The Company agrees to employ Employee as Chief Executive Officer (CEO) and Employee accepts such employment upon the terms and conditions hereinafter set forth. The Employee shall report directly to the Board.
2. Term. The term of this Agreement shall be for a period of twelve
(12) months from the Effective Date.
3. Compensation
(a) Special Stock Warrants. The Company agrees to issue to Employee warrants to purchase 10,000,000 shares of the Company's restricted common stock at a purchase price of $.001 per share (or 1,000,000 shares at a price of $.01 per share after the Company's intended one for 10 common stock reverse split). Said warrants are to be subject to a separate warrant agreement and considered earned upon the execution of this agreement. Said warrant agreement shall include a provision requiring the Company to register with the Securities and Exchange Commission the shares underlying the warrants.
(b) Stock Options. The Company intends to create an Employee Stock Option Plan. Accordingly, in addition to the provision in item 3(a) above, the Employee will be granted options to purchase common shares of Company in accordance with said Employee Stock Option Plan.
4. Duties. During the term of this Agreement, Employee shall serve the Company in the position of CEO and shall perform such duties as is consistent with these positions, and as may be delegated or assigned to him from time to time by the Company.
5. Extent of Services. The Employee shall devote substantially all of his working time, attention and energy during normal business hours (other than absences due to illness or vacation) to the performance of his duties for the Company.
6. Expenses. Employee is authorized to incur reasonable expenses in promoting the business of the Company and will be reimbursed by the Company for approved expenses in accordance with the Company's normal practice upon submission of required documentation.
7. Office: The Company and the Employee agree that the principal place of employment of the Employee shall be at the Company's principal employee offices in Stafford, Texas or such other place as the Board of Directors of the Company (the "Board") may determine.
8. Termination. The Employee's employment hereunder shall terminate upon the expiration of the Term and may be terminated during the Term under the following circumstances:
(a) Death. Employee's employment hereunder shall terminate upon his death.
(b) Disability. If, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been substantially unable to perform his
duties hereunder for an entire period of four (4) months or more during any six
(6) consecutive month period, and within thirty (30) days after written Notice
of Termination is given after such six (6) month period, Employee shall not have
returned to the substantial performance of his duties on a fulltime basis, the
Company shall have the right to terminate Employee's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate Employee's employment for Cause, and such termination in and of itself shall not be, nor shall it be deemed to be, a breach of this Agreement. For purposes of this Agreement, "Cause" to terminate Employee's employment shall include but not be limited to the Employee's:
(i) Conviction of, or plea of guilty or nolo contendere to, a felony; or
(ii) Continued failure to use reasonable best efforts to substantially perform his duties hereunder (other than such failure resulting from Employee's incapacity due to physical or mental illness or subsequent to the issuance of a Notice of Termination by Employee for Good Reason) after demand for substantial performance is delivered by the Company in writing that specifically identifies the manner in which the Company believes Employee has not used reasonable best efforts to substantially perform his duties; or
(iii) Misconduct (including, but not limited to, a breach of the provisions of Section 9) that is materially economically injurious to the Company or to any entity in control of, controlled by or under common control with the Company ("Affiliates").
(d) Good Reason. Employee may terminate his employment for "Good Reason" within one hundred and twenty (120) days after Employee has actual knowledge of the occurrence, without the written consent of Employee, of one of the following events that has not been cured within thirty (30) days after written notice thereof has been given by Employee to the Company:
(i) A reduction by the Company in Employee's Base Salary or a failure by the Company to pay any such amounts when due;
(ii) The Company's failure to provide the benefits set forth in Section 3 or the failure of the Company to substantially provide any material employee benefits due to be provided to
Employee (other than any such failure not inconsistent with any express provisions contained herein which failure affects all senior executive officers); or
(iii) The Company's failure to provide in all material respects the indemnification set forth in Section 11 of this Agreement. Employee's right to terminate his employment hereunder for Good Reason shall not be affected by his incapacity due to physical or mental illness. Employee's continued employment during the one hundred and twenty (120) day period referred to above in this paragraph (d) shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.
(e) Without Cause. The Company shall have the right to terminate Employee's employment hereunder without Cause by providing Employee with a Notice of Termination thirty (30) days prior to the date of termination of employment, and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement.
(f) Without Good Reason. Employee shall have the right to terminate his employment hereunder without Good Reason by providing the Company with a Notice of Termination thirty (30) days prior to the date of termination of employment, and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement.
9. Non-Competition, Confidentiality Agreement and Removal of Documents.
(a) Purpose: In connection with the limited protection afforded the Company
by the covenants contained in this Paragraph, Employee recognizes and
acknowledges that the Company's need for the following covenants is based upon:
(i) The Company has expended and will expend substantial time, money and effort
in developing concepts, products and technology in its lines of business and
valuable lists of customers and information relating to its business
requirements, needs, patterns and procedures; (ii) Employee in the course of
employment, will be entrusted with and exposed to the Company's trade secrets
and other proprietary and confidential information; (iii) The Company, during
the term of this Agreement and thereafter, will be engaged in a highly
competitive industry in which many firms, including the Company compete; (iv)
Employee could by utilizing the trade secrets or other proprietary and
confidential information owned by the Company, become a competitor or be
employed by or otherwise assist a competitor; and (v) the Company will suffer
great loss if Employee were to terminate this Agreement and thereafter enter,
directly or indirectly, into competition with the Company.
(b) Non-Competition Agreement. While the Employee is employed by the Company and for a period to two (2) years thereafter, as part of the consideration for the compensation described in paragraph 3, above,, Employee agrees not to, directly or indirectly, acting alone or in conjunction with others, except with the express written permission of the Company secured in advance:
(i) invest, own (in whole or in part) be employed by, consult with, be a stockholder, officer, director, partner or representative of, or engage in any business which designs, manufactures, uses or sells, technology or conducts any business in direct competition with the Company or any of its subsidiaries or affiliates during the term hereof;
(ii) solicit or contact customers of the Company for purposes other than the business of the Company;
(iii) solicit, canvas or accept, or transact any other business in the same lines of business as Company;
(iv) induce or attempt to influence any employee of Company to terminate his or her employment; or
(v) disparage by word, action or otherwise the business reputation of the Company.
(c) Confidentiality Agreement. During the term of this Agreement and following the
termination hereof, and for a period of five years thereafter the Employee agrees not to disclose or make any use, for his own benefit or for the benefit of a business or entity other than the Company or its subsidiaries or affiliates of any information or data of or pertaining to the Company, its business and financial affairs, or its products or services which is treated as confidential by the Company and is not generally known within its trade, which was acquired by Employee during his affiliation with the Company.
(d) Removal of Documents: Rights to Product. All records, files, drawings, documents, models, equipment, and the like relating to the Company's business, which Employee has control over shall not be removed from the Company's premises without its written consent, unless such removal is in the furtherance of the Company's business or is in connection with Employee's carrying out his duties under this Agreement and, if so removed, shall be returned to the Company promptly after termination of Employee's employment thereunder, or otherwise promptly after removal if such removal occurs following termination of employment. Employee shall assign to the Company all rights to trade secrets and other products relating to the Company's business developed by him alone or in conjunction with others at any time while employed by the Company. (e) Independent Agreement. All agreements made in this Paragraph shall be construed as agreements independent of any other provision herein, and the existence of any claim, cause of action or defense of Employee as against the Company predicated on this Agreement, or otherwise, shall not constitute a defense to the Company's enforcement of such agreement. The covenants and agreements of Employee contained herein shall survive the termination or expiration of this Agreement.
(f) Equitable Remedies. Employee further acknowledges and understands that his services are of a special and unique nature, therefore the breach of this agreement cannot be adequately or accurately compensated for in damages by an action at law, and that the breach or threatened breach of any provisions of this agreement would cause the Company irreparable harm. In the event of any such breach, Employee agrees that the Company shall be entitled, as a matter of right, to injunctive and other equitable relief, without waiving any other rights which it may have to damages or otherwise under this Agreement.
(g) Nature of Restrictions. Employee hereby specifically acknowledges and agrees that the temporal and other restrictions contained in this Paragraph are reasonable and necessary to protect the business and prospects of the Company, and that the enforcement of the provisions of this Paragraph will not work an undue hardship on him.
(h) Survival. Employee further agrees, in the event that any provision of this Paragraph is held to be invalid or against public policy, the remaining provisions of this Paragraph and the remainder of this Agreement shall not be affected thereby.
10. Inventions and Patents. Employee agrees that any inventions, designs, improvements, and/or discoveries made by Employee during the term of his employment solely or jointly with others, which (i) are made directly or indirectly using the Company's equipment, supplies, facilities, trade secrets, or time (ii) related at the time of conception or reduction to practice of the business of the Company and/or the Company's actual or anticipated research and development, or (iii) result from any work performed by Employee for the Company, shall be the exclusive property of the Company. Employee agrees that he will promptly and fully inform and disclose to the Company all such inventions, designs, improvements, and discoveries, and Employee promises to assign such inventions to the Company. Employee also agrees that the Company shall
have the right to keep such inventions as trade secrets, if the Company chooses. Employee shall assist the Company in obtaining patents in the United States and in all foreign countries on all inventions, design, improvements, and discoveries deemed patentable by the Company and shall execute all documents and do all things necessary to obtain Letters Patents to vest the Company with full and extensive titles to the patents and will assist the Company to protect the patents against infringement by others. For purposes of this Paragraph, an invention is presumed if it relates at the time of conception or reduction to practice of the business of the Company or the Company's actual or anticipated research or development during the period of Employee's employment.
11. Indemnification of Officers and Employees. The Company shall indemnify, protect and hold Employee harmless, to the fullest extent permitted by Texas law and the Company's certificate of incorporation, as amended, and its by-laws, from any and all claims and legal actions against the Company including but not limited to product liability claims, shareholder or government claims, fines, penalties, or legal actions; or any other tort or action against the Employee as a result of Employee's employment by Company. Company does not presently maintain officer and director liability insurance. However, if the Company does obtain such coverage in the future, the Company will immediately cause said Employee to be covered by said insurance.
12. Notices. Any notices, demands, or requests provided for, required or permitted to be given pursuant to this Agreement shall be deemed to have been properly given if in writing and given to the party personally or if it is sent by registered mail, postage prepaid, to the following addresses:
TO EMPLOYEE: TO THE COMPANY: Dwaine Reese Gold Bond Resources, Inc. 2206 Country Creek Way 10701 Corporate Drive, Suite 150 Richmond, TX 77469 Stafford, TX 77477 |
13. Entire Agreement. This Agreement contains the entire agreement of the parties hereto relative to the subject matter hereof and supersedes any prior negotiations or agreements between the parties.
14. Benefit. This Agreement shall bind and inure to the benefit of the parties, their successors, assigns, heirs and personal representatives.
15. Assignment. This Agreement is personal in nature to the Employee and shall not be assignable or delegable voluntarily or by operation of law or otherwise by the Employee, without the consent of the Company.
16. Amendment. This Agreement shall not be changed, modified, supplemented or amended, in whole or in part except by an instrument in writing signed by the parties hereto
or their respective successors or assigns, or otherwise as provided herein.
17. Severability. In the event that any one or more of the provisions of this Agreement are for any reason, held to be illegal, invalid, or unenforceable under present or future laws during the term hereof, such provision shall be fully severable and this Agreement and each separate provision hereof shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement.
18.Applicable Law. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled any applicable Court of Law presiding in Harris County, Texas, United States. In respect to any such legal proceedings, the prevailing party shall be entitled to receive, in addition to any other remedy, all costs and expenses incurred in such proceedings, including reasonable attorney's fees.
IN WITNESS WHEREOF the parties have executed this Agreement on the day and year as noted.
Gold Bond Resources, Inc. EMPLOYEE By:/s/ Parrish Ketchmark /s/ Dwaine Reese Parrish Ketchmark President Dwaine Reese Date: July 1, 2003 Date: August 11, 2003 |
GOBM(GOBM)-REESE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
Between
ENERTECK CHEMICAL CORPORATION
And
DWAINE REESE
This Employment Agreement (the "Agreement") is made and entered into to be effective the 1st day of July, 2003 (The "Effective Date") by and between EnerTeck Chemical Corporation, a Texas corporation, (the "Company") and Dwaine Reese ("Employee").
WITNESSETH:
WHEREAS, Employee is an experienced professional whose educational background, experience, skill and expertise in the field of manufacturing, marketing, business development, engineering, management and the like render him valuable to the Company as an employee,
WHEREAS, the Company desires to employ the Employee and the Employee desires to be employed by the Company; and
WHEREAS, Employee and the Company desire to set forth the terms and conditions of Employee's employment with the Company.
NOW, THEREFORE, and in consideration of the promises and of the full and faithful performance of the respective agreements herein contained, the parties hereto do mutually covenant and agree with each other as follows:
1. Employment. The Company agrees to employ Employee as Chief Executive Officer (CEO) and Employee accepts such employment upon the terms and conditions hereinafter set forth. The Employee shall report directly to the Board.
2. Term. The term of this Agreement shall be for a period of twelve
(12) months from the Effective Date.
3. Compensation
(a) Basic Compensation. The Company agrees to pay Employee a wage of $150,000 per year, payable in equal monthly payments on the regular paydays of the Company for the term of this Agreement.
(b) Benefits. In addition to the compensation indicated in 3(a), above, Employee shall be entitled to participate in any group employee benefit program of the Company, including medical insurance and 401(k) programs, if the Company creates and institutes any such plan in its sole discretion.
(c) Vacations. Employee shall also be entitled to four (4) weeks vacation time during each calendar year. The dates of vacation time are subject to Company approval.
4. Duties. During the term of this Agreement, Employee shall serve the Company in the position of CEO and shall perform such duties as is consistent with these positions, and as may be delegated or assigned to him from time to time by the Company.
5. Extent of Services. The Employee shall devote substantially all of his working time, attention and energy during normal business hours (other than absences due to illness or vacation) to the performance of his duties for the Company.
6. Expenses. Employee is authorized to incur reasonable expenses in promoting the business of the Company and will be reimbursed by the Company for approved expenses in accordance with the Company's normal practice upon submission of required documentation.
7.Office: The Company and the Employee agree that the principal place of employment of the Employee shall be at the Company's principal employee offices in Stafford, Texas or such other place as the Board of Directors of the Company (the "Board") may determine.
8. Termination. The Employee's employment hereunder shall terminate upon the expiration of the Term and may be terminated during the Term under the following circumstances:
(a) Death. Employee's employment hereunder shall terminate upon his death.
(b) Disability. If, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been substantially unable to perform his
duties hereunder for an entire period of four (4) months or more during any six
(6) consecutive month period, and within thirty (30) days after written Notice
of Termination is given after such six (6) month period, Employee shall not have
returned to the substantial performance of his duties on a fulltime basis, the
Company shall have the right to terminate Employee's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate Employee's employment for Cause, and such termination in and of itself shall not be, nor shall it be deemed to be, a breach of this Agreement. For purposes of this Agreement, "Cause" to terminate Employee's employment shall include but not be limited to the Employee's:
(i) Conviction of, or plea of guilty or nolo contendere to, a felony; or
(ii) Continued failure to use reasonable best efforts to substantially perform his duties hereunder (other than such failure resulting from Employee's incapacity due to physical or mental illness or subsequent to the issuance of a Notice of Termination by Employee for Good Reason) after demand for substantial performance is delivered by the Company in writing that specifically identifies the manner in which the Company believes Employee has not used reasonable best efforts to substantially perform his duties; or
(iii) Misconduct (including, but not limited to, a breach of the provisions of Section 9) that is materially economically injurious to the Company or to any entity in control of, controlled by or under common control with the Company ("Affiliates").
(d) Good Reason. Employee may terminate his employment for "Good Reason" within one hundred and twenty (120) days after Employee has actual knowledge of the occurrence, without the written consent of Employee, of one of the following events that has not been cured within thirty (30) days after written notice thereof has been given by Employee to the Company:
(i) A reduction by the Company in Employee's Base Salary or a failure by the Company to pay any such amounts when due;
(ii) The Company's failure to provide the benefits set forth in
Section 3 or the failure of the Company to substantially provide any material
employee benefits due to be provided to Employee (other than any such failure
not inconsistent with any express provisions contained herein which failure
affects all senior executive officers); or
(iii) The Company's failure to provide in all material respects the indemnification set forth in Section 11 of this Agreement. Employee's right to terminate his employment hereunder for Good Reason shall not be affected by his incapacity due to physical or mental illness. Employee's continued employment during the one hundred and twenty (120) day period referred to above in this paragraph (d) shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.
(e) Without Cause. The Company shall have the right to terminate Employee's employment hereunder without Cause by providing Employee with a Notice of Termination thirty (30) days prior to the date of termination of employment, and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement.
(f) Without Good Reason. Employee shall have the right to terminate his employment hereunder without Good Reason by providing the Company with a Notice of Termination thirty (30) days prior to the date of termination of employment, and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement.
9. Non-Competition, Confidentiality Agreement and Removal of Documents.
(a) Purpose: In connection with the limited protection afforded the
Company by the covenants contained in this Paragraph, Employee recognizes and
acknowledges that the Company's need for the following covenants is based upon:
(i) The Company has expended and will expend substantial time, money and effort
in developing concepts, products and technology in its lines of business and
valuable lists of customers and information relating to its business
requirements, needs, patterns and procedures; (ii) Employee in the course of
employment, will be entrusted with and exposed to the Company's trade secrets
and other proprietary and confidential information; (iii) The Company, during
the term of this Agreement and thereafter, will be engaged in a highly
competitive industry in which many firms, including the Company compete; (iv)
Employee could by utilizing the trade secrets or other proprietary and
confidential information owned by the Company, become a competitor or be
employed by or otherwise assist a competitor; and (v) the Company will suffer
great loss if Employee were to terminate this Agreement and thereafter enter,
directly or indirectly, into competition with the Company.
(b) Non-Competition Agreement. While the Employee is employed by the Company and for a period to two (2) years thereafter, as part of the consideration for the compensation described in paragraph 3, above,, Employee agrees not to, directly or indirectly, acting alone or in conjunction with others, except with the express written permission of the Company secured in advance:
(i) invest, own (in whole or in part) be employed by, consult with, be a stockholder, officer, director, partner or representative of, or engage in any business which designs, manufactures, uses or sells, technology or conducts any business in direct competition with the Company or any of its subsidiaries or affiliates during the term hereof;
(ii) solicit or contact customers of the Company for purposes other than the business of the Company;
(iii) solicit, canvas or accept, or transact any other business in the same lines of business as Company;
(iv) induce or attempt to influence any employee of Company to terminate his or her employment; or
(v) disparage by word, action or otherwise the business reputation of the Company.
(c) Confidentiality Agreement. During the term of this Agreement and following the termination hereof, and for a period of five years thereafter the Employee agrees not to disclose or make any use, for his own benefit or for the benefit of a business or entity other than the Company or its subsidiaries or affiliates of any information or data of or pertaining to the
Company, its business and financial affairs, or its products or services which is treated as confidential by the Company and is not generally known within its trade, which was acquired by Employee during his affiliation with the Company.
(d) Removal of Documents: Rights to Product. All records, files, drawings, documents, models, equipment, and the like relating to the Company's business, which Employee has control over shall not be removed from the Company's premises without its written consent, unless such removal is in the furtherance of the Company's business or is in connection with Employee's carrying out his duties under this Agreement and, if so removed, shall be returned to the Company promptly after termination of Employee's employment thereunder, or otherwise promptly after removal if such removal occurs following termination of employment. Employee shall assign to the Company all rights to trade secrets and other products relating to the Company's business developed by him alone or in conjunction with others at any time while employed by the Company. (e) Independent Agreement. All agreements made in this Paragraph shall be construed as agreements independent of any other provision herein, and the existence of any claim, cause of action or defense of Employee as against the Company predicated on this Agreement, or otherwise, shall not constitute a defense to the Company's enforcement of such agreement. The covenants and agreements of Employee contained herein shall survive the termination or expiration of this Agreement.
(f) Equitable Remedies. Employee further acknowledges and understands that his services are of a special and unique nature, therefore the breach of this agreement cannot be adequately or accurately compensated for in damages by an action at law, and that the breach or threatened breach of any provisions of this agreement would cause the Company irreparable harm. In the event of any such breach, Employee agrees that the Company shall be entitled, as a matter of right, to injunctive and other equitable relief, without waiving any other rights which it may have to damages or otherwise under this Agreement.
(g) Nature of Restrictions. Employee hereby specifically acknowledges and agrees that the temporal and other restrictions contained in this Paragraph are reasonable and necessary to protect the business and prospects of the Company, and that the enforcement of the provisions of this Paragraph will not work an undue hardship on him.
(h) Survival. Employee further agrees, in the event that any provision of this Paragraph is held to be invalid or against public policy, the remaining provisions of this Paragraph and the remainder of this Agreement shall not be affected thereby.
10. Inventions and Patents. Employee agrees that any inventions, designs, improvements, and/or discoveries made by Employee during the term of his employment solely or jointly with others, which (i) are made directly or indirectly using the Company's equipment, supplies, facilities, trade secrets, or time (ii) related at the time of conception or reduction to practice of the business of the Company and/or the Company's actual or anticipated research and development, or (iii) result from any work performed by Employee for the Company, shall be the exclusive property of the Company. Employee agrees that he will promptly and fully inform and disclose to the Company all such inventions, designs, improvements, and discoveries, and Employee promises to assign such inventions to the Company. Employee also agrees that the Company shall have the right to keep such inventions as trade secrets, if the Company chooses. Employee shall
assist the Company in obtaining patents in the United States and in all foreign countries on all inventions, design, improvements, and discoveries deemed patentable by the Company and shall execute all documents and do all things necessary to obtain Letters Patents to vest the Company with full and extensive titles to the patents and will assist the Company to protect the patents against infringement by others. For purposes of this Paragraph, an invention is presumed if it relates at the time of conception or reduction to practice of the business of the Company or the Company's actual or anticipated research or development during the period of Employee's employment.
11. Indemnification of Officers and Employees. The Company shall indemnify, protect and hold Employee harmless, to the fullest extent permitted by Texas law and the Company's certificate of incorporation, as amended, and its by-laws, from any and all claims and legal actions against the Company including but not limited to product liability claims, shareholder or government claims, fines, penalties, or legal actions; or any other tort or action against the Employee as a result of Employee's employment by Company. Company does not presently maintain officer and director liability insurance. However, if the Company does obtain such coverage in the future, the Company will immediately cause said Employee to be covered by said insurance.
12. Notices. Any notices, demands, or requests provided for, required or permitted to be given pursuant to this Agreement shall be deemed to have been properly given if in writing and given to the party personally or if it is sent by registered mail, postage prepaid, to the following addresses:
TO EMPLOYEE: TO THE COMPANY: Dwaine Reese EnerTeck Chemical Corporation 2206 Country Creek Way 10701 Corporate Drive, Suite 150 Richmond, TX 77469 Stafford, TX 77477 |
13. Entire Agreement. This Agreement contains the entire agreement of the parties hereto relative to the subject matter hereof and supersedes any prior negotiations or agreements between the parties.
14. Benefit. This Agreement shall bind and inure to the benefit of the parties, their successors, assigns, heirs and personal representatives.
15. Assignment. This Agreement is personal in nature to the Employee and shall not be assignable or delegable voluntarily or by operation of law or otherwise by the Employee, without the consent of the Company.
16. Amendment. This Agreement shall not be changed, modified, supplemented or amended, in whole or in part except by an instrument in writing signed by the parties hereto or their respective successors or assigns, or otherwise as provided herein.
17. Severability. In the event that any one or more of the provisions of this Agreement are for any reason, held to be illegal, invalid, or unenforceable under present or future laws during the term hereof, such provision shall be fully severable and this Agreement and each separate provision hereof shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement.
18.Applicable Law. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled any applicable Court of Law presiding in Harris County, Texas, United States. In respect to any such legal proceedings, the prevailing party shall be entitled to receive, in addition to any other remedy, all costs and expenses incurred in such proceedings, including reasonable attorney's fees.
IN WITNESS WHEREOF the parties have executed this Agreement on the day and year as noted.
EnerTeck Chemical Corporation EMPLOYEE By: /s/ Parrish Ketchmark /s/ Dwaine Reese Parrish Ketchmark President Dwaine Reese Date: July 1, 2003 Date: August 11, 2003 |
GOBM-REESE EMPLOYMENT AGREEMENT
Employment Agreement - EnerTeck Chemical Corporation and V. Patrick Keating
EMPLOYMENT AGREEMENT
Between
ENERTECK CHEMICAL COMPANY
And
[- VERNON PATRICK KEATING
This Employment Agreement (the "Agreement") is made and entered into to
|
be effective the 1st day of August, 2003 (The Effective Date) by and between EnerTeck Chemical Corporation, a Texas corporation, (the "Company") and V. Patrick Keating ("Employee").
WITNESSETH:
WHEREAS, Employee is an experienced professional and because of whose educational background, skill and expertise in the field of manufacturing, marketing, business development, engineering, management and the like and which skill and expertise would be valuable to the Company,
WHEREAS, the Company desires to employ the Employee and the Employee desires to be employed by the Company; and
WHEREAS, Employee and the Company desire to set forth the terms and conditions of Employee's employment with the Company.
NOW, THEREFORE, and in consideration of the premises and of the full and faithful performance of the respective agreements herein contained, the parties hereto do mutually covenant and agree with each other as follows:
1. Employment. The Company agrees to employ Employee as Executive Vice President and Employee accepts such employment upon the terms and conditions hereinafter set forth. The Employee shall report directly to the President or COO.
2. Term. The term of this Agreement shall be for a period of thirty-six (36) months from the Effective Date (August 1, 2003).
3. Compensation
(a) In the interim period between the Effective Date of this Agreement and such time that the Company generates sufficient cash flow to support executive compensation for its executives, the Company agrees to pay Employee a wage of seventy-two thousand ($72,000) per annum.
(b) If and when the Company generates sufficient cash flow to pay executive compensation to its executives as determined solely by the Board of Directors, then the Employee's minimum annual base salary shall be increased to $125,000 per year, payable in equal bi-weekly payments on the regular paydays of the Company for the remainder of this Agreement.
(c) Stock Options. The Company will create an Employee Stock Option Plan during the three (3) year term of this Agreement and in addition to
Employment Agreement - EnerTeck Chemical Corporation and V. Patrick Keating
the provisions in items 3(a) and 3(b) above, the Employee will be granted options to purchase common shares of Company stock consistent with said Company Employee Stock Option Plan.
(d)Benefits. In addition to the items 3(a) - (c), Employee shall be entitled to participate in any group employee benefit program of the Company, including medical insurance and 401(k) programs, if the Company creates and institutes any such plan in its sole discretion.
(e)Vacations. Employee shall also be entitled to four (4) weeks vacation time during each calendar year. The dates of vacation time are subject to Company approval.
4. Duties. During the term of this Agreement, Employee shall serve the Company in the position of Executive Vice President of Business Development and shall perform such duties as is consistent with that position, and as may be delegated or assigned to him from time to time by the Company.
5. Extent of Services. The Employee shall devote his full ability, attention and energy to the Company's business during the term of this Agreement and the necessary time required to conduct the Company's business.
6. Expenses. Employee is authorized to incur reasonable expenses in promoting the business of the Company and will be reimbursed by the Company for approved expenses in accordance with the Company's normal practice upon submission of required documentation.
7.Office: The Company and the Employee agree that the Employee, if the Employee's principal residence is in a city other than Houston, Texas, the Employee, at the Employee's option, may choose to office at a location other than the Company's designated office location, and that the Company shall not be obligated to compensate or reimburse Employee for any travel or office expenses (including rent) which arise from the Employee's decision to office in a location other than the Company designated office location.
8. Termination. This Agreement may be terminated in accordance with any one of the following provisions:
(a) Voluntary. Employee may terminate this Agreement at any time during the term of this Agreement by giving thirty (30) days written notice of termination to the Company
(b) Death and Disability. If Employee should die or become 100% physically disabled to work or perform his duties, the salary due at that time shall continue for a period of three months time and any unvested portions of all stock options shall vest in full.
9. Severance. The Company can terminate this Agreement by giving Employee thirty (30) days written notice, but only in the event the Employee's conduct constitutes gross misfeasance, nonfeasance, and/or malfeasance. This termination notification will only be issued after consideration by and approval of the Board of Directors.
10. Non-Competition and Confidentiality Agreement
(a) Purpose: In connection with the limited protection afforded the Company by the covenants contained in this Paragraph, Employee
Employment Agreement - EnerTeck Chemical Corporation and V. Patrick Keating
recognizes and acknowledges that the Company's need for the following covenants is base upon: (i) The Company has expended and will expend substantial time, money and effort in developing concepts, products and technology in its lines of business and valuable lists of customers and information relating to its business requirements, needs, patterns and procedures; (ii) Employee in the course of employment, will be entrusted with and exposed to the Company's trade secrets and other proprietary and confidential information; (iii) The Company, during the term of this Agreement and thereafter, will be engaged in a highly competitive industry in which many firms, including the Company compete; (iv) Employee could by utilizing the trade secrets or other proprietary and confidential information owned by the Company, become a competitor or be employed by or otherwise assist a competitor; and (v) the Company will suffer great loss if Employee were to terminate this Agreement and thereafter enter, directly or indirectly, into competition with the Company.
(b) Non-Competition Agreement. During the term of employee's employment with the Company and for a period to two (2) years thereafter, as part consideration for the above referenced options, if any, Employee agrees not to, directly or indirectly, acting alone or in conjunction with others, except with the express written permission of the Company secured in advance:
(i) invest, own (in whole or in part) be employed by, consult with, be a stockholder, officer, director, partner or representative of, or engage in any business which designs, manufactures, uses or sells, technology or conducts any business in direct competition with the Company or any of its subsidiaries or affiliates during the term hereof:
(ii) solicit or contact customers of the Company for purposes other than the business of the Company:
(iii) solicit, canvas or accept, or transact any other business in the same lines of business as Company:
(iv) induce or attempt to influence any employee of Company to terminate his or her employment; or
(v) disparage by word, action or otherwise the business reputation of the Company.
(c) Confidentiality Agreement. During the term of this Agreement and following the termination hereof, and for a period of five years thereafter the Employee agrees not to disclose or make any use, for his own benefit or for the benefit of a business or entity other than the Company or its subsidiaries or affiliates of any information or data of or pertaining to the Company, its business and financial affairs, or its products or services which is treated as confidential by the Company and is not generally known within its trade, which was acquired by Employee during his affiliation with the Company.
(d) Independent Agreement. All agreements made in this Paragraph shall be construed as agreements independent of any other provision herein, and the existence of any claim, cause of action or defense of
Employment Agreement - EnerTeck Chemical Corporation and V. Patrick Keating
Employee as against the Company predicated on this Agreement, or otherwise, shall not constitute a defense to the Company's enforcement of such agreement. The covenants and agreements of Employee contained herein shall survive the termination or expiration of this Agreement.
(e) Equitable Remedies. Employee further acknowledges and understands that his services are of a special and unique nature, therefore the breach of this agreement cannot be adequately or accurately compensated for in damages by an action at law, and that the breach or threatened breach of any provisions of this agreement would cause the Company irreparable harm. In the event of any such breach, Employee agrees that the Company shall be entitled, as a matter of right, to injunctive and other equitable relief, without waiving any other rights which it may have to damages or otherwise under this Agreement.
(f) Nature of Restrictions. Employee hereby specifically acknowledges and agrees that the temporal and other restrictions contained in this Paragraph are reasonable and necessary to protect the business and prospects of the Company, and that the enforcement of the provisions of this Paragraph will not work an undue hardship on him.
(g) Survival. Employee further agrees, in the event that any provision of this Paragraph is held to be invalid or against public policy, the remaining provisions of this Paragraph and the remainder of this Agreement shall not be affected thereby.
11. Inventions and Patents. Employee agrees that any inventions, designs, improvements, and/or discoveries made by Employee during the term of his employment solely or jointly with others, which (i) are made directly or indirectly using the Company's equipment, supplies, facilities, trade secrets, or time (ii) related at the time of conception or reduction to practice of the business of the Company and/or the Company's actual or anticipated research and development, or (iii) result from any work performed by Employee for the Company, shall be the exclusive property of the Company. Employee agrees that he will promptly and fully inform and disclose to the Company all such inventions, designs, improvements, and discoveries, and Employee promises to assign such inventions to the Company. Employee also agrees that the Company shall have the right to keep such inventions as trade secrets, if the Company chooses. Employee shall assist the Company in obtaining patents in the United States and in all foreign countries on all inventions, design, improvements, and discoveries deemed patentable by the Company and shall execute all documents and do all things necessary to obtain Letters Patents to vest the Company with full and extensive titles to the patents and will assist the Company to protect the patents against infringement by others. For purposes of this Paragraph, an invention is presumed if it relates at the time of conception or reduction to practice of the business of the Company or the Company's actual or anticipated research or development during the period of Employee's employment. It is to be understood that specifically excluded from the above ownership or
Employment Agreement - EnerTeck Chemical Corporation and V. Patrick Keating
governance by the Company are Employee's ownership and inventive concepts, related to Employee's equity interest in WaxTech International, Inc., a Texas corporation engaged in the businesses of wax and chemical manufacturing and marketing, intellectual property development, international business development, agricultural products, and crude oil refining. The above exception is only applicable if the WaxTech activities are not in competition with those activities of EnerTeck Chemical Corporation. Any and all WaxTech activities that precede the Effective Date of this Agreement are expressly the exclusive property of WaxTech and are excluded from any ownership or governance of the Company.
12. Indemnification of Officers and Employees. The Company shall indemnify, protect and hold Employee harmless from any and all claims and legal actions against the Company including but not limited to product liability claims, shareholder or government claims, fines, penalties, or legal actions; or any other tort or action against the Employee as a result of Employee's employment by Company. Company does not presently carry officer and director liability insurance, but will purchase such insurance commensurate with the business(es) undertaken by the Company when cash flow is sufficient to pay the premiums therefor.
13. Notices. Any notices, demands, or requests provided for, required or permitted to be given pursuant to this Agreement shall be deemed to have been properly given if in writing and given to the party personally or if it is sent by registered mail, postage prepaid, to the following addresses:
TO EMPLOYEE: TO THE COMPANY: V. Patrick Keating EnerTeck Chemical Corporation 403 Briar Park 10701 Corporate Dr 293 Houston, Texas 77042 Stafford, TX 77477 |
14. Entire Agreement. This Agreement contains the entire agreement of the parties hereto relative to the subject matter hereof and supersedes any prior negotiations or agreements between the parties.
15. Benefit. This Agreement shall bind and inure to the benefit of the parties, their successors, assigns, heirs and personal representatives.
16. Assignment. This Agreement is personal in nature to the Employee and shall not be assignable or delegable voluntarily or by operation of law or otherwise by the Employee, without the consent of the Company.
17. Amendment. This Agreement shall not be changed, modified, supplemented or amended, in whole or in part except by an instrument in writing signed by the parties hereto or their respective successors or assigns, or otherwise as provided herein.
Employment Agreement - EnerTeck Chemical Corporation and V. Patrick Keating
18. Severability. In the event that any one or more of the provisions of this Agreement are for any reason, held to be illegal, invalid, or unenforceable under present or future laws during the term hereof, such provision shall be fully severable and this Agreement and each separate provision hereof shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement.
19.Applicable Law. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled any applicable Court of Law presiding in Harris County, Texas, United States. In respect to any such legal proceedings, the prevailing party shall be entitled to receive, in addition to any other remedy, all costs and expenses incurred in such proceedings, including reasonable attorney's fees.
IN WITNESS WHEREOF the parties have executed this Agreement on the day and year as noted.
EnerTeck Chemical Corporation EMPLOYEE
By: s/s s/s
---------------------------- -----------------------------------
Dwaine D. Reese V. Patrick Keating
Chairman and COO
Date: 3/24/03 Date: 7/25/03
------- --------
|
EMPLOYMENT AGREEMENT
Between
GOLD BOND RESOURCES, INC.
And
LEON VAN KRAAYENBURG
This Employment Agreement (the "Agreement") is made and entered into to be effective the 1st day of August, 2003 (The "Effective Date") by and between Gold Bond Resources, Inc., a Texas corporation, (the "Company") and Leon van Kraayenburg ("Employee").
WITNESSETH:
WHEREAS, Employee is an experienced professional whose educational background, experience, skill and expertise in the field of corporate financial accounting,finance, statutory reporting, taxes, administration and management and the like render him valuable to the Company as an employee,
WHEREAS, the Company desires to employ the Employee and the Employee desires to be employed by the Company; and
WHEREAS, Employee and the Company desire to set forth the terms and conditions of Employee's employment with the Company.
NOW, THEREFORE, and in consideration of the promises and of the full and faithful performance of the respective agreements herein contained, the parties hereto do mutually covenant and agree with each other as follows:
1. EMPLOYMENT. The Company agrees to employ Employee as Executive Vice President-Finance, Chief Financial Officer and Treasurer and Employee accepts such employment upon the terms and conditions hereinafter set forth. The Employee shall report directly to the Board of Directors.
2. TERM. The term of this Agreement shall be for a period of twenty four (24) months from the Effective Date.
3. COMPENSATION
(a) Special Stock Warrants. The Company agrees to issue to
Employee warrants to purchase 2,000,000 shares of the Company's restricted
common stock at a purchase price of $.12 per share (or 200,000 shares at a price
of $1.20 per share after the Company's intended one for 10 common stock reverse
split). Said warrants are to be subject to a separate warrant agreement and
considered earned upon the execution of this agreement. Said warrant agreement
shall include a provision requiring the Company to register with the Securities
and Exchange Commission the shares underlying the warrants.
(b) Stock Options. The Company intends to create an Employee
Stock Option Plan. Accordingly, in addition to the provision in item 3(a) above,
the Employee will be granted options to purchase common shares of Company in accordance with said Employee Stock Option Plan.
4. DUTIES. During the term of this Agreement, Employee shall serve the Company in the positions as indicated above and shall perform such duties as is consistent with these positions, and as may be delegated or assigned to him from time to time by the Board of Directors.
5. EXTENT OF SERVICES. The Employee shall devote substantially all of his working time, attention and energy during normal business hours (other than absences due to illness or vacation) to the performance of his duties for the Company.
6. EXPENSES. Employee is authorized to incur reasonable expenses in promoting the business of the Company and will be reimbursed by the Company for approved expenses in accordance with the Company's normal practice upon submission of required documentation.
7. OFFICE: The Company and the Employee agree that the principal place of employment of the Employee shall be at the Company's principal employee offices in Stafford, Texas or such other place as the Board of Directors of the Company (the "Board") may determine.
8. TERMINATION. The Employee's employment hereunder shall terminate
upon the expiration of the Term and may be terminated during the Term under the
following circumstances:
(a) Death. Employee's employment hereunder shall terminate upon his death.
(b) Disability. If, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been substantially unable to perform his
duties hereunder for an entire period of four (4) months or more during any six
(6) consecutive month period, and within thirty (30) days after written Notice
of Termination is given after such six (6) month period, Employee shall not have
returned to the substantial performance of his duties on a fulltime basis, the
Company shall have the right to terminate Employee's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate Employee's
employment for Cause, and such termination in and of itself shall not be, nor
shall it be deemed to be, a breach of this Agreement. For purposes of this
Agreement, "Cause" to terminate Employee's employment shall include but not be
limited to the Employee's:
(i) Conviction of, or plea of guilty or nolo contendere to, a felony;
or
(ii) Continued failure to use reasonable best efforts to substantially
perform his duties hereunder (other than such failure resulting from Employee's
incapacity due to physical or mental illness or subsequent to the issuance of a
Notice of Termination by Employee for Good Reason) after demand for substantial
performance is delivered by the Company in writing that specifically identifies
the manner in which the Company believes Employee has not used reasonable best
efforts to substantially perform his duties; or
(iii) Misconduct (including, but not limited to, a breach of the
provisions of Section 9) that is materially economically injurious to the
Company or to any entity in control of, controlled by or under common control
with the Company ("Affiliates").
(d) Good Reason. Employee may terminate his employment for "Good Reason"
within one hundred and twenty (120) days after Employee has actual knowledge of
the occurrence, without the written consent of Employee, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Employee to the Company:
(i) A reduction by the Company in Employee's Base Salary or a failure
by the Company to pay any such amounts when due;
(ii) The Company's
failure to provide the benefits set forth in Section 3 or the failure of the
Company to substantially provide any material employee benefits due to be
provided to Employee (other than any such failure not inconsistent with any
express provisions contained herein which failure affects all senior executive
officers); or
(iii) The Company's failure to provide in all material respects the
indemnification set forth in Section 11 of this Agreement. Employee's right to
terminate his employment hereunder for Good Reason shall not be affected by his
incapacity due to physical or mental illness. Employee's continued employment
during the one hundred and twenty (120) day period referred to above in this
paragraph (d) shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder.
(e) Without Cause. The Company shall have the right to terminate Employee's
employment hereunder without Cause by providing Employee with a Notice of
Termination thirty (30) days prior to the date of termination of employment, and
such termination shall not in and of itself be, nor shall it be deemed to be, a
breach of this Agreement.
(f) Without Good Reason. Employee shall have the right to terminate his
employment hereunder without Good Reason by providing the Company with a Notice
of Termination thirty (30) days prior to the date of termination of employment,
and such termination shall not in and of itself be, nor shall it be deemed to
be, a breach of this Agreement.
9. NON-COMPETITION, CONFIDENTIALITY AGREEMENT AND REMOVAL OF DOCUMENTS.
(a) Purpose: In connection with the limited protection afforded the
Company by the covenants contained in this Paragraph, Employee recognizes and
acknowledges that the Company's need for the following covenants is based upon:
(i) The Company has expended and will expend substantial time, money and effort
in developing concepts, products and technology in its lines of business and
valuable lists of customers and information relating to its business
requirements, needs, patterns and procedures; (ii) Employee in the course of
employment, will be entrusted with and exposed to the Company's trade secrets
and other proprietary and confidential information; (iii) The Company, during
the term of this Agreement and thereafter, will be engaged in a highly
competitive industry in which many firms, including the Company compete; (iv)
Employee could by utilizing the trade secrets or other proprietary and
confidential information owned by the Company, become a competitor or be
employed by or otherwise assist a competitor; and (v) the Company will suffer
great loss if Employee were to terminate this Agreement and thereafter enter,
directly or indirectly, into competition with the Company.
(b) Non-Competition Agreement. While the Employee is employed by the Company and for a period to two (2) years thereafter, as part of the consideration for the compensation described in paragraph 3, above,, Employee agrees not to, directly or indirectly, acting alone or in conjunction with others, except with the express written permission of the Company secured in advance:
(i) invest, own (in whole or in part) be employed by, consult with, be
a stockholder, officer, director, partner or representative of, or
engage in any business which designs, manufactures, uses or sells,
technology or conducts any business in direct competition with the
Company or any of its subsidiaries or affiliates during the term
hereof;
(ii) solicit or contact customers of the Company for purposes other
than the business of the Company;
(iii) solicit, canvas or accept, or transact any other business in the
same lines of business as Company; (iv) induce or attempt to influence
any employee of Company to terminate his or her employment; or
(v) disparage by word, action or otherwise the business reputation of
the Company.
(c) Confidentiality Agreement. During the term of this Agreement and following the termination hereof, and for a period of five years thereafter the Employee agrees not to disclose or make any use, for his own benefit or for the benefit of a business or entity other than the Company or its subsidiaries or affiliates of any information or data of or pertaining to the Company, its business and financial affairs, or its products or services which is treated as confidential by the Company and is not generally known within its trade, which was acquired by Employee during his affiliation with the Company.
(d) Removal of Documents: Rights to Product. All records, files, drawings, documents, models, equipment, and the like relating to the Company's business, which Employee has control over shall not be removed from the Company's premises without its written consent, unless such removal is in the furtherance of the Company's business or is in connection with Employee's carrying out his duties under this Agreement and, if so removed, shall be returned to the Company promptly after termination of Employee's employment thereunder, or otherwise promptly after removal if such removal occurs following termination of employment. Employee shall assign to the Company all rights to trade secrets and other products relating to the Company's business developed by him alone or in conjunction with others at any time while employed by the Company.
(e)Independent Agreement. All agreements made in this Paragraph shall be
construed as agreements independent of any other provision herein, and the
existence of any claim, cause of action or defense of Employee as against the
Company predicated on this Agreement, or otherwise, shall not constitute a
defense to the Company's enforcement of such agreement. The covenants and
agreements of Employee contained herein shall survive the termination or
expiration of this Agreement.
(f) Equitable Remedies. Employee further acknowledges and understands that
his services are of a special and unique nature, therefore the breach of this
agreement cannot be adequately or accurately compensated for in damages by an
action at law, and that the breach or threatened breach of any provisions of
this agreement would cause the Company irreparable harm. In the event of any
such breach, Employee agrees that the Company shall be entitled, as a matter of
right, to injunctive and other equitable relief, without waiving any other
rights which it may have to damages or otherwise under this Agreement.
(g) Nature of Restrictions. Employee hereby specifically acknowledges and
agrees that the temporal and other restrictions contained in this Paragraph are
reasonable and necessary to protect the business and prospects of the Company,
and that the enforcement of the provisions of this Paragraph will not work an
undue hardship on him.
(h) Survival. Employee further agrees, in the event that any provision of
this Paragraph is held to be invalid or against public policy, the remaining
provisions of this Paragraph and the remainder of this Agreement shall not be
affected thereby.
10. INVENTIONS AND PATENTS. Employee agrees that any inventions, designs, improvements, and/or discoveries made by Employee during the term of his employment solely or jointly with others, which (i) are made directly or indirectly using the Company's equipment, supplies, facilities, trade secrets, or time (ii) related at the time of conception or reduction to practice of the business of the Company and/or the Company's actual or anticipated research and development, or (iii) result from any work performed by Employee for the Company, shall be the exclusive property of the Company. Employee agrees that he will promptly and fully inform and disclose to the Company all such inventions, designs, improvements, and discoveries, and Employee promises to assign such inventions to the Company. Employee also agrees that the Company shall have the right to keep such inventions as trade secrets, if the Company chooses. Employee shall assist the Company in obtaining patents in the United States and in all foreign countries on all inventions, design, improvements, and discoveries deemed patentable by the Company and shall execute all documents and do all things necessary to obtain Letters Patents to vest the Company with full and extensive titles to the patents and will assist the Company to protect the patents against infringement by others. For purposes of this Paragraph, an invention is presumed if it relates at the time of conception or reduction to practice of the business of the Company or the Company's actual or anticipated research or development during the period of Employee's employment.
11. INDEMNIFICATION OF OFFICERS AND EMPLOYEES. The Company shall
indemnify, protect and hold Employee harmless, to the fullest extent permitted
by Texas law and the Company's certificate of incorporation, as amended, and its
by-laws, from any and all claims and legal actions against the Company including
but not limited to product liability claims, shareholder or government claims,
fines, penalties, or legal actions; or any other tort or action against the
Employee as a result of Employee's employment by Company. Company does not
presently maintain officer and director liability insurance. However, if the
Company does obtain such coverage in the future, the Company will immediately
cause said Employee to be covered by said insurance.
12. NOTICES. Any notices, demands, or requests provided for, required
or permitted to be given pursuant to this Agreement shall be deemed to have been
properly given if in writing and given to the party personally or if it is sent
by registered mail, postage prepaid, to the following addresses:
TO EMPLOYEE: TO THE COMPANY: Leon van Kraayenburg Gold Bond Resources, Inc. 14826 Cedar Point Drive 10701 Corporate Drive, Suite 150 Houston, Texas 77070 Stafford, TX 77477 |
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties hereto relative to the subject matter hereof and supersedes any prior negotiations or agreements between the parties.
14. BENEFIT. This Agreement shall bind and inure to the benefit of the parties, their successors, assigns, heirs and personal representatives.
15. ASSIGNMENT. This Agreement is personal in nature to the Employee and shall not be assignable or delegable voluntarily or by operation of law or otherwise by the Employee, without the consent of the Company.
16. AMENDMENT. This Agreement shall not be changed, modified, supplemented or amended, in whole or in part except by an instrument in writing signed by the parties hereto or their respective successors or assigns, or otherwise as provided herein.
17. SEVERABILITY. In the event that any one or more of the provisions of this Agreement are for any reason, held to be illegal, invalid, or unenforceable under present or future laws during the term hereof, such provision shall be fully severable and this Agreement and each separate provision hereof shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement.
18.APPLICABLE LAW. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled any applicable Court of Law presiding in Harris County, Texas, United States. In respect to any such legal proceedings, the prevailing party shall be entitled to receive, in addition to any other remedy, all costs and expenses incurred in such proceedings, including reasonable attorney's fees.
IN WITNESS WHEREOF the parties have executed this Agreement on the day and year as noted.
Gold Bond Resources, Inc. EMPLOYEE
By: /S/ By:/S/
---------------------------- -----------------------------
Parrish Ketchmark
President Leon van Kraayenburg
Date: August 1, 2003 Date: August 1, 2003
|
EMPLOYMENT AGREEMENT
Between
ENERTECK CHEMICAL CORP.
And
LEON VAN KRAAYENBURG
This Employment Agreement (the "Agreement") is made and entered into to be effective the 1st day of August, 2003 (The "Effective Date") by and between EnerTeck Chemical Corp., a Texas corporation, (the "Company") and Leon van Kraayenburg ("Employee").
WITNESSETH:
WHEREAS, Employee is an experienced professional whose educational background, experience, skill and expertise in the field of corporate financial accounting, finance, statutory reporting, taxes, administration and management and the like render him valuable to the Company as an employee,
WHEREAS, the Company desires to employ the Employee and the Employee desires to be employed by the Company; and
WHEREAS, Employee and the Company desire to set forth the terms and conditions of Employee's employment with the Company.
NOW, THEREFORE, and in consideration of the promises and of the full and faithful performance of the respective agreements herein contained, the parties hereto do mutually covenant and agree with each other as follows:
1. EMPLOYMENT. The Company agrees to employ Employee as its Executive Vice President-Finance, Chief Financial Officer (CFO), and Treasurer, and Employee accepts such employment upon the terms and conditions hereinafter set forth. The Employee shall report directly to the Board.
2. TERM. The term of this Agreement shall be for a period of twenty four (24) months from the Effective Date.
3. COMPENSATION
(a) Basic Compensation. During the interim period between the Effective Date of this Agreement and such time that the Company generates sufficient cash flow to support increased compensation for its executives, the Company agrees to pay Employee a wage of $72,000 per year, payable in equal monthly payments on the regular paydays of the Company for the term of this Agreement. If and when the Company generates sufficient cash flow to pay increased compensation to its executives as determined solely by the Board of Directors, then Employee's basic compensation shall be increased to $125,000 per year, payable in equal monthly payments on the regular paydays of the Company for the remainder of the term of this Agreement.
(b)Benefits. In addition to the compensation indicated in3(a), above, Employee shall be entitled to participate in any group employee benefit program of the Company, including medical insurance and 401(k) programs, if the Company creates and institutes any such plan in its sole discretion.
(c) Vacations. Employee shall also be entitled to four (4) weeks paid vacation time during each calendar year. The dates of vacation time are subject to Company approval.
4. DUTIES. During the term of this Agreement, Employee shall serve the Company in the positions indicated above and shall perform such duties as is consistent with these positions, and as may be delegated or assigned to him from time to time by the Board of Directors.
5. EXTENT OF SERVICES. The Employee shall devote substantially all of his working time, attention and energy during normal business hours (other than absences due to illness or vacation) to the performance of his duties for the Company.
6. EXPENSES. Employee is authorized to incur reasonable expenses in promoting the business of the Company and will be reimbursed by the Company for approved expenses in accordance with the Company's normal practice upon submission of required documentation.
7. OFFICE: The Company and the Employee agree that the principal place of employment of the Employee shall be at the Company's principal employee offices in Stafford, Texas or such other place as the Board of Directors of the Company (the "Board") may determine.
8. TERMINATION. The Employee's employment hereunder shall terminate upon the expiration of the Term and may be terminated during the Term under the following circumstances:
(a) Death. Employee's employment hereunder shall terminate upon his death.
(b) Disability. If, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been substantially unable to perform his
duties hereunder for an entire period of four (4) months or more during any six
(6) consecutive month period, and within thirty (30) days after written Notice
of Termination is given after such six (6) month period, Employee shall not have
returned to the substantial performance of his duties on a fulltime basis, the
Company shall have the right to terminate Employee's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate Employee's
employment for Cause, and such termination in and of itself shall not be, nor
shall it be deemed to be, a breach of this Agreement. For purposes of this
Agreement, "Cause" to terminate Employee's employment shall include but not be
limited to the Employee's:
(i) Conviction of, or plea of guilty or nolo contendere to, a felony;
or
(ii) Continued failure to use reasonable best efforts to substantially
perform his duties hereunder (other than such failure resulting from Employee's
incapacity due to physical or mental illness or subsequent to the issuance of a
Notice of Termination by Employee for Good Reason) after demand for substantial
performance is delivered by the Company in writing that specifically identifies
the manner in which the Company believes Employee has not used reasonable best
efforts to substantially perform his duties; or
(iii) Misconduct (including, but not limited to, a breach of the
provisions of Section 9) that is materially economically injurious to the
Company or to any entity in control of, controlled by or under common control
with the Company ("Affiliates").
(d) Good Reason. Employee may terminate his employment for "Good Reason"
within one hundred and twenty (120) days after Employee has actual knowledge of
the occurrence, without the written consent of Employee, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Employee to the Company:
(i) A reduction by the Company in Employee's Base Salary or a failure
by the Company to pay any such amounts when due; (ii) The Company's
failure to provide the benefits set forth in Section 3 or the failure
of the Company to substantially
provide any material employee benefits due to be provided to Employee (other
than any such failure not inconsistent with any express provisions contained
herein which failure affects all senior executive officers); or
(iii) The Company's failure to provide in all material respects the
indemnification set forth in Section 11 of this Agreement. Employee's right to
terminate his employment hereunder for Good Reason shall not be affected by his
incapacity due to physical or mental illness. Employee's continued employment
during the one hundred and twenty (120) day period referred to above in this
paragraph (d) shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder.
(e) Without Cause. The Company shall have the right to terminate Employee's
employment hereunder without Cause by providing Employee with a Notice of
Termination thirty (30) days prior to the date of termination of employment, and
such termination shall not in and of itself be, nor shall it be deemed to be, a
breach of this Agreement.
(f) Without Good Reason. Employee shall have the right to terminate his
employment hereunder without Good Reason by providing the Company with a Notice
of Termination thirty (30) days prior to the date of termination of employment,
and such termination shall not in and of itself be, nor shall it be deemed to
be, a breach of this Agreement.
9. NON-COMPETITION, CONFIDENTIALITY AGREEMENT AND REMOVAL OF DOCUMENTS.
(a) Purpose: In connection with the limited protection afforded the
Company by the covenants contained in this Paragraph, Employee recognizes and
acknowledges that the Company's need for the following covenants is based upon:
(i) The Company has expended and will expend substantial time, money and effort
in developing concepts, products and technology in its lines of business and
valuable lists of customers and information relating to its business
requirements, needs, patterns and procedures; (ii) Employee in the course of
employment, will be entrusted with and exposed to the Company's trade secrets
and other proprietary and confidential information; (iii) The Company, during
the term of this Agreement and thereafter, will be engaged in a highly
competitive industry in which many firms, including the Company compete; (iv)
Employee could by utilizing the trade secrets or other proprietary and
confidential information owned by the Company, become a competitor or be
employed by or otherwise assist a competitor; and (v) the Company will suffer
great loss if Employee were to terminate this Agreement and thereafter enter,
directly or indirectly, into competition with the Company.
(b) Non-Competition Agreement. While the Employee is employed by the
Company and for a period to two (2) years thereafter, as part of the
consideration for the compensation described in paragraph 3, above, Employee
agrees not to, directly or indirectly, acting alone or in conjunction with
others, except with the express written permission of the Company secured in
advance:
(i) invest, own (in whole or in part) be employed by, consult with, be a stockholder, officer, director, partner or representative of, or engage in any business which designs, manufactures, uses or sells, technology or conducts any business in direct competition with the Company or any of its subsidiaries or affiliates during the term hereof;
(ii) solicit or contact customers of the Company for purposes other than the business of the Company;
(iii) solicit, canvas or accept, or transact any other business in the same lines of business as Company;
(iv) induce or attempt to influence any employee of Company to terminate his or her employment; or
(v) disparage by word, action or otherwise the business reputation of the Company.
(c) Confidentiality Agreement. During the term of this Agreement and following the termination hereof, and for a period of five years thereafter the Employee agrees not to disclose or make any use, for his own benefit or for the benefit of a business or entity other than the Company or its subsidiaries or affiliates of any information or data of or pertaining to the Company, its business and financial affairs, or its products or services which is treated as confidential by the Company and is not generally known within its trade, which was acquired by Employee during his affiliation with the Company.
(d) Removal of Documents: Rights to Product. All records, files, drawings, documents, models, equipment, and the like relating to the Company's business, which Employee has control over shall not be removed from the Company's premises without its written consent, unless such removal is in the furtherance of the Company's business or is in connection with Employee's carrying out his duties under this Agreement and, if so removed, shall be returned to the Company promptly after termination of Employee's employment thereunder, or otherwise promptly after removal if such removal occurs following termination of employment. Employee shall assign to the Company all rights to trade secrets and other products relating to the Company's business developed by him alone or in conjunction with others at any time while employed by the Company.
(e) Independent Agreement. All agreements made in this Paragraph shall be construed as agreements independent of any other provision herein, and the existence of any claim, cause of action or defense of Employee as against the Company predicated on this Agreement, or otherwise, shall not constitute a defense to the Company's enforcement of such agreement. The covenants and agreements of Employee contained herein shall survive the termination or expiration of this Agreement.
(f) Equitable Remedies. Employee further acknowledges and understands that his services are of a special and unique nature, therefore the breach of this agreement cannot be adequately or accurately compensated for in damages by an action at law, and that the breach or threatened breach of any provisions of this agreement would cause the Company irreparable harm. In the event of any such breach, Employee agrees that the Company shall be entitled, as a matter of right, to injunctive and other equitable relief, without waiving any other rights which it may have to damages or otherwise under this Agreement.
(g) Nature of Restrictions. Employee hereby specifically acknowledges and agrees that the temporal and other restrictions contained in this Paragraph are reasonable and necessary to protect the business and prospects of the Company, and that the enforcement of the provisions of this Paragraph will not work an undue hardship on him.
(h) Survival. Employee further agrees, in the event that any provision of this Paragraph is held to be invalid or against public policy, the remaining provisions of this Paragraph and the remainder of this Agreement shall not be affected thereby.
10. INVENTIONS AND PATENTS. Employee agrees that any inventions, designs, improvements, and/or discoveries made by Employee during the term of his employment solely or jointly with others, which (i) are made directly or indirectly using the Company's equipment, supplies, facilities, trade secrets, or time (ii) related at the time of conception or reduction to practice of the business of the Company and/or the Company's actual or anticipated research and development, or (iii) result from any work performed by Employee for the Company, shall be the exclusive property of the Company. Employee agrees that he will promptly and fully inform and disclose to the Company all such inventions, designs, improvements, and discoveries, and Employee promises to assign such inventions to the Company. Employee also agrees that the Company shall have the right to keep such inventions as trade secrets, if the Company chooses. Employee shall assist the Company in obtaining patents in the United States and in all foreign countries on all inventions, design, improvements, and discoveries deemed patentable by the Company and shall execute all documents and do all things necessary to obtain Letters Patents to vest the Company with full and extensive titles to the patents and will assist the Company to protect the patents against infringement by others. For purposes of this Paragraph, an invention is presumed if it relates at the time of conception or reduction to practice of the business of the Company or the Company's actual or anticipated research or development during the period of Employee's employment.
11. INDEMNIFICATION OF OFFICERS AND EMPLOYEES. The Company shall indemnify, protect and hold Employee harmless, to the fullest extent permitted by Texas law and the Company's certificate of incorporation, as amended, and its by-laws, from any and all claims and legal actions against the Company including but not limited to product liability claims, shareholder or government claims, fines, penalties, or legal actions; or any other tort or action against the Employee as a result of Employee's employment by Company. Company does not presently maintain officer and director liability insurance. However, if the Company does obtain such coverage in the future, the Company will immediately cause said Employee to be covered by said insurance.
12. NOTICES. Any notices, demands, or requests provided for, required or permitted to be given pursuant to this Agreement shall be deemed to have been properly given if in writing and given to the party personally or if it is sent by registered mail, postage prepaid, to the following addresses:
TO EMPLOYEE: TO THE COMPANY: Leon van Kraayenburg EnerTeck Chemical Corporation 14826 Cedar Point Drive 10701 Corporate Drive, Suite 150 Houston, TX 77070 Stafford, TX 77477 |
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties hereto relative to the subject matter hereof and supersedes any prior negotiations or agreements between the parties.
14. BENEFIT. This Agreement shall bind and inure to the benefit of the parties, their successors, assigns, heirs and personal representatives.
15. ASSIGNMENT. This Agreement is personal in nature to the Employee and shall not be assignable or delegable voluntarily or by operation of law or otherwise by the Employee, without the consent of the Company.
16. AMENDMENT. This Agreement shall not be changed, modified, supplemented or amended, in whole or in part except by an instrument in writing signed by the parties hereto or their respective successors or assigns, or otherwise as provided herein.
17. SEVERABILITY. In the event that any one or more of the provisions of this Agreement are for any reason, held to be illegal, invalid, or unenforceable under present or future laws during the term hereof, such provision shall be fully severable and this Agreement and each separate provision hereof shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement.
18. APPLICABLE LAW. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled any applicable Court of Law presiding in the State of Texas. In respect to any such legal proceedings, the prevailing party shall be entitled to receive, in addition to any other remedy, all costs and expenses incurred in such proceedings, including reasonable attorney's fees.
IN WITNESS WHEREOF the parties have executed this Agreement on the day and year as noted.
EnerTeck Chemical Corp EMPLOYEE
By /S/ By /S/
---------------------------------------- --------------------------------
Parrish Ketchmark
President Leon van Kraayenburg
Date: August 1, 2003 Date: August 1, 2003
|
GOBM-VANK EMPLOYMENT AGREEMENT
CONSULTING AGREEMENT
This Consulting Agreement (hereinafter referred to as "Agreement") is between EnerTeck Chemical Corporation, having a place of business at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477 (hereinafter referred to as "ECC"), its parent company, Gold Bond Resources, Inc., a Washington state corporation and a public company ("GOBM"), and James J. Mullen (hereinafter referred to as "CONSULTANT"), having a place of business at 8202 Campodolcino Drive, Corpus Christi, Texas 78414.
The parties hereby agree as follows:
1. ECC/GOBM agrees to engage the CONSULTANT and the CONSULTANT agrees to provide legal/consulting services, including but not limited to, general law and intellectual property law to ECC/GOBM.
2. This Agreement shall commence on January 15, 2003 and shall terminate on January 15, 2004, a period of twelve months (12).
3. ECC/GOBM hereby retains the services of CONSULTANT to consult on matters relating to general law and intellectual property law; and for such mutually agreed upon legal matters as requested by ECC/GOBM upon which CONSULTANT shall be willing to act, to advise ECC/GOBM to the best of his ability on all legal issues during the term of this Agreement. The CONSULTANT agrees that he will perform consulting services for ECC/GOBM as and when requested by ECC/GOBM and at such locations as necessary for the performance of such services. ECC/GOBM agrees to endeavor to arrange such times, places, and periods of consultation as mutually convenient and which do not conflict with other commitments the CONSULTANT may have.
4. ECC/GOBM shall pay the CONSULTANT a fee of $ 6,000.00 per month for the term of this agreement (unless ECC/GOBM and CONSULTANT mutually agree, in writing, to different compensation arrangements) for the time spent in the performance of such consulting services under this Agreement.
In addition to the monthly fee set forth above, Consultant will be issued five year warrants for 1,000,000 shares of GOBM (the public company's) common stock with an exercise price of $.12 per share. These warrants are hereby deemed to be earned upon the execution of this Consulting Agreement.and the shares underlying the warrants issued by the public company, GOBM, shall have registration rights attached thereto. This issuance of these warrants is not part of any officer and/or director compensation and is separate and distinct therefrom.
5. In addition to the compensation set forth above, ECC/GOBM shall reimburse the CONSULTANT for the pre-approved actual and reasonable expenses of CONSULTANT performing services under this Agreement, including air travel (not in excess of the fares for air journeys reimbursed to employees of ECC/GOBM), carfare (if for a personal car, not in excess of the per mile rate reimbursed to employees of ECC/GOBM), out-of-pocket living expenses for travel, and such expenses as telephone, telegraph, and reproduction expenses reasonably incurred as necessary in connection with the performance of the consulting services.
6. CONSULTANT shall not for any reason nor at any time during or after the term of this AGREEMENT use or disclose to any person (except to the extent that the proper furnishing of its consulting services may require such disclosure to employees of ECC/GOBM) any secret or confidential information relating to the processes, products, technology, machinery, apparatus, or plants of ECC/GOBM, or any other confidential information given to it by any officer, employee, or representative of ECC/GOBM or obtained in the course, or as a result of the consulting services unless authorized to do so in writing by an officer of ECC/GOBM. Any information not generally available to the public shall be considered secret or confidential for purposes of this Agreement.
7. The restrictions provided for herein concerning use and disclosure of
ECC/GOBM confidential or proprietary information shall not apply to the
use or disclosure of information which CONSULTANT can demonstrate (1)
was in the possession of CONSULTANT prior to the date of this Agreement
and which was not previously obtained either directly or indirectly
from ECC/GOBM, (2) was at the time of disclosure to CONSULTANT or
thereafter becomes, through no act or failure to act on the part of
CONSULTANT or employees, part of the public domain by publication or
otherwise, or (3) was or is hereafter furnished to CONSULTANT by others
without restrictions on disclosure or use and was not obtained either
directly or indirectly from ECC/GOBM. Specific information shall not be
deemed to be within any of the foregoing exclusions set out in (1),
(2), or (3) merely because it is or may be within the scope of more
general information which falls within any one or more of the foregoing
exclusions. CONSULTANT agrees that he shall neither identify nor
confirm that information which is otherwise free to disclose under the
exclusions set out in (1), (2), or (3) of this paragraph was received
from ECC/GOBM.
8. CONSULTANT agrees to not make any public statements with respect to the business, personnel, or affairs of ECC/GOBM without express prior written consent of an officer of ECC/GOBM.
9. CONSULTANT agrees to abide by the general corporate policies of ECC/GOBM.
10. CONSULTANT agrees that any work prepared for ECC/GOBM which is eligible for copyright protection in the United States or elsewhere shall be a work made for hire. If any such work is deemed for any reason not to be a work made for hire, CONSULTANT assigns all right, title, and interest in the copyright in such work, and all extensions and renewals thereof to ECC/GOBM, and agrees to provide assistance as requested by ECC/GOBM in the establishment, preservation, and enforcement of its copyright in such work, such assistance to be provided at ECC/GOBM'S expense but without additional compensation to CONSULTANT. CONSULTANT agrees to waive all rights relating to the work developed or produced including without limitation on use or subsequent modifications.
11. CONSULTANT agrees to promptly communicate all inventions and improvement to inventions(s) which during the term of this Agreement he may conceive, make or discover that relate to the scope of this Agreement. All such inventions or improvements, whether patentable or not, shall be the exclusive property of ECC/GOBM without any obligation on ECC/GOBM to make payment therefor, in addition to the remuneration specified in this Agreement. At the request of ECC/GOBM, CONSULTANT shall execute or cause to be
executed any document(s) relative to invention(s) or improvements(s) which ECC/GOBM deems necessary in protection of said invention(s) or improvement(s).
12. Publications arising out of or as a result of the consulting services are to be submitted to ECC/GOBM for approval.
13. The CONSULTANT agrees to act as an Independent Contractor and have no power, nor represent that he has any power, to bind ECC/GOBM, to assume, or to create any obligation or responsibility, express or implied, on behalf of or in the name of ECC/GOBM. However, CONSULTANT will be acting in the capacity as a non-employee Vice President and General Counsel of ECC/GOBM and as such will have the capacity to carry out the normal duties of this position. As an Independent Contractor, CONSULTANT agrees to be responsible for any personal injury or property damage which CONSULTANT or employees of CONSULTANT may suffer in the course of or in connection with the performance of the consulting services under this Agreement. CONSULTANT acknowledges that ECC/GOBM will not carry any personal injury insurance or otherwise provide for CONSULTANT'S protection. CONSULTANT agrees not to make any claims against ECC/GOBM, or any of its subsidiaries or affiliates for any personal injury or loss which employees of CONSULTANT may suffer.
14. The compensation as agreed upon herein above shall be the only compensation due to CONSULTANT from ECC/GOBM or any of its subsidiaries or affiliates, except for any compensation (which other persons are entitled to as an officer and director of ECC/GOBM and it's associated companies and /or parent company) such as warrants and/or stock options. CONSULTANT shall not be entitled to any benefits which ECC/GOBM makes available to its employees. Because CONSULTANT is an Independent Contractor, ECC/GOBM will not withhold from any compensation earned by the CONSULTANT or the employees of CONSULTANT any payroll deductions, contributions, taxes or fees required of the CONSULTANT, including, but not limited to, social security payments and income tax. CONSULTANT shall indemnify ECC/GOBM against the payment of all wages and of all payroll deductions, contributions, taxes, or fees lawfully required of CONSULTANT by its employees, including, but not limited to, social security payments and income tax.
15. Warranty of Non-Conflict of Interest - CONSULTANT warrants that he is not at the date hereof and will not during the term of this Agreement be retained by or under contract to or under an obligation of secrecy to a competitor of ECC/GOBM to prevent CONSULTANT from providing services relating to ECC/GOBM's business interests.
16. This Agreement shall not be waived, modified, or terminated except in writing, signed by the parties. No waiver of a breach of any term or condition of this Agreement shall be deemed to constitute the waiver of any other breach of the same or any other term or condition.
17. This Agreement and any benefits thereof may not be assigned by the CONSULTANT, but ECC/GOBM may assign this Agreement to the transferee of the whole or any part of the business of ECC/GOBM, and such assignee shall thereafter be substituted for ECC/GOBM in all respects hereunder.
18. ECC/GOBM shall have the right to terminate this Agreement, upon thirty
(30) days written notice to CONSULTANT, without any obligation to the
CONSULTANT except to pay for services previously rendered.
19. CONSULTANT shall have the right to terminate this Agreement upon 30 days written notice to ECC/GOBM.
20. Termination of this Agreement does not relieve CONSULTANT of any of its obligations of confidentiality under this Agreement. Upon the termination of this Agreement, CONSULTANT agrees to quit ECC/GOBM's premises and shall deliver up to ECC/GOBM all documents, plans, drawings, or papers in any way relating to the affairs of ECC/GOBM, which may be in the possession of CONSULTANT or employees of CONSULTANT.
21. All notices, requests, demands, and other communications required or permitted hereunder shall be deemed to have been duly given as follows:
a) If to the CONSULTANT, when delivered by hand or mailed, by First Class Mail, postage prepaid, and addressed as follows:
James J. Mullen
8202 Campodolcino Drive
Corpus Christi, TX 78414
TEL: 361-985-0990
b) If to ECC/GOBM, when delivered by hand or mailed, by first class mail, postage prepaid, and addressed as follows:
EnerTeck Chemical Corporation/Gold Bond Resources, Inc.
Attn: President
10701 Corporate Drive Suite 150
Stafford, Texas 77477
TEL: (281) 240-1787
22. The validity, performance, construction, and effect of this Agreement shall be governed by the laws of the State of Texas.
ACCEPTED AND AGREED:
ENERTECK CHEMICAL CORPORATION
By: (sign)/s/Dwaine Reese Title: Chairman and COO Date: June 12, 2003 |
GOLD BOND RESOURCES, INC.
By: /s/Dwaine Reese Title: Chairman Date: June 12, 2003 |
JAMES J. MULLEN
By: (sign) /s/ James J. Mullen Title: Attorney at Law Date: June 3, 2003 |
EMPLOYMENT AGREEMENT
Between
ENERTECK CHEMICAL CORPORATION
And
ROY STERN
This Employment Agreement (the "Agreement") is made and entered into to be effective the 1st day of August, 2003 (The "Effective Date") by and between EnerTeck Chemical Corporation, a Texas corporation, (the "Company") and Roy Stern ("Employee").
WITNESSETH:
WHEREAS, Employee is an experienced professional whose educational background, experience, skill and expertise in the field of manufacturing, marketing, business development, engineering, management and the like render him valuable to the Company as an employee,
WHEREAS, the Company desires to employ the Employee and the Employee desires to be employed by the Company; and
WHEREAS, Employee and the Company desire to set forth the terms and conditions of Employee's employment with the Company.
NOW, THEREFORE, and in consideration of the promises and of the full and faithful performance of the respective agreements herein contained, the parties hereto do mutually covenant and agree with each other as follows:
1. Employment. The Company agrees to employ Employee as its Vice President - Fleet Sales, and Employee accepts such employment upon the terms and conditions hereinafter set forth. The Employee shall report directly to the Board.
2. Term. The term of this Agreement shall be for a period of twenty-four (24) months from the Effective Date.
3. Compensation
(a) Basic Compensation. The Company agrees to pay Employee a wage of $110,000 per year, payable in equal monthly payments on the regular paydays of the Company for the term of this Agreement.
(b) Sales Commissions. The Company agrees to pay Employee sales commissions of 1% of the gross sales made by the Company as a result of the Employee's sales efforts. The Employee shall be entitled to said commissions during the term of this agreement, as extended, plus for the additional period that the non-compete provision referred to under paragraph 9(b), below, is in effect.
(c) Stock Options. The Company's parent, Gold Bond Resources, Inc. ("GOBM"), intends to create an Employee Stock Option Plan. Accordingly, in addition to the compensation provided for in subparagraphs 3(a) and 3(b), above, the Employee will be granted
options to purchase common shares of GOBM in accordance with said Employee Stock Option Plan.
(d) Special Stock Warrants. The Company's Parent, GOBM, agrees to issue to Employee warrants to purchase 1,000,000 shares of the GOBM's restricted common stock at a purchase price of $.12 per share (or 100,000 shares at a price of $1.20 per share after GOBM's intended one for 10 common stock reverse split). Said warrants are to be subject to a separate warrant agreement and considered earned upon the execution of this agreement. The warrant agreement will require GOBM to cause the shares underlying the Special Stock Warrants to be registered with the SEC.
(e) Benefits. In addition to the compensation indicated in subparagraphs 3(a) and 3(b), above, Employee shall be entitled to participate in any group employee benefit program of the Company, including medical, dental and life insurance and 401(k) programs, if the Company creates and institutes any such programs in its sole discretion.
(f) Vacations. Employee shall also be entitled to four (4) weeks paid vacation time during each calendar year. The dates of vacation time are subject to Company approval.
4. Duties. During the term of this Agreement, Employee shall serve the Company in the position indicated above and shall perform such duties as is consistent with these positions, and as may be delegated or assigned to him from time to time by the Company.
5. Extent of Services. The Employee shall devote substantially all of his working time, attention and energy during normal business hours (other than absences due to illness or vacation) to the performance of his duties for the Company.
6. Expenses. Employee is authorized to incur reasonable expenses in promoting the business of the Company and will be reimbursed by the Company for approved expenses in accordance with the Company's normal practice upon submission of required documentation.
7. Office: The Company and the Employee agree that the Employee's principal place of employment shall be at his San Francisco office. The Employee agrees to be responsible for his own rental expense, and the Company agrees to pay all other approved expenses related to the operation of the San Francisco office.
8. Termination. The Employee's employment hereunder shall terminate upon the expiration of the Term and may be terminated during the Term under the following circumstances:
(a) Death. Employee's employment hereunder shall terminate upon his death.
(b) Disability. If, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been substantially unable to perform his
duties hereunder for an entire period of four (4) months or more during any six
(6) consecutive month period, and within thirty (30) days after written Notice
of Termination is given after such six (6) month period, Employee shall not have
returned to the substantial performance of his duties on a fulltime basis, the
Company shall have the right to terminate Employee's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate Employee's employment for Cause, and such termination in and of itself shall not be, nor shall it be deemed to be, a breach of this Agreement. For purposes of this Agreement, "Cause" to terminate Employee's employment shall include but not be limited to the Employee's:
(i) Conviction of, or plea of guilty or nolo contendere to, a felony; or
(ii) Continued failure to use reasonable best efforts to substantially perform his duties hereunder (other than such failure resulting from Employee's incapacity due to physical or mental illness or subsequent to the issuance of a Notice of Termination by Employee for Good Reason) after demand for substantial performance is delivered by the Company in writing that specifically identifies the manner in which the Company believes Employee has not used reasonable best efforts to substantially perform his duties; or
(iii) Misconduct (including, but not limited to, a breach of the provisions of Section 9) that is materially economically injurious to the Company or to any entity in control of, controlled by or under common control with the Company ("Affiliates").
(d) Good Reason. Employee may terminate his employment for "Good Reason" within one hundred and twenty (120) days after Employee has actual knowledge of the occurrence, without the written consent of Employee, of one of the following events that has not been cured within thirty (30) days after written notice thereof has been given by Employee to the Company:
(i) A reduction by the Company in Employee's Base Salary or a failure by the Company to pay any such amounts when due;
(ii) The Company's failure to provide the benefits set forth in Section 3 or the failure of the Company to substantially provide any material employee benefits due to be provided to Employee (other than any such failure not inconsistent with any express provisions contained herein which failure affects all senior executive officers); or
(iii) The Company's failure to provide in all material respects the indemnification set forth in Section 11 of this Agreement. Employee's right to terminate his employment hereunder for Good Reason shall not be affected by his incapacity due to physical or mental illness. Employee's continued employment during the one hundred and twenty (120) day period referred to above in this paragraph (d) shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.
(e) Without Cause. The Company shall have the right to terminate Employee's employment hereunder without Cause by providing Employee with a Notice of Termination thirty (30) days prior to the date of termination of employment, and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement.
(f) Without Good Reason. Employee shall have the right to terminate his employment hereunder without Good Reason by providing the Company with a Notice of Termination thirty (30) days prior to the date of termination of employment, and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement.
9. Non-Competition, Confidentiality Agreement and Removal of Documents.
(a) Purpose: In connection with the limited protection afforded the Company
by the covenants contained in this Paragraph, Employee recognizes and
acknowledges that the Company's need for the following covenants is based upon:
(i) The Company has expended and will expend substantial time, money and effort
in developing concepts, products and technology in its lines of business and
valuable lists of customers and information relating to its business
requirements, needs, patterns and procedures; (ii) Employee in the course of
employment, will be entrusted with and exposed to the Company's trade secrets
and other proprietary and confidential information; (iii) The Company, during
the term of this Agreement and thereafter, will be engaged in a highly
competitive industry in which many firms, including the Company compete; (iv)
Employee could by utilizing the trade secrets or other proprietary and
confidential information owned by the Company, become a competitor or be
employed by or otherwise assist a competitor; and (v) the Company will suffer
great loss if Employee were to terminate this Agreement and thereafter enter,
directly or indirectly, into competition with the Company.
(b) Non-Competition Agreement. While the Employee is employed by the Company and for a period to one (1) year thereafter, as part of the consideration for the compensation described in paragraph 3, above, Employee agrees not to, directly or indirectly, acting alone or in conjunction with others, except with the express written permission of the Company secured in advance:
(i) invest, own (in whole or in part) be employed by, consult with, be a stockholder, officer, director, partner or representative of, or engage in any business which designs, manufactures, uses or sells, technology or conducts any business in direct competition with the Company or any of its subsidiaries or affiliates during the term hereof;
(ii) solicit or contact customers of the Company for purposes other than the business of the Company; (iii) solicit, canvas or accept, or transact any other business in the same lines of business as Company; (iv) induce or attempt to influence any employee of Company to terminate his or her employment; or (v) disparage by word, action or otherwise the business reputation of the Company.
(c) Confidentiality Agreement. During the term of this Agreement and following the termination hereof, and for a period of five years thereafter the Employee agrees not to disclose or make any use, for his own benefit or for the benefit of a business or entity other than the Company or its subsidiaries or affiliates of any information or data of or pertaining to the Company, its business and financial affairs, or its products or services which is treated as confidential by the Company and is not generally known within its trade, which was acquired by Employee during his affiliation with the Company.
(d) Removal of Documents: Rights to Product. All records, files, drawings, documents, models, equipment, and the like relating to the Company's business, which Employee has control over shall not be removed from the Company's premises without its written consent, unless such removal is in the furtherance of the Company's business or is in connection with Employee's carrying out his duties under this Agreement and, if so removed, shall be returned to the Company promptly after termination of Employee's employment thereunder, or otherwise promptly after removal if such removal occurs following termination of employment. Employee shall assign to the Company all rights to trade secrets and other products relating to the Company's business developed by him alone or in conjunction with others at any time while employed by the Company.
(e) Independent Agreement. All agreements made in this Paragraph shall be construed as agreements independent of any other provision herein, and the existence of any claim, cause of action or defense of Employee as against the Company predicated on this Agreement, or otherwise, shall not constitute a defense to the Company's enforcement of such agreement. The covenants and agreements of Employee contained herein shall survive the termination or expiration of this Agreement.
(f) Equitable Remedies. Employee further acknowledges and understands that his services are of a special and unique nature, therefore the breach of this agreement cannot be adequately or accurately compensated for in damages by an action at law, and that the breach or threatened breach of any provisions of this agreement would cause the Company irreparable harm. In the event of any such breach, Employee agrees that the Company shall be entitled,
as a matter of right, to injunctive and other equitable relief, without waiving any other rights which it may have to damages or otherwise under this Agreement.
(g) Nature of Restrictions. Employee hereby specifically acknowledges and agrees that the temporal and other restrictions contained in this Paragraph are reasonable and necessary to protect the business and prospects of the Company, and that the enforcement of the provisions of this Paragraph will not work an undue hardship on him.
(h) Survival. Employee further agrees, in the event that any provision of this Paragraph is held to be invalid or against public policy, the remaining provisions of this Paragraph and the remainder of this Agreement shall not be affected thereby.
10. Inventions and Patents. Employee agrees that any inventions, designs, improvements, and/or discoveries made by Employee during the term of his employment solely or jointly with others, which (i) are made directly or indirectly using the Company's equipment, supplies, facilities, trade secrets, or time (ii) related at the time of conception or reduction to practice of the business of the Company and/or the Company's actual or anticipated research and development, or (iii) result from any work performed by Employee for the Company, shall be the exclusive property of the Company. Employee agrees that he will promptly and fully inform and disclose to the Company all such inventions, designs, improvements, and discoveries, and Employee promises to assign such inventions to the Company. Employee also agrees that the Company shall have the right to keep such inventions as trade secrets, if the Company chooses. Employee shall assist the Company in obtaining patents in the United States and in all foreign countries on all inventions, design, improvements, and discoveries deemed patentable by the Company and shall execute all documents and do all things necessary to obtain Letters Patents to vest the Company with full and extensive titles to the patents and will assist the Company to protect the patents against infringement by others. For purposes of this Paragraph, an invention is presumed if it relates at the time of conception or reduction to practice of the business of the Company or the Company's actual or anticipated research or development during the period of Employee's employment.
11. Indemnification of Officers and Employees. The Company shall indemnify, protect and hold Employee harmless, to the fullest extent permitted by Texas law and the Company's certificate of incorporation, as amended, and its by-laws, from any and all claims and legal actions against the Company including but not limited to product liability claims, shareholder or government claims, fines, penalties, or legal actions; or any other tort or action against the Employee as a result of Employee's employment by Company. Company does not presently maintain officer and director liability insurance. However, if the Company does obtain such coverage in the future, the Company will immediately cause said Employee to be covered by said insurance.
12. Notices. Any notices, demands, or requests provided for, required or permitted to be given pursuant to this Agreement shall be deemed to have been properly given if in writing and given to the party personally or if it is sent by registered mail, postage prepaid, to the following
addresses:
TO EMPLOYEE: TO THE COMPANY:
Roy Stern EnerTeck Chemical Corporation
1500 Francisco Street, Unit #11 10701 Corporate Drive, Suite 150
San Francisco, CA 94128 Stafford, TX 77477
|
13. Entire Agreement. This Agreement contains the entire agreement of the parties hereto relative to the subject matter hereof and supersedes any prior negotiations or agreements between the parties.
14. Benefit. This Agreement shall bind and inure to the benefit of the parties, their successors, assigns, heirs and personal representatives.
15. Assignment. This Agreement is personal in nature to the Employee and shall not be assignable or delegable voluntarily or by operation of law or otherwise by the Employee, without the consent of the Company.
16. Amendment. This Agreement shall not be changed, modified, supplemented or amended, in whole or in part except by an instrument in writing signed by the parties hereto or their respective successors or assigns, or otherwise as provided herein.
17. Severability. In the event that any one or more of the provisions of this Agreement are for any reason, held to be illegal, invalid, or unenforceable under present or future laws during the term hereof, such provision shall be fully severable and this Agreement and each separate provision hereof shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement.
18.Applicable Law. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled any applicable Court of Law presiding in Harris County in the State of Texas. In respect to any such legal proceedings, the prevailing party shall be entitled to receive, in addition to any other remedy, all costs and expenses incurred in such proceedings, including reasonable attorney's fees.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF the parties have executed this Agreement on the day and year as noted.
EnerTeck Chemical Corporation EMPLOYEE
By s/s s/s
--------------------------- ------------------------------------
Parrish Ketchmark Roy Stern
President
Date: August 1, 2003 Date: August 5, 2003
-------------- --------------
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Gold Bond Resources, Inc.
By: s/s
----------------------------------------
Parrish Ketchmark
President
Date: August 1, 2003
|
GOBM-RSTERNEMPLOYMENT AGREEMENT
CONSULTING AGREEMENT
This consulting agreement (the "Consulting Agreement") made as of the 9th day of January 2003, by and between PARRISH BRIAN PARTNERS, INC. with an office at 75 Oak Street, Suite 202, Norwood, New Jersey 07648 ("PARTNERS") and GOLD BOND RESOUCRES, INC., 10701 Corporate Drive, Suite 293, Stafford, Texas 77477 ("GOBM").
WHEREAS, GOBM, is an energy technology company and through its wholly owned subsidiary, ENERTECK CHEMICAL CORPORATION ("ENERTECK") has commercialized a diesel fuel specific combustion catalyst; and
WHEREAS, GOBM is a publicly traded entity under the rules of the NATIONAL ASSOCIATION OF SECURITIES DEALERS and trades on the OTC ELECTRONIC BULLETIN BOARD; and
WHEREAS, GOBM requires certain financial and business development services; and
WHEREAS, PARTNERS is engaged in the business of providing consulting and business development services and is desirous of performing such services for GOBM; and
WHEREAS, GOBM and PARTNERS desire to memorialize their relationship in a written document; and
WHEREAS, the execution of this Agreement has been approved by the Board of Directors of GOBM.
NOW THEREFORE IN CONSIDERATION OF THE MUTUAL COVENANTS HEREINAFTER
STATED, INTENDED TO BE LEGALLY BOUND, THE PARTIES HAVE AGREED AS FOLLOWS:
1. APPOINTMENT
GOBM hereby appoints PARTNERS as its non-exclusive consultant and business development representative and hereby retains PARTNERS and PARTNERS accepts such appointment and agrees to perform the services specified in a competent, professional, and faithful manner upon the terms and conditions hereinafter set forth.
2. TERM
The term of this Agreement shall commence upon the date hereof and continue for five (5) years thereafter, subject to the right of either party hereto to terminate this Agreement for any reason upon thirty (30) days written notice to the other party.
3. SERVICES
(a) PARTNERS shall assist in establishing and advising GOBM with respect to general business planning, development and implementation of such plans and strategies including the development and expansion of GOBM's present business and new business ventures;
(b) PARTNERS shall assist GOBM in analyzing present corporate financial needs and possible future financing and advise GOBM with respect to capital structure;
(c) PARTNERS shall seek to identify merger, acquisition, investment and similar joint ventures and/or business combination candidates and assist GOBM in the analysis and development of potential mergers, acquisitions, investments and/or joint ventures which GOBM may consider, and assist in effecting and completing same, if so directed;
(d) PARTNERS shall act, generally, as financial public relations advisor, essentially acting as liaison between GOBM and its stockholders, as advisor and liaison with respect to existing and potential market makers, broker-dealers, underwriters and investors and as advisor with respect to the planning, design, development, organization, writing and distribution of communications and information, including but not limited to press releases, shareholder reports, company profiles and other documents;
(e) PARTNERS shall consult with and advise GOBM with respect to shareholder meetings, interviews of GOBM'S officers by the financial media and interviews of GOBM'S officers by analysts, market makers, broker-dealers and other members of the financial community;
(f) PARTNERS shall seek to make GOBM, its management, its products and services and its financial situation and prospects known to the various industries in which the Company and its subsidiaries operate, the financial press and publications, broker-dealers, mutual funds, institutional investors, market makers, analysts, investment advisors and other members of the financial community as well as the financial media and the public generally;
(g) To the extent requested by GOBM, PARTNERS shall assist GOBM in securing funding, including through the exercise of warrants, options, and similar rights, issued or to be issued;
(h) PARTNERS shall provide general business and financial consulting services as may be requested by the Board of Directors of GOBM.
4. PERFORMANCE OF SERVICES
PARTNERS warrants and agrees:
(a) That it will render the advisory and consulting services and assume its responsibilities under this Agreement in accordance with high professional standards and high levels of expertise; that the personnel assigned to perform services under this Agreement shall have the appropriate skills and expertise to efficiently perform such services; and that in carrying out its responsibilities under this Agreement, PARTNERS hereby assures GOBM that its actions and performance of services hereunder are and shall be conducted in compliance with all applicable laws, rules and regulations, including but not limited to federal and state securities laws; and PARTNERS shall disclose to any and all parties with whom it deals in accordance with this agreement on behalf of GOBM any and all of its interest in GOBM, whether direct, indirect, beneficial, contingent or otherwise;
(b) GOBM shall have no responsibility for the acts and conduct of PARTNERS hereunder, or its failure to act, such as in the filing of reports, forms or disclosures, and PARTNERS hereby agrees that it shall defend, indemnify and hold GOBM (which term for this Section 4(b) includes GOBM'S officers, directors, agents, shareholders, attorneys and representatives) harmless for and against any and all liabilities, actions, claims, suits, proceedings, demands, investigations, including costs, expenses and
counsel fees, incidental to the performance of services by PARTNERS hereunder or due to any failure of disclosure by PARTNERS to third parties as to its interest in GOBM or as to information concerning GOBM or its failure to comply with all applicable federal and state securities laws, exchanges' and commissions' rules and regulations; provided such indemnity shall not apply to the extent any such liability arises from or is substantially attributable to the actions, negligence act or material omission by GOBM;
(c) That it shall not release any financial or other material information or data regarding GOBM without first providing same to and receiving prior approval of GOBM;
(d) That it shall not conduct meetings with financial analysts, merger, acquisition, joint venture, other business combination or investment candidates, and potential and existing customers without informing and obtaining the approval of GOBM in advance of the proposed meeting with the format or agenda of such meeting and with complete copies of all reports and communications to be made available at any such meeting to be provided prior thereto to GOBM;
(e) That it shall not release any information or data about GOBM to any pre-selected person or limited group of people or other entity, in the event PARTNERS is or should have been aware that such information is material and has not otherwise been generally released;
(f) That it shall restrict or cease, as directed by GOBM, all public relations efforts, including all dissemination of information regarding GOBM immediately upon receipt of instructions to that effect from GOBM; and after notice by GOBM of a filing for a proposed public offering of its securities and during any period of restriction on publicity, PARTNERS shall not engage in any public relations efforts not in the normal course without written approval of securities counsel for GOBM and counsel for underwriters, if any;
(g) PARTNERS shall not take any action which would in any way adversely affect the reputation, standing or prospects of GOBM or would cause GOBM to be in violation of applicable law;
(h) That it shall promptly supply GOBM prior to their use or dissemination with complete copies of all stockholder reports and communications; with all data and information to be supplied to any financial analyst, broker-dealer, market maker, or other member of the financial community and with all brochures or other materials relating to GOBM, its operations, management, product, services, finances, proposals, properties, and the like. PARTNERS shall inform GOBM in advance in writing as to the persons or institutions to whom release of any of the foregoing information or communications are to be made.
5. DUTIES OF GOBM
GOBM shall provide PARTNERS, on a regular and timely basis, with all counsel approved data and information about it, its subsidiaries, its management, its products and services and its operations and shall advise PARTNERS of any facts which would affect the accuracy of any data and information previously supplied pursuant to this paragraph.
GOBM shall promptly supply PARTNERS with full and complete copies of all filings with all federal and state securities agencies; with full and complete copies of all stockholder reports and communications; with all data and information supplied to any financial analyst, broker-dealer, market maker or other member of the financial community and with all brochures or other sales materials relating
to its products or services. GOBM shall inform PARTNERS as to the persons or institutions to whom release of any of the foregoing information or communications have been made.
6. REPRESENTATION AND INDEMNIFICATION
GOBM shall be deemed to have made a continuing representation of the
accuracy of any and all material facts, information and data which it supplies
to PARTNERS and acknowledges its awareness that PARTNERS will rely on such
continuing representation in disseminating such information and otherwise
performing its consulting functions. However, nothing herein is to be construed
as alleviating PARTNERS' due diligence obligations; and provided further that
all information provided by GOBM to PARTNERS that subsequently changes or is
updated is construed as accurate at the time provided. Other than its knowledge
of changes or updated materials, PARTNERS, in the absence of notice in writing
from GOBM, will rely on the continuing accuracy of material, information and
data. GOBM shall defend, indemnify and hold PARTNERS (which term for this
Section 6 includes PARTNERS' officers, directors, agents, shareholders,
attorneys and representatives) harmless for any and all liabilities, actions,
claims, suits, proceedings, demands, investigations, including costs, expenses
and counsel fees, incident to the providing to PARTNERS by GOBM of materially
false facts, information or data concerning itself or its operations or omitting
to provide such material facts, information or data that renders the disclosure
false, misleading fraudulent; provided such indemnity shall not apply to the
extent any liability arises from or is substantially attributable to a negligent
act or material omission by PARTNERS.
7. COMPENSATION
a) For PARTNERS agreeing to be available to provide the services described hereunder, GOBM agrees to issue to PARTNERS 15,000,000 warrants to acquire 15,000,000 shares of GOBM common stock, at an exercise price of $0.10, in lieu of PARTNERS' normal monetary retainer fee and normal monthly monetary compensation. Said warrants are to be issued and are deemed earned upon execution of this Agreement. Said warrants shall expire five (5) years after the execution of this Agreement. The form of Warrant is attached hereto as Exhibit "A".
b) In addition to the payments provided in subsection 7(a) hereof,
PARTNERS shall be entitled to additional success fees in connection with any
acquisitions, divestitures, financing and other similar transactions not so
defined in subsection 7(a) above when consummated by GOBM in which PARTNERS has
been involved for purposes of negotiation or evaluation on behalf of GOBM. Any
transaction which is so initiated, notwithstanding consummation date, within two
(2) years of the termination of this Agreement shall be subject to this success
fee, which success fee to be separately negotiated between the parties, and
agreed to in writing via an instrument separate from this Agreement.
c) As further inducement to PARTNERS to serve GOBM as provided in
Section 3 above, GOBM covenants and agrees that, as more fully set forth in
Exhibit "A", GOBM shall immediately cause to be filed a Registration Statement
under the Securities Act of 1933, as amended, registering the shares acquired
via the warrant exercise. The aforementioned registrations will be at the
expense of GOBM.
8. EXPENSES
PARTNERS is expected to incur reasonable out-of-pocket expenses, including telephone charges, for providing the services for GOBM as provided herein. Reimbursement for such expenses shall be subject to such reasonable budget previously approved by GOBM. Any anticipated significant
expenses (significant encompasses any expenses exceeding $500.00) must be submitted to GOBM for prior written approval.
For other expenses on behalf of GOBM other than out-of-pocket expenses, such as third party work (lay-outs, mark-ups, printing, art, photograph or graphics), for GOBM annual reports, interim shareholder reports, product brochures, press releases, and similar works, GOBM shall either pay such third-party vendors or reimburse PARTNERS if previously approved by GOBM as to the vendor and the work.
9. RELATIONSHIP OF PARTIES
PARTNERS is responsible for compensation of its agents, employees and representatives, as well as all applicable withholding therefrom and taxes thereon. This Agreement does not establish any partnership, joint venture or other business entity or association between the parties hereto and neither party is intended to have any interest in the business or property of the other except for the issuance of warrants to acquire shares by PARTNERS as set forth in Section 7 hereto. Except as expressly agreed herein neither party shall have the authority to obligate, commit or bind the other in any manner whatsoever, except that should PARTNERS desire to subcontract services, GOBM shall be notified in writing and approve of such subcontractor relationship before any services are rendered or compensation is assigned to subcontractor.
10. DISCLOSURE OF INFORMATION
PARTNERS acknowledges that, in and as a result of the Agreement, it will be making use of, acquiring and/or adding to confidential or proprietary information of a special and unique nature and value to GOBM, including, but not limited to, the nature and material terms of business opportunities and proposals available to GOBM, the names and addresses of GOBM customers and suppliers, operating procedures, methods and systems, financial records of GOBM and other information, data and documents now existing or later acquired by PARTNERS regardless of whether any such information, data or documents qualify as a "trade secret" under applicable federal or state laws (collectively, the "Confidential Information"). As a material inducement to GOBM to enter into this Agreement, and to pay to PARTNERS the compensation referred to in Section 7 hereof, along with other considerations provided herein, PARTNERS covenants and agrees that it shall not at any time during the term or following any termination of this Agreement, directly or indirectly, divulge or disclose or use for any purpose whatsoever (except for the sole and exclusive benefit of GOBM as reasonably required in connection with its duties to or as otherwise required by law), any Confidential Information which has been obtained by or disclosed to it as a result of this Agreement or its retention hereunder. In accordance with the foregoing, PARTNERS further agrees that it will at no time retain or remove from the premises of GOBM records of any kind or description whatsoever for any purpose whatsoever unless authorized by GOBM and will return all of the foregoing to GOBM upon GOBM'S request or upon any termination or expiration of this Agreement. In the event of a breach of threatened breach by PARTNERS of any of the provisions of this Section 11, GOBM, in addition to and not in limitation of any other rights, remedies or damages available to it at law or in equity, shall be entitled to a permanent injunction in order to prevent or to restrain any such breach by PARTNERS or its agents, partners, representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with PARTNERS.
11. TRANSFER OF INTEREST AND DUTIES.
The parties hereto agree that in the event GOBM is sold or merged with another corporation, then, and in that case, this Agreement may be assigned by GOBM to said merged or acquiring corporation, and PARTNERS hereby agrees to be bound by this Agreement even though GOBM shall be merged with another.
12. APPLICABLE LAW; SEVERABILITY.
This Agreement shall be governed by and construed pursuant to the laws of the State of New Jersey. If any terms or part of this Agreement shall be determined to be invalid, illegal or unenforceable in whole or in part, the validity of the remaining part of such term of the validity of any other term of this Agreement shall not in any way be affected. All provisions of this Agreement shall be construed to be valid and enforceable to the full extent permitted by law.
13. BINDING PROVISIONS AND PERFORMANCE.
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their successors in interest of any kind whatsoever, and all such parties agree to be bound by the provisions contained herein. Except as expressly provided herein, this Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party hereto.
14. AMENDMENT.
No amendment or variation of the terms of this Agreement shall be valid unless made in writing and signed by the parties hereto.
15. ENTIRE AGREEMENT.
This Agreement represents the entire agreement between the parties hereto with respect to the subject matter hereof.
16. NOTICES.
Any notice required or permitted to be given hereunder shall be in writing and shall be mailed by first-class pre-paid mail or otherwise delivered in person or by facsimile with hardcopy to follow by first-class pre-paid mail at the address of such party set forth in the preamble to this Agreement or to such other address or facsimile telephone number as the party shall have furnished in writing to the other party.
17. WAIVER.
Any waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions will not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term of any other term of this Agreement.
IN WITNESS WHEREOF, the Consulting Agreement has been executed by the Parties as of the date first written above.
/s/ Dwaine Reese /s/ Parrish B. Ketchmark ------------------------------ ------------------------------------ Dwaine Reese, Chairman Parrish B. Ketchmark, President GOLD BOND RESOURCES, INC. PARRISH BRIAN PARTNERS, INC. |
AMENDMENT TO JANUARY 9, 2003
CONSULTING AGREEMENT
This amendment to the January 9, 2003 consulting agreement (the "Amended Consulting Agreement") is made as of the 15th day of May 2003, by and between PARRISH BRIAN PARTNERS, INC. with an office at 75 Oak Street, Suite 202, Norwood, New Jersey 07648 ("PARTNERS") and GOLD BOND RESOUCRES, INC., 10701 Corporate Drive, Suite 293, Stafford, Texas 77477 ("GOBM").
WHEREAS, GOBM AND ITS WHOLLY-OWNED SUBSIDIARY, ENERTECK CHEMICAL CORP. ("ENERTECK"), are in need of an individual to act as each's Interim President until such time as an individual or individuals can be retained to act in such capacities under terms and conditions acceptable to GOBM; and
WHEREAS, PARTNERS has an individual currently under its employ who is qualified to serve in such capacities; and
WHEREAS, the execution of this Agreement has been approved by the Board of Directors of all of the parties.
NOW THEREFORE IN CONSIDERATION OF THE MUTUAL COVENANTS CONTAINED IN THE
JANUARY 9, 2003 CONSULTING AGREEMENT, THE PARTIES HAVE AGREED AS FOLLOWS:
Under the services to be provided by PARTNERS referred to in Paragraph 3 of the January 9, 2003 Consulting Agreement entitled "SERVICES", PARTNERS hereby agrees to provide and GOBM agrees to accept the services of PARTNERS' employee, PARRISH B. KETCHMARK ("PBK"), to act as Interim President of GOBM and ENERTECK until such time(s) when a permanent replacement or replacements is or are appointed. However, the preceding not withstanding, PARTNERS will make PBK's services available for a period ending no later than May 14, 2004.
PARTNERS hereby agrees to provide PBK's services referred to herein for no additional compensation either to PARTNERS or PBK as partial consideration for the compensation due to PARTNERS under paragraph 7 of the January 9, 2003 Consulting Agreement. However, the foregoing not withstanding, PBK, individually, will participate as an employee in the Employee Stock Option Plan that GOBM intends to create, and will be granted options to purchase shares of GOBM in accordance with said Employee Stock Option Plan. Furthermore, PBK is hereby authorized to incur reasonable expenses in providing the services contemplated herein and will be reimbursed by GOBM or ENERTECK (as the case may be) in accordance with GOBM and/or ENERTECK'S normal practice upon submission of required documentation.
PBK shall devote as much of his working time in the performance of his duties as are herein contemplated, as he feels, in his sole discretion, is necessary to accomplish the goals of GOBM and/or ENERTECK. PBK will serve at the discretion of the Board of Directors of GOBM, and may be terminated from either or both positions upon 30 days written notice.
This Amendment to the January 9, 2003 Consulting Agreement is hereby incorporated into and made a part of the January 9, 2003 Consulting Agreement,
IN WITNESS WHEREOF, this Amendment to the January 9, 2003 Consulting Agreement has been executed by the Parties as of the date first written above.
/s/ Dwaine Reese /s/ Parrish B. Ketchmark ------------------ ---------------------------------- Dwaine Reese, Chairman Parrish B. Ketchmark, President GOLD BOND RESOURCES, INC. PARRISH BRIAN PARTNERS, INC. GOBM-PartnersContractAmendment |
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
GOLD BOND RESOURCES, INC.
15,000,000 WARRANTS FOR THE PURCHASE OF 15,000,000 SHARES OF
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NO. W-1 15,000,000 SHARES
THIS CERTIFIES that, for value received, Parrish Brian Partners, Inc.
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(including any transferee, the "Holder"), is entitled to subscribe for and purchase from Gold Bond Resources, Inc., a Wahington corporation (the "Company"), the amount of shares set forth above (the "Shares") upon the terms and conditions set forth herein. This Warrant is being issued as consideration to the Holder pursuant to the January 9, 2003 Consulting Agreement by and between the Holder and the Company. Each warrant grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $0.10 per share ("Exercise Price"), for a period of five years ("Exercise Period" and collectively, the "Warrants"). As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. In the event that the Company effects its planned one from 10 reverse common stock split before the exercise of the warrants herein, the aforementioned number of warrants and exercise price will be adjusted accordingly, i.e., 1,500,000 warrants for the purchase of 1,500,000 shares of common stock at an exercise price of $1.00.
1. This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto as Exhibit A, duly executed) to the Company at its office at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477, Attention:
President, or at such other place as is designated in writing by the Company, together with a certified or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price of $0.10 (or in the event of the aforementioned reverse stock split, at an exercise price of $1.00 per share) multiplied by the number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative the Form of Assignment, a copy of which is attached hereto as Exhibit B, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or
transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment or transfer of this Warrant or such Shares is registered under the Act, it being understood that neither this Warrant nor such Shares are currently registered for sale and that the Company has no obligation or intention to so register this Warrant or such Shares except as specifically provided for in the Subscription Agreement, or (ii) this Warrant or such Shares are sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act in the opinion of counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment
shall become effective at the close of business on such record date; provided, however, that, to the extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.01; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an "Extraordinary Event"), such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively "Extraordinary Event Consideration") receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a
specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or
(d) effect any liquidation, dissolution, or winding-up of the Company; or
(e) take any other action that would cause an adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be
made without charge to the Holder for any tax or other charge in respect of such issuance. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
9. (a) Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the "Commission")), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an "Electing Holder") may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.
(b) If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.
(c) In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.
(d) In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.
(e) (i) The Company shall indemnify and hold harmless each
holder of Common Stock registered pursuant to this Agreement with the
Commission, or under any state securities law or regulation, and each such
holder's officers, directors, employees and agents and each person, if any, who
controls such holder within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several to
which such holder or such other person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such holder for any legal or other expenses reasonably incurred by such holder
in connection with investigating or defending any such action or claim;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (x) made in any such document in reliance upon and in conformity with
written information with respect to such holder furnished to the Company by such
holder expressly for use therein or (y) made in any preliminary prospectus if
(A) such holder failed to send or deliver a current copy of the prospectus to
the person asserting any such loss, claim, damage, or liability with or prior to
the delivery of written confirmation of the sale of the securities concerned to
such person, (B) it is determined that it was the responsibility of such holder
to provide such person with a current copy of the prospectus, and (C) such
current copy of the prospectus would have completely corrected such untrue
statement or omission.
(ii) Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company's officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein.
(iii) Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this
Section 9(e) is unavailable or insufficient to hold harmless an indemnified
party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions
provided in such sections) in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the holder or holders from
this Agreement and from the offering of the shares of Common Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state
a material fact relates to information supplied by the Company or the holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the holders
agree that it would not be just and equitable if contribution pursuant to this
Section 9(e)(iv) were determined by pro rata allocation (even if the holders
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this Section 9(e)(iv). Except as provided in Section
9(e)(iii), the amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 9(e)(iv) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e)
to the contrary, no Holder shall be liable for any amount, in the aggregate, in
excess of the net proceeds to such Holder from the sale of such holder's Shares
giving rise to such losses, claims, damages or liabilities.
(v) The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.
10. Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.
13. The Company may by notice to the Holders of all the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrants; provided, however, that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Holders of Warrants representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of this Warrant, or increasing the Exercise Price therefor, or the acceleration of the termination of the Exercise Period, shall be made without the consent in writing of the Holders of Warrants representing not less than two-thirds of the Warrants then outstanding (other than such changes as are specifically prescribed by this Warrant as originally executed or are made in compliance with applicable law).
14. This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.
Dated: August 1, 2003
GOLD BOND RESOURCES, INC.
Attest:
By: /s/ Dwaine Reese
Name: Dwaine Reese
Secretary Title: CEO
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EXHIBIT A
GOLD BOND RESOURCES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:
and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.
Dated: ____________, ________ Name:
----------------------------------
(Please Print)
Address:
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----------------------- (Signature)
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EXHIBIT B
GOLD BOND RESOURCES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of Gold Bond Resources, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.
NOTICE:
The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
GOLD BOND RESOURCES, INC.
10,000,000 WARRANTS FOR THE PURCHASE OF 10,000,000 SHARES OF
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NO. W-8 10,000,000 SHARES
THIS CERTIFIES that, for value received, Dwaine Reese (including any
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transferee, the "Holder"), is entitled to subscribe for and purchase from Gold Bond Resources, Inc., a Washington corporation (the "Company"), the amount of shares set forth above (the "Shares") upon the terms and conditions set forth herein. This Warrant is being issued in connection with the employment agreement by and between the Holder and the Company. Each warrant grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $0.001 per share ("Exercise Price"), for a period of five years ("Exercise Period" and collectively, the "Warrants"). As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. In the event that the Company effects its planned one from 10 reverse common stock split before the exercise of the warrants herein, the aforementioned number of warrants and exercise price will be adjusted accordingly, i.e., 1,000,000 warrants for the purchase of 1,000,000 shares of common stock at an exercise price of $.01.
1. This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto as Exhibit A, duly executed) to the Company at its office at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477, Attention: President, or at such other place as is designated in writing by the Company, together with a certified
or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price of $0.001 (or in the event of the aforementioned reverse stock split, at an exercise price of $.01 per share) multiplied by the number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative the Form of Assignment, a copy of which is attached hereto as Exhibit B, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of this
Warrant or such Shares is registered under the Act, it being understood that
neither this Warrant nor such Shares are currently registered for sale and that
the Company has no obligation or intention to so register this Warrant or such
Shares except as specifically provided for in the Subscription Agreement, or
(ii) this Warrant or such Shares are sold, assigned or transferred in accordance
with all the requirements and limitations of Rule 144 under the Act, or (iii)
such sale, assignment, or transfer is otherwise exempt from registration under
the Act in the opinion of counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment shall become effective at the close of business on such record date; provided, however, that, to the
extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.01; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an "Extraordinary Event"), such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively "Extraordinary Event Consideration") receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or
(d) effect any liquidation, dissolution, or winding-up of the Company; or
(e) take any other action that would cause an adjustment to the Exercise Price; then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
9. (a) Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the "Commission")), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an "Electing Holder") may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.
(b) If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.
(c) In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered
thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.
(d) In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.
(e) (i) The Company shall indemnify and hold harmless each
holder of Common Stock registered pursuant to this Agreement with the
Commission, or under any state securities law or regulation, and each such
holder's officers, directors, employees and agents and each person, if any, who
controls such holder within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several to
which such holder or such other person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such holder for any legal or other expenses reasonably incurred by such holder
in connection with investigating or defending any such action or claim;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (x) made in any such document in reliance upon and in conformity with
written information with respect to such holder furnished to the Company by such
holder expressly for use therein or (y) made in any preliminary prospectus if
(A) such holder failed to send or deliver a current copy of the prospectus to
the person asserting any such loss, claim, damage, or liability with or prior to
the delivery of written confirmation of the sale of the securities concerned to
such person, (B) it is determined that it was the responsibility of such holder
to provide such person with a current copy of the prospectus, and (C) such
current copy of the prospectus would have completely corrected such untrue
statement or omission.
(ii) Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company's officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or
other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein.
(iii) Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this
Section 9(e) is unavailable or insufficient to hold harmless an indemnified
party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions
provided in such sections) in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the holder or holders from
this Agreement and from the offering of the shares of Common Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the holder and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission. The Company and the holders agree that it would not be just and equitable if contribution pursuant to this Section 9(e)(iv) were determined by pro rata allocation (even if the holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 9(e)(iv). Except as provided in Section 9(e)(iii), the amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9(e)(iv) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e) to the contrary, no Holder shall be liable for any amount, in the aggregate, in excess of the net proceeds to such Holder from the sale of such holder's Shares giving rise to such losses, claims, damages or liabilities.
(v) The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.
10. Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.
13. The Company may by notice to the Holders of all the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Warrants; provided, however, that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Holders of Warrants representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of this Warrant, or increasing the Exercise Price therefor, or the acceleration of the termination of the Exercise Period, shall be made without the consent in writing of the Holders of Warrants representing not less than two-thirds of the Warrants then outstanding (other than such changes as are specifically prescribed by this Warrant as originally executed or are made in compliance with applicable law).
14. This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.
Dated: August 1, 2003
GOLD BOND RESOURCES, INC.
Attest:
By: /s/ Parrish B. Ketchmark
Name: Parrish B. Ketchmark
Secretary Title: President
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EXHIBIT A
GOLD BOND RESOURCES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:
and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.
Dated: ____________, ________ Name:
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(Please Print)
Address:
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----------------------- (Signature)
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EXHIBIT B
GOLD BOND RESOURCES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of Gold Bond Resources, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.
NOTICE:
The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
GOLD BOND RESOURCES, INC.
1,000,000 WARRANTS FOR THE PURCHASE OF 1,000,000 SHARES OF
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NO. W-5 1,000,000 SHARES
THIS CERTIFIES that, for value received, James M. Mullen (including any transferee, the "Holder"), is entitled to subscribe for and purchase from Gold Bond Resources, Inc., a Washington corporation (the "Company"), the amount of shares set forth above (the "Shares") upon the terms and conditions set forth herein. This Warrant is being issued in connection with the consulting agreement by and between the Holder and the Company last executed on June 12, 2003. Each warrant grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $0.12 per share ("Exercise Price"), for a period of five years ("Exercise Period" and collectively, the "Warrants"). As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. In the event that the Company effects its planned one from 10 reverse common stock split before the exercise of the warrants herein, the aforementioned number of warrants and exercise price will be adjusted accordingly, i.e., 100,000 warrants for the purchase of 100,000 shares of common stock at an exercise price of $1.20.
1. This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto as Exhibit A, duly executed) to the Company at its office at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477, Attention: President, or at such other place as is designated in writing by the Company, together with a certified
or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price of $0.12 (or in the event of the aforementioned reverse stock split, at an exercise price of $1.20 per share)multiplied by the number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative the Form of Assignment, a copy of which is attached hereto as Exhibit B, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of this
Warrant or such Shares is registered under the Act, it being understood that
neither this Warrant nor such Shares are currently registered for sale and that
the Company has no obligation or intention to so register this Warrant or such
Shares except as specifically provided for in the Subscription Agreement, or
(ii) this Warrant or such Shares are sold, assigned or transferred in accordance
with all the requirements and limitations of Rule 144 under the Act, or (iii)
such sale, assignment, or transfer is otherwise exempt from registration under
the Act in the opinion of counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment shall become effective at the close of business on such record date; provided, however, that, to the
extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.01; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an "Extraordinary Event"), such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively "Extraordinary Event Consideration") receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or
(d) effect any liquidation, dissolution, or winding-up of the Company; or
(e) take any other action that would cause an adjustment to the Exercise Price; then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
9. (a) Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the "Commission")), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an "Electing Holder") may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.
(b) If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.
(c) In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered
thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.
(d) In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.
(e) (i) The Company shall indemnify and hold harmless each
holder of Common Stock registered pursuant to this Agreement with the
Commission, or under any state securities law or regulation, and each such
holder's officers, directors, employees and agents and each person, if any, who
controls such holder within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several to
which such holder or such other person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such holder for any legal or other expenses reasonably incurred by such holder
in connection with investigating or defending any such action or claim;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (x) made in any such document in reliance upon and in conformity with
written information with respect to such holder furnished to the Company by such
holder expressly for use therein or (y) made in any preliminary prospectus if
(A) such holder failed to send or deliver a current copy of the prospectus to
the person asserting any such loss, claim, damage, or liability with or prior to
the delivery of written confirmation of the sale of the securities concerned to
such person, (B) it is determined that it was the responsibility of such holder
to provide such person with a current copy of the prospectus, and (C) such
current copy of the prospectus would have completely corrected such untrue
statement or omission.
(ii) Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company's officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or
other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein.
(iii) Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this
Section 9(e) is unavailable or insufficient to hold harmless an indemnified
party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions
provided in such sections) in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the holder or holders from
this Agreement and from the offering of the shares of Common Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the holder and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission. The Company and the holders agree that it would not be just and equitable if contribution pursuant to this Section 9(e)(iv) were determined by pro rata allocation (even if the holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 9(e)(iv). Except as provided in Section 9(e)(iii), the amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9(e)(iv) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e) to the contrary, no Holder shall be liable for any amount, in the aggregate, in excess of the net proceeds to such Holder from the sale of such holder's Shares giving rise to such losses, claims, damages or liabilities.
(v) The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.
10. Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.
13. The Company may by notice to the Holders of all the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Warrants; provided, however, that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Holders of Warrants representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of this Warrant, or increasing the Exercise Price therefor, or the acceleration of the termination of the Exercise Period, shall be made without the consent in writing of the Holders of Warrants representing not less than two-thirds of the Warrants then outstanding (other than such changes as are specifically prescribed by this Warrant as originally executed or are made in compliance with applicable law).
14. This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.
Dated: August 1, 2003
GOLD BOND RESOURCES, INC.
Attest:
By: /s/ Parrish B. Ketchmark
Name: Parrish B. Ketchmark
Secretary Title: President
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EXHIBIT A
GOLD BOND RESOURCES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:
and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.
Dated: ____________, ________ Name:
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(Please Print)
Address:
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----------------------- (Signature)
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EXHIBIT B
GOLD BOND RESOURCES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of Gold Bond Resources, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.
NOTICE:
The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
GOLD BOND RESOURCES, INC.
2,000,000 WARRANTS FOR THE PURCHASE OF 2,000,000 SHARES OF
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NO. W-9 2,000,000 SHARES
THIS CERTIFIES that, for value received, Leon van Kraayenburg
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(including any transferee, the "Holder"), is entitled to subscribe for and purchase from Gold Bond Resources, Inc., a Washington corporation (the "Company"), the amount of shares set forth above (the "Shares") upon the terms and conditions set forth herein. This Warrant is being issued in connection with the employment agreement by and between Holder and the Company. Each warrant grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $0.12 per share ("Exercise Price"), for a period of five years ("Exercise Period" and collectively, the "Warrants"). As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. In the event that the Company effects its planned one from 10 reverse common stock split before the exercise of the warrants herein, the aforementioned number of warrants and exercise price will be adjusted accordingly, i.e., 200,000 warrants for the purchase of 200,000 shares of common stock at an exercise price of $1.20.
1. This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto as Exhibit A, duly executed) to the
Company at its office at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477, Attention: President, or at such other place as is designated in writing by the Company, together with a certified or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price of $0.12 (or in the event of the aforementioned reverse stock split, at an exercise price of $1.20 per share) multiplied by the number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative the Form of Assignment, a copy of which is attached hereto as Exhibit B, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the
transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment or transfer of this Warrant or such Shares is registered under the Act, it being understood that neither this Warrant nor such Shares are currently registered for sale and that the Company has no obligation or intention to so register this Warrant or such Shares except as specifically provided for in the Subscription Agreement, or (ii) this Warrant or such Shares are sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act in the opinion of counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or
exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment shall become effective at the close of business on such record date; provided, however, that, to the extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.01; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an "Extraordinary Event"), such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively "Extraordinary Event Consideration") receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive
upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or
(d) effect any liquidation, dissolution, or winding-up of the Company; or
(e) take any other action that would cause an adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The Company shall not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
9. (a) Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the "Commission")), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an "Electing Holder") may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.
(b) If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.
(c) In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as
may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.
(d) In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.
(e) (i) The Company shall indemnify and hold harmless each
holder of Common Stock registered pursuant to this Agreement with the
Commission, or under any state securities law or regulation, and each such
holder's officers, directors, employees and agents and each person, if any, who
controls such holder within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several to
which such holder or such other person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such holder for any legal or other expenses reasonably incurred by such holder
in connection with investigating or defending any such action or claim;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (x) made in any such document in reliance upon and in conformity with
written information with respect to such holder furnished to the Company by such
holder expressly for use therein or (y) made in any preliminary prospectus if
(A) such holder failed to send or deliver a current copy of the prospectus to
the person asserting any such loss, claim, damage, or liability with or prior to
the delivery of written confirmation of the sale of the securities concerned to
such person, (B) it is determined that it was the responsibility of such holder
to provide such person with a current copy of the prospectus, and (C) such
current copy of the prospectus would have completely corrected such untrue
statement or omission.
(ii) Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company's officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written
information with respect to such holder furnished to the Company by such holder expressly for use therein.
(iii) Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this
Section 9(e) is unavailable or insufficient to hold harmless an indemnified
party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions
provided in such sections) in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the holder or holders from
this Agreement and from the offering of the shares of Common Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the holder and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the holders agree that it would not be just and equitable if contribution
pursuant to this Section 9(e)(iv) were determined by pro rata allocation (even
if the holders were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to above in
this Section 9(e)(iv). Except as provided in Section 9(e)(iii), the amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9(e)(iv) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e) to the contrary, no Holder shall be liable for any amount, in the aggregate, in excess of the net proceeds to such Holder from the sale of such holder's Shares giving rise to such losses, claims, damages or liabilities.
(v) The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.
10. Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.
13. The Company may by notice to the Holders of all the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrants; provided, however, that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Holders of Warrants representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of this Warrant, or
increasing the Exercise Price therefor, or the acceleration of the termination of the Exercise Period, shall be made without the consent in writing of the Holders of Warrants representing not less than two-thirds of the Warrants then outstanding (other than such changes as are specifically prescribed by this Warrant as originally executed or are made in compliance with applicable law).
14. This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.
Dated: August 1, 2003
GOLD BOND RESOURCES, INC.
Attest:
By:/s/
------------------------------------------
Name: Parrish B. Ketchmark
Secretary Title: President
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EXHIBIT A
GOLD BOND RESOURCES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:
(Print Name, Address and Social Security or Tax Identification Number)
and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.
Dated: ____________, ________ Name:______________________________
(Please Print)
Address:______________________________
______________________________
______________________________
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____________________(Signature)
EXHIBIT B
GOLD BOND RESOURCES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of Gold Bond Resources, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.
NOTICE:
The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
GOLD BOND RESOURCES, INC.
1,750,000 WARRANTS FOR THE PURCHASE OF 1,750,000 SHARES OF
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NO. W-3 1,750,000 SHARES
THIS CERTIFIES that, for value received, Waxtech International, Inc. (including any transferee, the "Holder"), is entitled to subscribe for and purchase from Gold Bond Resources, Inc., a Washington corporation (the "Company"), the amount of shares set forth above (the "Shares") upon the terms and conditions set forth herein. This Warrant is being issued as consideration to the Holder for services rendered to the Company as referred to in the September 17, 2002 letter to the Holder from the Company. Each warrant grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $0.12 per share ("Exercise Price"), for a period of five years ("Exercise Period" and collectively, the "Warrants"). As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. In the event that the Company effects its planned one from 10 reverse common stock split before the exercise of the warrants herein, the aforementioned number of warrants and exercise price will be adjusted accordingly, i.e., 175,000 warrants for the purchase of 175,000 shares of common stock at an exercise price of $1.20.
1. This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto as Exhibit A, duly executed) to the Company at its office at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477, Attention:
President, or at such other place as is designated in writing by the Company, together with a certified or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price of $0.12 (or in the event of the aforementioned reverse stock split, at an exercise price of $1.00 per share) multiplied by the number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative the Form of Assignment, a copy of which is attached hereto as Exhibit B, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or
transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment or transfer of this Warrant or such Shares is registered under the Act, it being understood that neither this Warrant nor such Shares are currently registered for sale and that the Company has no obligation or intention to so register this Warrant or such Shares except as specifically provided for in the Subscription Agreement, or (ii) this Warrant or such Shares are sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act in the opinion of counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment
shall become effective at the close of business on such record date; provided, however, that, to the extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.01; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an "Extraordinary Event"), such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively "Extraordinary Event Consideration") receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a
specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or
(d) effect any liquidation, dissolution, or winding-up of the Company; or
(e) take any other action that would cause an adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be
made without charge to the Holder for any tax or other charge in respect of such issuance. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
9. (a) Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the "Commission")), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an "Electing Holder") may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.
(b) If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.
(c) In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.
(d) In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.
(e) (i) The Company shall indemnify and hold harmless each
holder of Common Stock registered pursuant to this Agreement with the
Commission, or under any state securities law or regulation, and each such
holder's officers, directors, employees and agents and each person, if any, who
controls such holder within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several to
which such holder or such other person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such holder for any legal or other expenses reasonably incurred by such holder
in connection with investigating or defending any such action or claim;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (x) made in any such document in reliance upon and in conformity with
written information with respect to such holder furnished to the Company by such
holder expressly for use therein or (y) made in any preliminary prospectus if
(A) such holder failed to send or deliver a current copy of the prospectus to
the person asserting any such loss, claim, damage, or liability with or prior to
the delivery of written confirmation of the sale of the securities concerned to
such person, (B) it is determined that it was the responsibility of such holder
to provide such person with a current copy of the prospectus, and (C) such
current copy of the prospectus would have completely corrected such untrue
statement or omission.
(ii) Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company's officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein.
(iii) Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this
Section 9(e) is unavailable or insufficient to hold harmless an indemnified
party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions
provided in such sections) in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the holder or holders from
this Agreement and from the offering of the shares of Common Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state
a material fact relates to information supplied by the Company or the holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the holders
agree that it would not be just and equitable if contribution pursuant to this
Section 9(e)(iv) were determined by pro rata allocation (even if the holders
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this Section 9(e)(iv). Except as provided in Section
9(e)(iii), the amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 9(e)(iv) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e)
to the contrary, no Holder shall be liable for any amount, in the aggregate, in
excess of the net proceeds to such Holder from the sale of such holder's Shares
giving rise to such losses, claims, damages or liabilities.
(v) The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.
10. Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.
13. The Company may by notice to the Holders of all the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrants; provided, however, that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Holders of Warrants representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of this Warrant, or increasing the Exercise Price therefor, or the acceleration of the termination of the Exercise Period, shall be made without the consent in writing of the Holders of Warrants representing not less than two-thirds of the Warrants then outstanding (other than such changes as are specifically prescribed by this Warrant as originally executed or are made in compliance with applicable law).
14. This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.
Dated: August 1, 2003
GOLD BOND RESOURCES, INC.
Attest:
By: /s/ Parrish B. Ketchmark
Name: Parrish B. Ketchmark
Secretary Title: President
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EXHIBIT A
GOLD BOND RESOURCES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:
and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.
Dated: ____________, ________ Name:
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(Please Print)
Address:
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----------------------- (Signature)
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EXHIBIT B
GOLD BOND RESOURCES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of Gold Bond Resources, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.
NOTICE:
The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
GOLD BOND RESOURCES, INC.
1,000,000 WARRANTS FOR THE PURCHASE OF 1,000,000 SHARES OF
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NO. W-7 1,000,000 SHARES
THIS CERTIFIES that, for value received, Deborah Tenney (including any transferee, the "Holder"), is entitled to subscribe for and purchase from Gold Bond Resources, Inc., a Washington corporation (the "Company"), the amount of shares set forth above (the "Shares") upon the terms and conditions set forth herein. This Warrant is being issued in connection with the Holder's employment by the Company. Each warrant grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $0.12 per share ("Exercise Price"), for a period of five years ("Exercise Period" and collectively, the "Warrants"). As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. In the event that the Company effects its planned one from 10 reverse common stock split before the exercise of the warrants herein, the aforementioned number of warrants and exercise price will be adjusted accordingly, i.e., 100,000 warrants for the purchase of 100,000 shares of common stock at an exercise price of $1.20.
1. This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto as Exhibit A, duly executed) to the Company at its office at 10701 Corporate Drive, Suite 150 Stafford, Texas 77477, Attention: President, or at such other place as is designated in writing by the Company, together with a certified
or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price of $0.12 (or, in the event of the aforementioned reverse stock split, at an exercise price of $1.20 per share) multiplied by the number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative the Form of Assignment, a copy of which is attached hereto as Exhibit B, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of this
Warrant or such Shares is registered under the Act, it being understood that
neither this Warrant nor such Shares are currently registered for sale and that
the Company has no obligation or intention to so register this Warrant or such
Shares except as specifically provided for in the Subscription Agreement, or
(ii) this Warrant or such Shares are sold, assigned or transferred in accordance
with all the requirements and limitations of Rule 144 under the Act, or (iii)
such sale, assignment, or transfer is otherwise exempt from registration under
the Act in the opinion of counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment shall become effective at the close of business on such record date; provided, however, that, to the
extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.01; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an "Extraordinary Event"), such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively "Extraordinary Event Consideration") receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or
(d) effect any liquidation, dissolution, or winding-up of the Company; or
(e) take any other action that would cause an adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
9. (a) Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the "Commission")), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an "Electing Holder") may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.
(b) If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.
(c) In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered
thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.
(d) In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.
(e) (i) The Company shall indemnify and hold harmless each
holder of Common Stock registered pursuant to this Agreement with the
Commission, or under any state securities law or regulation, and each such
holder's officers, directors, employees and agents and each person, if any, who
controls such holder within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several to
which such holder or such other person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such holder for any legal or other expenses reasonably incurred by such holder
in connection with investigating or defending any such action or claim;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (x) made in any such document in reliance upon and in conformity with
written information with respect to such holder furnished to the Company by such
holder expressly for use therein or (y) made in any preliminary prospectus if
(A) such holder failed to send or deliver a current copy of the prospectus to
the person asserting any such loss, claim, damage, or liability with or prior to
the delivery of written confirmation of the sale of the securities concerned to
such person, (B) it is determined that it was the responsibility of such holder
to provide such person with a current copy of the prospectus, and (C) such
current copy of the prospectus would have completely corrected such untrue
statement or omission.
(ii) Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company's officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or
other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein.
(iii) Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this
Section 9(e) is unavailable or insufficient to hold harmless an indemnified
party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions
provided in such sections) in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the holder or holders from
this Agreement and from the offering of the shares of Common Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the holder and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission. The Company and the holders agree that it would not be just and equitable if contribution pursuant to this Section 9(e)(iv) were determined by pro rata allocation (even if the holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 9(e)(iv). Except as provided in Section 9(e)(iii), the amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9(e)(iv) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e) to the contrary, no Holder shall be liable for any amount, in the aggregate, in excess of the net proceeds to such Holder from the sale of such holder's Shares giving rise to such losses, claims, damages or liabilities.
(v) The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.
10. Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.
13. The Company may by notice to the Holders of all the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Warrants; provided, however, that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Holders of Warrants representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of this Warrant, or increasing the Exercise Price therefor, or the acceleration of the termination of the Exercise Period, shall be made without the consent in writing of the Holders of Warrants representing not less than two-thirds of the Warrants then outstanding (other than such changes as are specifically prescribed by this Warrant as originally executed or are made in compliance with applicable law).
14. This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.
Dated: August 1, 2003
GOLD BOND RESOURCES, INC.
Attest:
By: /s/ Parrish B. Ketchmark
Name: Parrish B. Ketchmark
Secretary Title: President
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EXHIBIT A
GOLD BOND RESOURCES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:
and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.
Dated: ____________, ________ Name:
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(Please Print)
Address:
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EXHIBIT B
GOLD BOND RESOURCES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of Gold Bond Resources, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.
NOTICE:
The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
GOLD BOND RESOURCES, INC.
1,000,000 WARRANTS FOR THE PURCHASE OF 1,000,000 SHARES OF
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NO. W-6 1,000,000 SHARES
THIS CERTIFIES that, for value received, Roy Stern (including any transferee, the "Holder"), is entitled to subscribe for and purchase from Gold Bond Resources, Inc., a Washington corporation (the "Company"), the amount of shares set forth above (the "Shares") upon the terms and conditions set forth herein. This Warrant is being issued in connection with the employment agreement by and between the Holder and the Company. Each warrant grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $0.12 per share ("Exercise Price"), for a period of five years ("Exercise Period" and collectively, the "Warrants"). As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. In the event that the Company effects its planned one from 10 reverse common stock split before the exercise of the warrants herein, the aforementioned number of warrants and exercise price will be adjusted accordingly, i.e., 100,000 warrants for the purchase of 100,000 shares of common stock at an exercise price of $1.20.
1. This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto as Exhibit A, duly executed) to the Company at its office at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477, Attention: President, or at such other place as is designated in writing by the Company, together with a certified
or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price of $0.12 (or in the event of the aforementioned reverse split, at an exercise price of $1.20 per share) multiplied by the number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative the Form of Assignment, a copy of which is attached hereto as Exhibit B, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of this
Warrant or such Shares is registered under the Act, it being understood that
neither this Warrant nor such Shares are currently registered for sale and that
the Company has no obligation or intention to so register this Warrant or such
Shares except as specifically provided for in the Subscription Agreement, or
(ii) this Warrant or such Shares are sold, assigned or transferred in accordance
with all the requirements and limitations of Rule 144 under the Act, or (iii)
such sale, assignment, or transfer is otherwise exempt from registration under
the Act in the opinion of counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment shall become effective at the close of business on such record date; provided, however, that, to the
extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.01; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an "Extraordinary Event"), such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively "Extraordinary Event Consideration") receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or
(d) effect any liquidation, dissolution, or winding-up of the Company; or
(e) take any other action that would cause an adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
9. (a) Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the "Commission")), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an "Electing Holder") may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.
(b) If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.
(c) In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered
thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.
(d) In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.
(e) (i) The Company shall indemnify and hold harmless each
holder of Common Stock registered pursuant to this Agreement with the
Commission, or under any state securities law or regulation, and each such
holder's officers, directors, employees and agents and each person, if any, who
controls such holder within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several to
which such holder or such other person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such holder for any legal or other expenses reasonably incurred by such holder
in connection with investigating or defending any such action or claim;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (x) made in any such document in reliance upon and in conformity with
written information with respect to such holder furnished to the Company by such
holder expressly for use therein or (y) made in any preliminary prospectus if
(A) such holder failed to send or deliver a current copy of the prospectus to
the person asserting any such loss, claim, damage, or liability with or prior to
the delivery of written confirmation of the sale of the securities concerned to
such person, (B) it is determined that it was the responsibility of such holder
to provide such person with a current copy of the prospectus, and (C) such
current copy of the prospectus would have completely corrected such untrue
statement or omission.
(ii) Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company's officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or
other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein.
(iii) Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this
Section 9(e) is unavailable or insufficient to hold harmless an indemnified
party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions
provided in such sections) in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the holder or holders from
this Agreement and from the offering of the shares of Common Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the holder and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission. The Company and the holders agree that it would not be just and equitable if contribution pursuant to this Section 9(e)(iv) were determined by pro rata allocation (even if the holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 9(e)(iv). Except as provided in Section 9(e)(iii), the amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9(e)(iv) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e) to the contrary, no Holder shall be liable for any amount, in the aggregate, in excess of the net proceeds to such Holder from the sale of such holder's Shares giving rise to such losses, claims, damages or liabilities.
(v) The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.
10. Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.
13. The Company may by notice to the Holders of all the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Warrants; provided, however, that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Holders of Warrants representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of this Warrant, or increasing the Exercise Price therefor, or the acceleration of the termination of the Exercise Period, shall be made without the consent in writing of the Holders of Warrants representing not less than two-thirds of the Warrants then outstanding (other than such changes as are specifically prescribed by this Warrant as originally executed or are made in compliance with applicable law).
14. This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.
Dated: August 1, 2003
GOLD BOND RESOURCES, INC.
Attest:
By: /s/ Parrish B. Ketchmark
Name: Parrish B. Ketchmark
Secretary Title: President
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EXHIBIT A
GOLD BOND RESOURCES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:
and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.
Dated: ____________, ________ Name:
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(Please Print)
Address:
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----------------------- (Signature)
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EXHIBIT B
GOLD BOND RESOURCES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of Gold Bond Resources, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.
NOTICE:
The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
GOLD BOND RESOURCES, INC.
4,981,500 WARRANTS FOR THE PURCHASE OF 4,981,500 SHARES OF
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NO. W-2 4,981,500 SHARES
THIS CERTIFIES that, for value received, Allan F. Dow & Associates, Inc. (including any transferee, the "Holder"), is entitled to subscribe for and purchase from Gold Bond Resources, Inc., a Washington corporation (the "Company"), the amount of shares set forth above (the "Shares") upon the terms and conditions set forth herein. This Warrant is being issued pursuant to the October 10, 2002 consulting agreement between the parties, as amended on March 18, 2003. Each warrant grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $0.12 per share ("Exercise Price"), for a period of five years ("Exercise Period" and collectively, the "Warrants"). As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. In the event that the Company effects its planned one from 10 reverse common stock split before the exercise of the warrants 498,150 warrants for the purchase of 498,150 shares of common stock at an exercise price of $1.20.
1. This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto duly executed) to the Company at its office at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477, Attention: President, or at such other place as is designated in writing by the Company, together with a certified
or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price of $0.12 (or in the event of the aforementioned reverse stock split, at an exercise price of $1.20 per share) multiplied by the number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of this
Warrant or such Shares is registered under the Act, it being understood that
neither this Warrant nor such Shares are currently registered for sale and that
the Company has no obligation or intention to so register this Warrant or such
Shares except as specifically provided for in the Subscription Agreement, or
(ii) this Warrant or such Shares are sold, assigned or transferred in accordance
with all the requirements and limitations of Rule 144 under the Act, or (iii)
such sale, assignment, or transfer is otherwise exempt from registration under
the Act in the opinion of counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment shall become effective at the close of business on such record date; provided, however, that, to the
extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.01; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an "Extraordinary Event"), such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively "Extraordinary Event Consideration") receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments which shall be as nearly equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments which shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or
(d) effect any liquidation, dissolution, or winding-up of the Company; or
(e) take any other action which would cause an adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this Warrant , and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
9. (a) Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the "Commission")), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an "Electing Holder") may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.
(b) If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.
(c) In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered
thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.
(d) In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.
(e) (i) The Company shall indemnify and hold harmless each
holder of Common Stock registered pursuant to this Agreement with the
Commission, or under any state securities law or regulation, and each such
holder's officers, directors, employees and agents and each person, if any, who
controls such holder within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several to
which such holder or such other person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such holder for any legal or other expenses reasonably incurred by such holder
in connection with investigating or defending any such action or claim;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (x) made in any such document in reliance upon and in conformity with
written information with respect to such holder furnished to the Company by such
holder expressly for use therein or (y) made in any preliminary prospectus if
(A) such holder failed to send or deliver a current copy of the prospectus to
the person asserting any such loss, claim, damage, or liability with or prior to
the delivery of written confirmation of the sale of the securities concerned to
such person, (B) it is determined that it was the responsibility of such holder
to provide such person with a current copy of the prospectus, and (C) such
current copy of the prospectus would have completely corrected such untrue
statement or omission.
(ii) Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company's officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or
other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein.
(iii) Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this
Section 9(e) is unavailable or insufficient to hold harmless an indemnified
party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions
provided in such sections) in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the holder or holders from
this Agreement and from the offering of the shares of Common Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the holder and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission. The Company and the holders agree that it would not be just and equitable if contribution pursuant to this Section 9(e)(iv) were determined by pro rata allocation (even if the holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this Section 9(e)(iv). Except as provided in Section 9(e)(iii), the amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9(e)(iv) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e) to the contrary, no Holder shall be liable for any amount, in the aggregate, in excess of the net proceeds to such Holder from the sale of such holder's Shares giving rise to such losses, claims, damages or liabilities.
(v) The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.
10. Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.
13. The Company may by notice to the Holders of all the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Warrants; provided, however, that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Holders of Warrants representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of this Warrant, or increasing the Exercise Price therefor, or the acceleration of the termination of the Exercise Period, shall be made without the consent in writing of the Holders of Warrants representing not less than two-thirds of the Warrants then outstanding (other than such changes as are specifically prescribed by this Warrant as originally executed or are made in compliance with applicable law).
14. This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.
Dated: August 1, 2003
GOLD BOND RESOURCES, INC.
Attest:
By: /s/ Parrish B. Ketchmark
Name: Parrish B. Ketchmark
Secretary Title: President
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EXHIBIT A
GOLD BOND RESOURCES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:
and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.
Dated: ____________, ________ Name:
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(Please Print)
Address:
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----------------------- (Signature)
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EXHIBIT B
GOLD BOND RESOURCES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of Gold Bond Resources, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.
NOTICE:
The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.
FORM OF WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION REQUIREMENTS UNDER SAID LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
GOLD BOND RESOURCES, INC.
1,500,000 WARRANTS FOR THE PURCHASE OF 1,500,000 SHARES OF
COMMON STOCK, PAR VALUE $0.001 PER SHARE
NO. W-4 1,500,000 SHARES
THIS CERTIFIES that, for value received, J.D. McGraw (including any transferee, the "Holder"), is entitled to subscribe for and purchase from Gold Bond Resources, Inc., a Washington corporation (the "Company"), the amount of shares set forth above (the "Shares") upon the terms and conditions set forth herein. This Warrant is being issued in connection with Settlement Agreement, General Release and Covenant Not To Sue dated July 25, 2003 by and between the Holder and the Company. Each warrant grants the Holder the right to purchase from the Company one share of its common stock at the exercise price of $0.12 per share ("Exercise Price"), for a period of five years ("Exercise Period" and collectively, the "Warrants"). As used herein, the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. In the event that the Company effects its planned one from 10 reverse common stock split before the exercise of the warrants herein, the aforementioned number of warrants and exercise price will be adjusted accordingly, i.e., 150,000 warrants for the purchase of 150,000 shares of common stock at an exercise price of $1.20 per share.
1. This Warrant may be exercised during the Exercise Period as to all of the Shares by the surrender of this Warrant (with the Exercise Form attached hereto as Exhibit A, duly executed) to the Company at its office at 10701 Corporate Drive, Suite 150, Stafford, Texas 77477, Attention:
President, or at such other place as is designated in writing by the Company, together with a certified or bank cashier's check payable to the order of the Company in an amount equal to the Exercise Price of $0.12 (or in the event of the aforementioned reverse stock split, at an exercise price of $1.20 per share) multiplied by the number of Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Shares, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative the Form of Assignment, a copy of which is attached hereto as Exhibit B, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company may require prior to registering any transfer of a Warrant an opinion of counsel reasonably satisfactory to the Company that such transfer complies with the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he/she has been advised by the Company that neither this Warrant nor the Shares have been registered under the Act, that this Warrant is being or has been issued and the Shares may be issued on the basis of the statutory exemption provided by Section 4(2) of the Act, relating to transactions by an issuer not involving any public offering, and that the Company's reliance thereon is based in part upon the representations made herein by the Holder. The Holder acknowledges that he has been informed by the Company of, or is otherwise familiar with, the nature of the limitations imposed by the Act and the rules and regulations thereunder on the transfer of securities. In particular, the Holder agrees that no sale, assignment or
transfer of this Warrant or the Shares issuable upon exercise hereof shall be valid or effective, and the Company shall not be required to give any effect to any such sale, assignment or transfer, unless (i) the sale, assignment or transfer of this Warrant or such Shares is registered under the Act, it being understood that neither this Warrant nor such Shares are currently registered for sale and that the Company has no obligation or intention to so register this Warrant or such Shares except as specifically provided for in the Subscription Agreement, or (ii) this Warrant or such Shares are sold, assigned or transferred in accordance with all the requirements and limitations of Rule 144 under the Act, or (iii) such sale, assignment, or transfer is otherwise exempt from registration under the Act in the opinion of counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants were first issued (i) declare a dividend on the outstanding Common Stock payable in shares of its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the Exercise Price, and the number of Shares issuable upon exercise of this Warrant, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, he/she would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the issuance to all holders of Common Stock of rights, options, or warrants to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock) at a price per share (or having a conversion or exchange price per share, if a security convertible into or exchangeable for Common Stock) less than the then applicable Exercise Price per share on such record date, then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so to be offered (or the aggregate initial conversion or exchange price of the convertible or exchangeable securities so to be offered) would purchase at such Exercise Price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock to be offered for subscription or purchase (or into which the convertible or exchangeable securities so to be offered are initially convertible or exchangeable). Such adjustment
shall become effective at the close of business on such record date; provided, however, that, to the extent the shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) are not delivered, the Exercise Price shall be readjusted after the expiration of such rights, options, or warrants (but only with respect to warrants exercised after such expiration), to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock (including any such distribution made to the stockholders of the Company in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness, cash (other than any cash dividend which, together with any cash dividends paid within the 12 months prior to the record date for such distribution, does not exceed 5% of the then applicable Exercise Price at the record date for such distribution) or assets (other than distributions and dividends payable in shares of Common Stock), or rights, options, or warrants to subscribe for or purchase Common Stock, or securities convertible into or exchangeable for shares of Common Stock (excluding those with respect to the issuance of which an adjustment of the Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by a fraction, the numerator of which shall be the then applicable Exercise Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error) of the portion of the evidences of indebtedness or assets so to be distributed, or of such rights, options, or warrants or convertible or exchangeable securities, or the amount of such cash, applicable to one share, and the denominator of which shall be such Exercise Price per share of Common Stock. Such adjustment shall become effective at the close of business on such record date.
(d) No adjustment in the Exercise Price shall be required if
such adjustment is less than $.01; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this Warrant after such record date, the shares of Common Stock, if any, issuable upon such exercise over and above the shares of Common Stock, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Exercise Price of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety (collectively an "Extraordinary Event"), such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof (collectively "Extraordinary Event Consideration") receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance, and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a
specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments that shall be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution (other than regularly scheduled cash dividends which are not in a greater amount per share than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of Common Stock entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property; or
(d) effect any liquidation, dissolution, or winding-up of the Company; or
(e) take any other action that would cause an adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up, or (iii) the date of such action which would require an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be
made without charge to the Holder for any tax or other charge in respect of such issuance. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
9. (a) Subject to the provisions of this Section 9, if at any time the Company proposes to file a registration statement under the Act covering its shares of Common Stock (other than a registration statement filed under Form S-4 or Form S-8 or any successor forms of the Securities and Exchange Commission (the "Commission")), it shall give to each holder of Warrants and/or Shares, notice of such proposed registration (and a description of the form and manner and other relevant facts involved in such proposed registration) at least 60 days prior to the filing of the registration statement and shall afford each such holder who gives the Company written notice not less than 15 days prior to such filing that such holder then proposes to sell or distribute publicly all or any portion of the Shares then held, or to be held upon exercise of such Warrants, the opportunity to have such shares included in the securities registered under the registration statement; provided, however, that following the giving of notice of its intention to register its securities and prior to the effective date of the registration statement filed in connection with such registration, the Company may determine, at its election, not to register any securities pursuant to such registration, and immediately thereon give written notice of such determination to each such holder who requested the registration of its securities and, thereupon, shall be relieved of its obligations to register any securities in connection with such registration; and, provided further, that prior to the effective date of the registration statement, any holder who has given the Company written notice of its desire to have its shares included in the securities to be registered under the registration statement (an "Electing Holder") may determine not to include all or some of such shares in such registration by providing written notice of such determination to the Company. All expenses, disbursements and fees (including, without limitation, fees and expenses of counsel, auditing fees, printing expenses, registration and filing fees and blue sky fees and expenses, but excluding any underwriting fees, discounts or commissions) incurred in connection with the registration by the Company of any shares for any such holder under this Section 9(a) shall be borne by the Company.
(b) If a registration pursuant to Section 9(a) involves an underwritten offering and the managing or lead underwriter advises the Company in writing (with a copy to each holder of Warrants and/or Shares that has requested registration) that, in its good faith opinion, the number of shares proposed to be included in such offering exceeds the number of shares that can reasonably be sold in (or during the time of) such offering or otherwise would materially and adversely affect its ability to effect such offering upon the terms proposed, then the Company will include in such registration the maximum number of securities that the Company is so advised should be included in such offering, and the Company, all Electing Holders and all other holders of securities proposing to register shares in such offering shall share pro rata in the number of shares of securities to be so excluded from such offering, with such sharing to be based upon the respective number of shares of securities as to which registration has been requested by each such party.
(c) In connection with any registration under the Act and state securities laws pursuant to this Section 9, the Company shall furnish each holder whose shares are registered thereunder with copies of the registration statement and all amendments thereto and will supply each such holder with copies of any preliminary and final prospectus included therein in such quantities as may be necessary for the purposes of such proposed sale or distribution that the holder or holders may reasonably request.
(d) In connection with any registration of shares pursuant to this Section 9, the Electing Holders whose shares are being registered shall furnish the Company with such information concerning such Electing Holders and the proposed sale or distribution as shall be required for use in the preparation of such registration statement and applications.
(e) (i) The Company shall indemnify and hold harmless each
holder of Common Stock registered pursuant to this Agreement with the
Commission, or under any state securities law or regulation, and each such
holder's officers, directors, employees and agents and each person, if any, who
controls such holder within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities, joint or several to
which such holder or such other person may become subject under the Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, registration statement, prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such holder for any legal or other expenses reasonably incurred by such holder
in connection with investigating or defending any such action or claim;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission (x) made in any such document in reliance upon and in conformity with
written information with respect to such holder furnished to the Company by such
holder expressly for use therein or (y) made in any preliminary prospectus if
(A) such holder failed to send or deliver a current copy of the prospectus to
the person asserting any such loss, claim, damage, or liability with or prior to
the delivery of written confirmation of the sale of the securities concerned to
such person, (B) it is determined that it was the responsibility of such holder
to provide such person with a current copy of the prospectus, and (C) such
current copy of the prospectus would have completely corrected such untrue
statement or omission.
(ii) Each holder of Common Stock registered pursuant to this Agreement will indemnify and hold harmless the Company and the Company's officers, directors, employees and agents and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or such other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such other persons for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such action or claim, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any such document, in reliance upon and in conformity with written information with respect to such holder furnished to the Company by such holder expressly for use therein.
(iii) Promptly after receipt by an indemnified party under Sections 9(e)(i) or (ii) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under either such section, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure or delay of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 9(e), except to the extent that the indemnifying party is materially prejudiced by such failure or delay to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to assume the defense thereof with counsel reasonably satisfactory to the indemnified party by notice in writing to the indemnified party. After receipt of written notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not, except as set forth in the following sentence, be liable to such indemnified party under either of such sections for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation incurred prior to the assumption by the indemnifying party. The preceding sentence notwithstanding, the indemnified party shall have the right to employ its own counsel and direct its defense, with the fees and expenses of such counsel and such other expenses related thereto to be borne by the indemnifying party, if the indemnified party shall have reasonably concluded that there may be defenses available to it which are different from or additional to those available to the indemnifying party. The indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this
Section 9(e) is unavailable or insufficient to hold harmless an indemnified
party under Sections 9(e)(i) or (ii) above (other than by reason of exceptions
provided in such sections) in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the holder or holders from
this Agreement and from the offering of the shares of Common Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the holders in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state
a material fact relates to information supplied by the Company or the holder and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the holders
agree that it would not be just and equitable if contribution pursuant to this
Section 9(e)(iv) were determined by pro rata allocation (even if the holders
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this Section 9(e)(iv). Except as provided in Section
9(e)(iii), the amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 9(e)(iv) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding any provision in this Section 9(e)
to the contrary, no Holder shall be liable for any amount, in the aggregate, in
excess of the net proceeds to such Holder from the sale of such holder's Shares
giving rise to such losses, claims, damages or liabilities.
(v) The obligations of the Company under this Section 9(e) shall be in addition to any liability which the Company may otherwise have at law or in equity.
10. Unless registered pursuant to the provisions of Section 9 hereof, the Shares issued upon exercise of this Warrant shall be subject to a stop transfer order and the certificate or certificates evidencing such Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant.
13. The Company may by notice to the Holders of all the Warrants make any changes or corrections in the Warrants (i) that it shall deem in good faith appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error contained in the Warrants; or (ii) that it may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrants; provided, however, that the Warrants shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Holders of Warrants representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of this Warrant, or increasing the Exercise Price therefor, or the acceleration of the termination of the Exercise Period, shall be made without the consent in writing of the Holders of Warrants representing not less than two-thirds of the Warrants then outstanding (other than such changes as are specifically prescribed by this Warrant as originally executed or are made in compliance with applicable law).
14. This Warrant has been negotiated and consummated in the State of Texas and shall be construed in accordance with the laws of the State of Texas applicable to contracts made and performed within such State, without regard to principles governing conflicts of law.
Dated: August 1, 2003
GOLD BOND RESOURCES, INC.
Attest:
By: /s/ Parrish B. Ketchmark
Name: Parrish B. Ketchmark
Secretary Title: President
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EXHIBIT A
GOLD BOND RESOURCES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase ___________ Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:
and, if such number of Shares shall not be all the Shares covered by the within Warrant, that a new Warrant for the balance of the Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.
Dated: ____________, ________ Name:
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(Please Print)
Address:
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----------------------- (Signature)
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EXHIBIT B
GOLD BOND RESOURCES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
To: Gold Bond Resources, Inc.
10701 Corporate Drive, Suite 150
Stafford, Texas 77477
Attention: Secretary
FOR VALUE RECEIVED, _______________ hereby sells, assigns, and transfers unto _______________ that certain Warrant (Number W-______) to purchase __________ shares of Common Stock, par value $0.001 per share, of Gold Bond Resources, Inc. (the "Company"), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.
NOTICE:
The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
GOLD BOND RESOURCES, INC.
COMMON STOCK PURCHASE WARRANT
APRIL 30, 2003
FOR VALUE RECEIVED, the Company hereby certifies that Maxim Group, LLC, the registered holder of this common stock purchase warrant (the "WARRANT") hereof, and its successors and assigns (the "HOLDER"), is entitled to purchase from Gold Bond Resources, Inc., a corporation duly organized and validly existing under the laws of the State of Washington (the "COMPANY"), 25,000 duly authorized, validly issued, fully paid and nonassessable shares of the common stock of the Company, par value $.001 per share (the "COMMON STOCK"), at a purchase price per share equal to $0.34 (the "WARRANT PRICE"), and subject to the terms, conditions and adjustments set forth below in this Warrant. The person or entity in whose name this Warrant (or one or more predecessor Warrants) is registered on the records of the Company regarding registration and transfers of the Warrant (the "WARRANT REGISTER") is the owner and holder thereof for all purposes, except as described in Section 8 hereof.
1. Vesting of Warrants. This Warrant shall vest and become exercisable immediately.
2. Expiration of Warrant. This Warrant shall expire at 5:00 p.m., New York local time, on April 29, 2008 (the "EXPIRATION DATE").
3. Exercise of Warrant. This Warrant shall be exercisable pursuant to the terms of Section 1 and this Section 3 hereof.
3.1 Manner of Exercise. This Warrant may only be exercised by the Holder hereof, in accordance with the terms and conditions hereof, in whole or in part with respect to any portion of the Warrant, into shares of Common Stock, during normal business hours on any day other than a Saturday or a Sunday or a day on which commercial banking institutions in New York, New York are authorized by law to be closed (a "BUSINESS Day") on or prior to the Expiration Date with respect to such portion of the Warrant, by surrender of this Warrant to the Company at its office maintained pursuant to Section 8.2(a) hereof, accompanied by an exercise notice in substantially the form attached to this Warrant as Exhibit A (or a reasonable facsimile thereof) duly executed by the Holder, together with the payment of the Warrant Price. Payment in full
or in part may also be made in the form of Common Stock (based on the closing price of the Common Stock on the trading day before the Warrant is exercised in full or in part) either owned by the Holder or acquired upon exercise of the Warrant.
3.2 When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 3.1 hereof, and, at such time, the corporation, association, partnership, organization, business, individual, government or political subdivision thereof or a governmental agency (a "PERSON" or the "PERSONS") in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon exercise as provided in Section 3.3 hereof shall be deemed to have become the holder or holders of record thereof.
3.3 Delivery of Stock Certificates. As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within five (5) Business Days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof or, subject to Section 7 hereof, as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct:
(a) a certificate or certificates (with appropriate restrictive legends, as applicable) for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which the Holder shall be entitled upon exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, all issuances of Common Stock shall be rounded up to the nearest whole share.
(b) in case exercise is in part only, a new Warrant of like tenor, dated the date hereof and calling in the aggregate on the face thereof for the number of shares of Common Stock equal to the number of shares called for on the face of this Warrant minus the number of shares designated by the Holder upon exercise as provided in Section 3.1 hereof (without giving effect to any adjustment thereof).
3.4 Company to Reaffirm Obligations. The Company will, at the time of each exercise of this Warrant, upon the written request of the Holder hereof, acknowledge in writing its continuing obligation to afford to the Holder all rights (including without limitation any rights to registration of the shares of Common Stock issued upon exercise) to which the Holder shall continue to be entitled after exercise in accordance with the terms of this Warrant; provided, however, that if the Holder shall fail to make a request, the failure shall not affect the continuing obligation of the Company to afford the rights to such Holder.
4. Adjustment of Common Stock Issuable Upon Exercise. The Warrant Price shall be subject to be adjusted and re-adjusted from time to time as provided in this Section 4 and, as so adjusted or re-adjusted, shall remain in effect until a further adjustment or re-adjustment thereof is required by this Section 4:
4.1 Dividends, Reclassifications, Recapitalizations, Reorganizations, etc. In the event that the Company shall, at any time prior to the exercise of this Warrant and prior to the full exercise hereof: (i) declare or pay to the holders of the Common Stock a dividend payable in any kind of shares of stock of the Company; or (ii) adopt a plan of reorganization or recapitalization or change, divide or otherwise reclassify its Common Stock into the same or a different number of shares with or without par value, or in shares of any class or classes; or (iii) sell, lease, transfer, convey or otherwise dispose of all or substantially all of its assets; or (iv) merge or consolidate with or into one or more corporations or other entities; or (v) make any distribution of its assets to holders of its Common Stock as a liquidation or partial liquidation dividend or by way of return of capital; then, upon the subsequent exercise of this Warrant, the Holder shall receive, in addition to or in substitution for the shares of Common Stock to which it would otherwise be entitled upon such exercise, the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, consolidation, merger or sale by a holder of the number of shares of Common Stock the Holder would have received had all shares of Common Stock issuable upon exercise of this Warrant been issued immediately prior to the happening of any of the foregoing events, at a price equal to the Warrant Price then in effect (the kind, amount and price of such stock and other securities to be subject to adjustment as herein provided).
4.2 Mergers, etc. The Company covenants and agrees that it will not merge or consolidate with or into or sell, lease, transfer, convey or otherwise dispose of all or substantially all of its assets to any other corporation or entity unless at the time of or prior to such transaction such other corporation or other entity shall expressly assume all of the liabilities and obligations of the Company under this Warrant and (without limiting the generality of the foregoing) shall expressly agree that the Holder of this Warrant shall thereafter have the right to receive upon the exercise of this Warrant the number and kind of shares of stock and other securities and property receivable upon such transaction by a Holder of the number and kind of shares which would have been receivable upon the exercise of this Warrant immediately prior to such transaction.
4.3 Notice of Certain Transactions. If, at any time while this Warrant is outstanding, the Company shall pay any dividend payable in cash or in Common Stock, shall offer to the holders of its Common Stock rights for subscription or purchase by them of any shares of stock of any class or any other rights, shall enter into an agreement to merge or consolidate with another corporation, or shall propose to liquidate or dissolve, then the Company shall cause notice thereof to be mailed to the registered Holder of this Warrant at its address appearing in the Warrant Register, at least thirty (30) days prior to (i) the record date as of which holders of Common Stock shall participate in such dividend, distribution, subscription or other rights, or liquidation or dissolution or (ii) the effective date of any such event or transaction and shall permit the Holder to exercise this Warrant or any unexercised portion thereof at any time within twenty (20) days following receipt of such notice; provided, however, that the Company will not provide notice of any such event prior to public announcement if such event is deemed by
the Company to be material, and in any such case, the Company shall not be in violation of this provision.
4.4 Adjustments to Warrant Price. If at any time after the
date of issuance hereof the Company shall grant or issue any shares of Common
Stock, or grant or issue any rights, warrants or options for the purchase of,
stock or other securities convertible into, Common Stock (such convertible stock
or securities being herein collectively referred to as "COMMON STOCK
EQUIVALENTS") other than: (i) shares issued in a transaction described in
Section 4.5; or (ii) shares issued, subdivided or combined in transactions
described in Section 4.1 if and to the extent that an adjustment to the Warrant
Price shall have been previously made pursuant to this Section 4 as a result of
such issuance, subdivision or combination of such securities; for a
consideration per share which is less than the Warrant Price, then the Warrant
Price in effect immediately prior to such issuance or sale (the "APPLICABLE
WARRANT PRICE") shall, and thereafter upon each issuance or sale, the Applicable
Warrant Price shall, simultaneously with such issuance or sale, be adjusted, so
that such Applicable Warrant Price shall equal a price determined by multiplying
the Applicable Warrant Price by a fraction, the numerator of which shall be:
(a) the sum of (x) the total number of shares of
Common Stock outstanding immediately prior to such issuance plus (y)
the number of shares of Common Stock which the aggregate consideration
received, as determined in accordance with Section 4.6 below for the
issuance or sale of such additional Common Stock or Common Stock
Equivalents deemed to be an issuance of Common Stock as provided in
Section 4.7 below would purchase at the Applicable Warrant Price
(including any consideration received by the Company upon the issuance
of any shares of Common Stock or Common Stock Equivalents since the
date the Applicable Warrant Price became effective not previously
included in any computation resulting in an adjustment pursuant to this
Section 4.4); and the denominator of which shall be:
(b) the total number of shares of Common Stock outstanding (or deemed to be outstanding as provided in Section 4.7) immediately after the issuance or sale of such additional shares.
Upon each adjustment of the Warrant Price pursuant to this Section 4.4, the total number of shares of Common Stock purchasable upon the exercise of each Warrant shall be such number of shares (calculated to the nearest tenth) purchasable at the Applicable Warrant Price multiplied by a fraction, the numerator of which shall be the Warrant Price in effect immediately prior to such adjustment and the denominator of which shall be the Warrant Price in effect immediately after such adjustment.
4.5 Exclusions. Anything in this Section 4 to the contrary notwithstanding, no adjustment in the Warrant Price shall be made in connection with any of the following:
(a) the grant, issuance or exercise of any Common Stock Equivalents pursuant to the Company's stock option plans or any other bona fide employee benefit plan or incentive arrangements adopted by the Company's Board of Directors; or
(b) the issuance of any shares of Common Stock pursuant to the grant or exercise of Common Stock Equivalents outstanding prior to the date first written above; or
(c) the issuance of any shares of Common Stock or Common Stock Equivalents in connection with the acquisition of the assets or stock of another entity; or
(d) a warrant exercisable into 1,000,000 shares of Common Stock to be issued to Dwaine Reese in 2003.
4.6 Calculation of Consideration. For the purpose of Section 4.4 above, the following provisions shall also be applied:
(a) In case of the issuance or sale of additional shares of Common Stock for cash, the consideration received by the Company therefor shall be deemed to be the amount of cash received by the Company for such shares, after deducting therefrom any commissions, compensations or other expenses paid or incurred by the Company for any underwriting or placement of, or otherwise in connection with the issuance or sale of such shares.
(b) In case of the issuance of Common Stock Equivalents, the consideration received by the Company therefor shall be deemed to be the gross amount of cash calculated in accordance with Section 4.6(a) above, if any, received by the Company for the issuance of such rights or Common Stock Equivalents, plus the minimum amounts of cash and fair value of other consideration, if any, payable to the Company upon the exercise of such rights or options or payable to the Company on conversion of such Common Stock Equivalents.
(c) In the case of the issuance of shares of Common Stock or Common Stock Equivalents for a consideration in whole or in part, other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as reasonably determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof); provided, however, that if such consideration consists of the cancellation of debt issued by the Company, the consideration shall be deemed to be the amount the Company received upon issuance of such debt (net proceeds) plus accrued interest and, in the case of original issue discount or zero coupon indebtedness, accreted value to the date of such cancellation, but not including any premium or discount at which the debt may then be trading or which might otherwise be appropriate for such class of debt.
(d) In case of the issuance of additional shares of Common Stock upon the conversion or exchange of any obligations (other than Common Stock Equivalents), the amount of the consideration received by the Company for such Common Stock shall be deemed to be the consideration received by the Company for such obligations or shares so converted or exchanged, after deducting from such consideration so received by the Company any expenses or commissions or compensations incurred or paid by the Company for any underwriting of, or otherwise in connection with, the issuance or sale of such obligations or shares, plus any consideration received by the Company in connection with such conversion or exchange other than a payment in adjustment of interest and dividends. If obligations or shares of the same class or series of a class as the obligations or shares so converted or exchanged have been originally issued for different amounts of consideration, then the amount of consideration received by the Company upon the original issuance of each of the obligations or shares so converted or exchanged shall be deemed to be the average amount of the consideration received by the Company upon the original issuance of all such obligations or shares. The amount of consideration received by the Company upon the original issuance of the obligations or shares so converted or exchanged and the amount of the consideration, if any, other than such obligations or shares, received by the Company upon such conversion or exchange shall be determined in the same manner as provided in Sections 4.6(a) and 4.6(c) above with respect to the consideration received by the Company in case of the issuance of additional shares of Common Stock or Common Stock Equivalents.
(e) In the case of the issuance of additional shares of Common Stock as a dividend, the aggregate number of shares of Common Stock issued in payment of such dividend shall be deemed to have been issued at the close of business on the record date fixed for the determination of stockholders entitled to such dividend and shall be deemed to have been issued without consideration; provided, however, that if the Company, after fixing such record date, shall legally abandon its plan to so issue Common Stock as a dividend, no adjustment of the Applicable Warrant Price shall be required by reason of the fixing of such record date.
4.7 Deemed Issuances of Common Stock. For purposes of the adjustments provided for in Section 4.4 above, if at any time, the Company shall issue any Common Stock Equivalents, the Company shall be deemed to have issued at the time of the issuance of such Common Stock Equivalents the maximum number of shares of Common Stock issuable upon conversion of the total amount of such Common Stock Equivalents.
4.8 Carry Forwards. Anything in this Section 4 to the contrary
notwithstanding, no adjustment in the Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
Warrant Price; provided, however, that any adjustments which by reason of this
Section 4.8 are not required to be made shall be carried forward and taken into
account in making subsequent adjustments. All calculations under this Section 4
shall be made to the nearest cent or to the nearest tenth of a share, as the
case may be.
4.9 Notice of Adjustments. Upon any adjustment of the Warrant Price, then and in each such case the Company shall promptly deliver a notice to the registered Holder of this Warrant, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of Shares purchasable at such price upon the exercise hereof, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.
5. Reservation of Shares. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, free from all taxes, liens and charges with respect to the issue thereof and not be subject to preemptive rights or other similar rights of stockholders of the Company, solely for the purpose of issuing the Common Stock and effecting the exercise of the Warrants in the Offering, such number of its shares of Common Stock as shall from time to time be sufficient to effect the issuance or exercise thereof, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to issue the Common Stock and effect the exercise of the Warrants in the Offering, in addition to such other remedies as shall be available to the Holder, the Company shall take such corporate action as may, in the opinion of its counsel, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including without limitation, using its best efforts to obtain the requisite stockholder approval necessary to increase the number of authorized shares of the Company's Common Stock. All shares of Common Stock issuable in the Offering and issuable upon exercise of the Warrant shall be duly authorized and, when issued upon exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable.
6. Listing.
6.1 After the date first written above, when the Company files a registration statement to register its securities or the securities of any stockholder of the Company under the Securities Act of 1933, as amended (the "ACT"), with the Securities and Exchange Commission (the "SEC"), the Company will include in such registration statement the shares of Common Stock underlying this Warrant. The Company shall secure the listing of the shares of Common Stock underlying this Warrant upon each national securities exchange or automated quotation system upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain such listing of shares of Common Stock issued under the terms of the Warrant. The Company shall at all times comply in all respects with the Company's reporting, filing and other obligations under the by-laws or rules of the OTC Bulletin Board Market or such other national securities exchange or market on which the Common Stock may then be listed, as applicable.
6.2 The Company will prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the sale of the securities registered thereunder, and shall comply with the provisions of the Act
with respect to the disposition of all securities owned by the Holder that are covered by such registration statement during such period in accordance with the intended methods of disposition by the Holder. The Company at its own expense will furnish to the Holder such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as the Holder may request in order to facilitate the disposition of the shares owned by the Holder.
6.3 If at any time or from time to time, the Company proposes to file a registration statement under the Act with respect to an offering of Common Stock (i) for the Company's own account (other than a registration statement on Form S-4 or Form S-8 (or any substitute form that may be adopted by the SEC)) or (ii) for the account of any of its holders of Common Stock, then the Company shall give written notice of such proposed filing to the Holder or its nominee as soon as practicable (but in no event less than thirty (30) days before the anticipated filing date), and such notice shall offer the Holder or its nominee the opportunity to register under such registration statement (and any related qualification under blue sky laws) such number of shares of Common Stock as the Holder or its nominee may request.
7. Restrictions on Transfer.
7.1 Restrictive Legends. This Warrant and each Warrant issued upon transfer or in substitution for this Warrant pursuant to Section 8, each certificate for Common Stock issued upon the exercise of any Warrant and each certificate issued upon the transfer of any such Common Stock shall be transferable only upon satisfaction of the conditions specified in this Section 7 and Section 8.4. Each of the foregoing securities shall be stamped or otherwise imprinted with a legend reflecting the restrictions on transfer set forth in Section 7 and Section 8.4 hereof and any restrictions required under the Act.
7.2 Notice of Proposed Transfer; Opinion of Counsel. Prior to
any transfer of any securities which are not registered under an effective
registration statement under the Act ("RESTRICTED SECURITIES"), the Holder will
give written notice to the Company of the Holder's intention to affect a
transfer and to comply in all other respects with this Section 7.2. Each notice
(i) shall describe the manner and circumstances of the proposed transfer, and
(ii) shall designate counsel for the Holder giving the notice (who may be
in-house counsel for the Holder). The Holder giving notice will submit a copy
thereof to the counsel designated in the notice. The following provisions shall
then apply:
(a) If in the opinion of counsel for the Holder reasonably satisfactory to the Company the proposed transfer may be effected without registration of Restricted Securities under the Act (which opinion shall state the basis of the legal conclusions reached therein), the Holder shall thereupon be entitled to transfer the Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Company. Each certificate representing the Restricted Securities issued upon or in
connection with any transfer shall bear the restrictive legends required by
Section 7.1 hereof.
(b) If the opinion called for in (a) above is not delivered, the Holder shall not be entitled to transfer the Restricted Securities until either (x) receipt by the Company of a further notice from such Holder pursuant to the foregoing provisions of this Section 7.2 and fulfillment of the provisions of clause (a) above, or (y) such Restricted Securities have been effectively registered under the Act.
Notwithstanding any other provision of this Section 7, no opinion of counsel shall be necessary for a transfer of Restricted Securities by the holder thereof to any Person holding more than 50% of the equity of an entity or any majority-owned subsidiary of such entity of a Holder, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if the transferee were the original purchaser hereof and such transfer is permitted under applicable securities laws.
7.3 Termination of Restrictions. The restrictions imposed by this Section 7 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities: (a) which Restricted Securities shall have been effectively registered under the Act, or (b) when, in the opinions of both counsel for the holder thereof and counsel for the Company, such restrictions are no longer required in order to insure compliance with the Act or Section 8 hereof. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the Holder thereof shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any), new securities of like tenor not bearing the applicable legends required by Section 7.1 hereof.
8. Ownership, Transfer and Substitution of Warrant.
8.1 Ownership of Warrant. The Company may treat the person in whose name this Warrant is registered to in the Warrant Register maintained pursuant to Section 8.2(b) hereof as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. Subject to Section 7 hereof, this Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.
8.2 Office; Transfer and Exchange of Warrant.
(a) The Company will maintain an office (which may be an agency maintained at a bank) in Stafford, Texas where notices, presentations and demands in respect of this Warrant may be made upon it. The office shall be maintained at 10701 Corporate Drive #150, Stafford, Texas 77477 until the Company notifies the holders of the Warrant of any change of location of the office.
(b) The Company shall cause to be kept at its office maintained pursuant to Section 8.2(a) hereof a Warrant Register for the registration and transfer of the Warrant. The names and addresses of holders of the Warrant, the transfers thereof and the names and addresses of transferees of the Warrant shall be registered in such Warrant Register. The Person in whose name any Warrant shall be so registered shall be deemed and treated as the owner and holder thereof for all purposes of this Warrant, and the Company shall not be affected by any notice or knowledge to the contrary.
(c) Upon the surrender of this Warrant, properly endorsed, for registration of transfer or for exchange at the office of the Company maintained pursuant to Section 8.2(a) hereof, the Company at its expense will (subject to compliance with Section 7 hereof, if applicable) execute and deliver to or upon the order of the Holder thereof a new Warrant of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face thereof for the number of shares of Common Stock called for on the face of the Warrant so surrendered.
8.3 Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of the Warrant and, in the case of any such loss, theft or destruction of the Warrant, upon delivery of indemnity reasonably satisfactory to the Company in form and amount or, in the case of any mutilation, upon surrender of the Warrant for cancellation at the office of the Company maintained pursuant to Section 8.2(a) hereof, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated the date hereof.
8.4 Restrictions on Transfer. In addition to the restrictions on transfer set forth in Section 7 hereof, neither the Warrant nor any portion of the Warrant may be transferred without the consent of the Company.
9. No Rights or Liabilities as Stockholder. No Holder shall be entitled to vote or receive dividends or be deemed the holder of any shares of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the shares of Common Stock purchasable upon the exercise hereof shall have become deliverable, as provided herein. The Holder will not be entitled to share in the assets of the Company in the event of liquidation, dissolution or the winding up of the Company.
10. Notices. Any notice or other communication in connection with this Warrant shall be deemed to be given if in writing (or in the form of a facsimile)
addressed as hereinafter provided and actually delivered at said address: (a) if
to any Holder, at the registered address of such holder as set forth in the
Warrant Register kept at the office of the Company maintained pursuant to
Section 8.2(a) hereof, or (b) if to the Company, to the attention of its Chief
Financial Officer at its office maintained pursuant to Section 8.2(a) hereof;
provided, however, that the exercise of any Warrant shall be effective in the
manner provided in Section 3 hereof.
11. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common Stock underlying this Warrant upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificate for shares of Common Stock underlying this Warrant in a name other that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof.
12. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register.
13. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of New York. The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be duly executed as of the date first above written.
GOLD BOND RESOURCES, INC.
By: s/s
----------------------
Name: Parrish B. ketchmark
Title: President
|
EXHIBIT A
FORM OF EXERCISE NOTICE
[To be executed only upon conversion of Warrant]
To GOLD BOND RESOURCES, INC.:
The undersigned registered holder of the within Warrant hereby irrevocably exercises the Warrant pursuant to Section 3.1 of the Warrant with respect to __________(1) shares of the Common Stock, at an exercise price per share of Common Stock of $.__, which the holder would be entitled to receive upon the cash exercise hereof, and requests that the certificates for the shares be issued in the name of, and delivered to, whose address is:
Dated: _______________
EXHIBIT B
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto _____________________ the right represented by the Warrant to purchase __________(1) shares of Common Stock of GOLD BOND RESOURCES, INC. to which the Warrant relates, and appoints _____________________ Attorney to make such transfer on the books of GOLD BOND RESOURCES, INC. maintained for the purpose, with full power of substitution in the premises.
Signed in the presence of:
Signed in the presence of:
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
GOLD BOND RESOURCES, INC.
COMMON STOCK PURCHASE WARRANT
JUNE 6, 2003
THIS COMMON STOCK PURCHASE WARRANT is one of a duly authorized issue of Warrants (a "WARRANT" or the "WARRANTS") of Gold Bond Resources, Inc., a corporation duly organized and validly existing under the laws of the State of Washington (the "COMPANY"), pursuant to a private offering of the common stock of the Company, par value $.001 per share (the "COMMON STOCK") up to a maximum of One Million Seventy Five Thousand and no/100 United States Dollars (US$1,075,000.00) (the "OFFERING"), as more fully described in the Company's Summary Memorandum dated as of May 28, 2003 (the "SUMMARY MEMORANDUM").
FOR VALUE RECEIVED, the Company hereby certifies that Maxim Group, LLC, the registered holder hereof and its successors and assigns (the "HOLDER"), is entitled to purchase from the Company 2,000,000 duly authorized, validly issued, fully paid and nonassessable shares of Common Stock, at a purchase price per share equal to $0.05 (the "WARRANT PRICE"), and subject to the terms, conditions and adjustments set forth below in this Warrant. The person or entity in whose name this Warrant (or one or more predecessor Warrants) is registered on the records of the Company regarding registration and transfers of the Warrant (the "WARRANT REGISTER") is the owner and holder thereof for all purposes, except as described in Section 8 hereof.
1. Vesting of Warrants. This Warrant shall vest and become exercisable immediately.
2. Expiration of Warrant. This Warrant shall expire at 5:00 p.m., New York local time, on June 5, 2008 (the "EXPIRATION DATE"), which is the fifth anniversary date of the closing of the Offering (the "CLOSING").
3. Exercise of Warrant. This Warrant shall be exercisable pursuant to the terms of Section 1 and this Section 3 hereof.
3.1 Manner of Exercise. This Warrant may only be exercised by the Holder hereof, in accordance with the terms and conditions hereof, in whole or in part with respect to any portion of the Warrant, into shares of Common Stock, during normal
business hours on any day other than a Saturday or a Sunday or a day on which commercial banking institutions in New York, New York are authorized by law to be closed (a "BUSINESS Day") on or prior to the Expiration Date with respect to such portion of the Warrant, by surrender of this Warrant to the Company at its office maintained pursuant to Section 8.2(a) hereof, accompanied by an exercise notice in substantially the form attached to this Warrant as Exhibit A (or a reasonable facsimile thereof) duly executed by the Holder, together with the payment of the Warrant Price.
3.2 When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 3.1 hereof, and, at such time, the corporation, association, partnership, organization, business, individual, government or political subdivision thereof or a governmental agency (a "PERSON" or the "PERSONS") in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon exercise as provided in Section 3.3 hereof shall be deemed to have become the holder or holders of record thereof.
3.3 Delivery of Stock Certificates. As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within five (5) Business Days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof or, subject to Section 7 hereof, as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct:
(a) a certificate or certificates (with appropriate restrictive legends, as applicable) for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which the Holder shall be entitled upon exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, all issuances of Common Stock shall be rounded up to the nearest whole share.
(b) in case exercise is in part only, a new Warrant of like tenor, dated the date hereof and calling in the aggregate on the face thereof for the number of shares of Common Stock equal to the number of shares called for on the face of this Warrant minus the number of shares designated by the Holder upon exercise as provided in Section 3.1 hereof (without giving effect to any adjustment thereof).
3.4 Company to Reaffirm Obligations. The Company will, at the time of each exercise of this Warrant, upon the written request of the Holder hereof, acknowledge in writing its continuing obligation to afford to the Holder all rights (including without limitation any rights to registration of the shares of Common Stock issued upon exercise) to which the Holder shall continue to be entitled after exercise in accordance with the terms of this Warrant; provided, however, that if the Holder shall fail to make a request, the failure shall not affect the continuing obligation of the Company to afford the rights to such Holder.
4. Adjustment of Common Stock Issuable Upon Exercise. The Warrant Price shall be subject to be adjusted and re-adjusted from time to time as provided in this Section 4 and, as so adjusted or re-adjusted, shall remain in effect until a further adjustment or re-adjustment thereof is required by this Section 4:
4.1 Dividends, Reclassifications, Recapitalizations, Reorganizations, etc. In the event that the Company shall, at any time prior to the exercise of this Warrant and prior to the full exercise hereof: (i) declare or pay to the holders of the Common Stock a dividend payable in any kind of shares of stock of the Company; or (ii) adopt a plan of reorganization or recapitalization or change, divide or otherwise reclassify its Common Stock into the same or a different number of shares with or without par value, or in shares of any class or classes; or (iii) sell, lease, transfer, convey or otherwise dispose of all or substantially all of its assets; or (iv) merge or consolidate with or into one or more corporations or other entities; or (v) make any distribution of its assets to holders of its Common Stock as a liquidation or partial liquidation dividend or by way of return of capital; then, upon the subsequent exercise of this Warrant, the Holder shall receive, in addition to or in substitution for the shares of Common Stock to which it would otherwise be entitled upon such exercise, the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, consolidation, merger or sale by a holder of the number of shares of Common Stock the Holder would have received had all shares of Common Stock issuable upon exercise of this Warrant been issued immediately prior to the happening of any of the foregoing events, at a price equal to the Warrant Price then in effect (the kind, amount and price of such stock and other securities to be subject to adjustment as herein provided).
4.2 Mergers, etc. The Company covenants and agrees that it will not merge or consolidate with or into or sell, lease, transfer, convey or otherwise dispose of all or substantially all of its assets to any other corporation or entity unless at the time of or prior to such transaction such other corporation or other entity shall expressly assume all of the liabilities and obligations of the Company under this Warrant and (without limiting the generality of the foregoing) shall expressly agree that the Holder of this Warrant shall thereafter have the right to receive upon the exercise of this Warrant the number and kind of shares of stock and other securities and property receivable upon such transaction by a Holder of the number and kind of shares which would have been receivable upon the exercise of this Warrant immediately prior to such transaction.
4.3 Notice of Certain Transactions. If, at any time while this Warrant is outstanding, the Company shall pay any dividend payable in cash or in Common Stock, shall offer to the holders of its Common Stock rights for subscription or purchase by them of any shares of stock of any class or any other rights, shall enter into an agreement to merge or consolidate with another corporation, or shall propose to liquidate or dissolve, then the Company shall cause notice thereof to be mailed to the registered Holder of this Warrant at its address appearing in the Warrant Register, at least thirty (30) days prior to (i) the record date as of which holders of Common Stock shall participate in such dividend, distribution, subscription or other rights, or liquidation or dissolution or (ii) the effective date of any such event or transaction and shall permit the Holder to
exercise this Warrant or any unexercised portion thereof at any time within twenty (20) days following receipt of such notice; provided, however, that the Company will not provide notice of any such event prior to public announcement if such event is deemed by the Company to be material, and in any such case, the Company shall not be in violation of this provision.
4.4 Adjustments to Warrant Price. If at any time after the
date of issuance hereof the Company shall grant or issue any shares of Common
Stock, or grant or issue any rights, warrants or options for the purchase of,
stock or other securities convertible into, Common Stock (such convertible stock
or securities being herein collectively referred to as "COMMON STOCK
EQUIVALENTS") other than: (i) shares issued in a transaction described in
Section 4.5; or (ii) shares issued, subdivided or combined in transactions
described in Section 4.1 if and to the extent that an adjustment to the Warrant
Price shall have been previously made pursuant to this Section 4 as a result of
such issuance, subdivision or combination of such securities; for a
consideration per share which is less than the Warrant Price, then the Warrant
Price in effect immediately prior to such issuance or sale (the "APPLICABLE
WARRANT PRICE") shall, and thereafter upon each issuance or sale, the Applicable
Warrant Price shall, simultaneously with such issuance or sale, be adjusted, so
that such Applicable Warrant Price shall equal a price determined by multiplying
the Applicable Warrant Price by a fraction, the numerator of which shall be:
(a) the sum of (x) the total number of shares of
Common Stock outstanding immediately prior to such issuance plus (y)
the number of shares of Common Stock which the aggregate consideration
received, as determined in accordance with Section 4.6 below for the
issuance or sale of such additional Common Stock or Common Stock
Equivalents deemed to be an issuance of Common Stock as provided in
Section 4.7 below would purchase at the Applicable Warrant Price
(including any consideration received by the Company upon the issuance
of any shares of Common Stock or Common Stock Equivalents since the
date the Applicable Warrant Price became effective not previously
included in any computation resulting in an adjustment pursuant to this
Section 4.4); and the denominator of which shall be:
(b) the total number of shares of Common Stock outstanding (or deemed to be outstanding as provided in Section 4.7) immediately after the issuance or sale of such additional shares.
Upon each adjustment of the Warrant Price pursuant to this Section 4.4, the total number of shares of Common Stock purchasable upon the exercise of each Warrant shall be such number of shares (calculated to the nearest tenth) purchasable at the Applicable Warrant Price multiplied by a fraction, the numerator of which shall be the Warrant Price in effect immediately prior to such adjustment and the denominator of which shall be the Warrant Price in effect immediately after such adjustment.
4.5 Exclusions. Anything in this Section 4 to the contrary notwithstanding, no adjustment in the Warrant Price shall be made in connection with any of the following:
(a) the grant, issuance or exercise of any Common Stock Equivalents pursuant to the Company's stock option plans or any other bona fide employee benefit plan or incentive arrangements adopted by the Company's Board of Directors; or
(b) the issuance of any shares of Common Stock pursuant to the grant or exercise of Common Stock Equivalents outstanding prior to the date of the Closing; or
(c) the issuance of any shares of Common Stock or Common Stock Equivalents in connection with the acquisition of the assets or stock of another entity; or
(d) a warrant exercisable into 10,000,000 shares of Common Stock to be issued to Dwaine Reese in 2003.
4.6 Calculation of Consideration. For the purpose of Section 4.4 above, the following provisions shall also be applied:
(a) In case of the issuance or sale of additional shares of Common Stock for cash, the consideration received by the Company therefor shall be deemed to be the amount of cash received by the Company for such shares, after deducting therefrom any commissions, compensations or other expenses paid or incurred by the Company for any underwriting or placement of, or otherwise in connection with the issuance or sale of such shares.
(b) In case of the issuance of Common Stock Equivalents, the consideration received by the Company therefor shall be deemed to be the gross amount of cash calculated in accordance with Section 4.6(a) above, if any, received by the Company for the issuance of such rights or Common Stock Equivalents, plus the minimum amounts of cash and fair value of other consideration, if any, payable to the Company upon the exercise of such rights or options or payable to the Company on conversion of such Common Stock Equivalents.
(c) In the case of the issuance of shares of Common Stock or Common Stock Equivalents for a consideration in whole or in part, other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as reasonably determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof); provided, however, that if such consideration consists of the cancellation of debt issued by the Company, the consideration shall be deemed to be the amount the Company received upon issuance of such debt (net proceeds) plus accrued interest and, in the case of original issue discount or zero coupon indebtedness, accreted value to the date of such cancellation, but not
including any premium or discount at which the debt may then be trading or which might otherwise be appropriate for such class of debt.
(d) In case of the issuance of additional shares of Common Stock upon the conversion or exchange of any obligations (other than Common Stock Equivalents), the amount of the consideration received by the Company for such Common Stock shall be deemed to be the consideration received by the Company for such obligations or shares so converted or exchanged, after deducting from such consideration so received by the Company any expenses or commissions or compensations incurred or paid by the Company for any underwriting of, or otherwise in connection with, the issuance or sale of such obligations or shares, plus any consideration received by the Company in connection with such conversion or exchange other than a payment in adjustment of interest and dividends. If obligations or shares of the same class or series of a class as the obligations or shares so converted or exchanged have been originally issued for different amounts of consideration, then the amount of consideration received by the Company upon the original issuance of each of the obligations or shares so converted or exchanged shall be deemed to be the average amount of the consideration received by the Company upon the original issuance of all such obligations or shares. The amount of consideration received by the Company upon the original issuance of the obligations or shares so converted or exchanged and the amount of the consideration, if any, other than such obligations or shares, received by the Company upon such conversion or exchange shall be determined in the same manner as provided in Sections 4.6(a) and 4.6(c) above with respect to the consideration received by the Company in case of the issuance of additional shares of Common Stock or Common Stock Equivalents.
(e) In the case of the issuance of additional shares of Common Stock as a dividend, the aggregate number of shares of Common Stock issued in payment of such dividend shall be deemed to have been issued at the close of business on the record date fixed for the determination of stockholders entitled to such dividend and shall be deemed to have been issued without consideration; provided, however, that if the Company, after fixing such record date, shall legally abandon its plan to so issue Common Stock as a dividend, no adjustment of the Applicable Warrant Price shall be required by reason of the fixing of such record date.
4.7 Deemed Issuances of Common Stock. For purposes of the adjustments provided for in Section 4.4 above, if at any time, the Company shall issue any Common Stock Equivalents, the Company shall be deemed to have issued at the time of the issuance of such Common Stock Equivalents the maximum number of shares of Common Stock issuable upon conversion of the total amount of such Common Stock Equivalents.
4.8 Carry Forwards. Anything in this Section 4 to the contrary
notwithstanding, no adjustment in the Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
Warrant Price; provided, however, that any adjustments which by reason of this
Section 4.8 are not
required to be made shall be carried forward and taken into account in making subsequent adjustments. All calculations under this Section 4 shall be made to the nearest cent or to the nearest tenth of a share, as the case may be.
4.9 Notice of Adjustments. Upon any adjustment of the Warrant Price, then and in each such case the Company shall promptly deliver a notice to the registered Holder of this Warrant, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of Shares purchasable at such price upon the exercise hereof, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.
5. Reservation of Shares. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, free from all taxes, liens and charges with respect to the issue thereof and not be subject to preemptive rights or other similar rights of stockholders of the Company, solely for the purpose of issuing the Common Stock and effecting the exercise of the Warrants in the Offering, such number of its shares of Common Stock as shall from time to time be sufficient to effect the issuance or exercise thereof, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to issue the Common Stock and effect the exercise of the Warrants in the Offering, in addition to such other remedies as shall be available to the Holder, the Company shall take such corporate action as may, in the opinion of its counsel, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including without limitation, using its best efforts to obtain the requisite stockholder approval necessary to increase the number of authorized shares of the Company's Common Stock. All shares of Common Stock issuable in the Offering and issuable upon exercise of the Warrant shall be duly authorized and, when issued upon exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable.
6. Listing.
6.1 After the Closing, when the Company includes all the shares of Common Stock issued in the Offering in a registration statement of its securities under the Securities Act of 1933, as amended (the "Act") and files such registration statement with the Securities and Exchange Commission (the "SEC"), the Company will include in such registration statement the shares of Common Stock underlying this Warrant. The Company shall secure the listing of the shares of Common Stock underlying this Warrant upon each national securities exchange or automated quotation system upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain such listing of shares of Common Stock issued under the terms of the Warrant. The Company shall at all times comply in all respects with the Company's reporting, filing and other obligations under the by-laws or rules of the OTC Bulletin Board Market or such other national securities exchange or market on which the Common Stock may then be listed, as applicable.
6.2 The Company will prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the sale of the securities registered thereunder, and shall comply with the provisions of the Act with respect to the disposition of all securities owned by the Holder that are covered by such registration statement during such period in accordance with the intended methods of disposition by the Holder. The Company at its own expense will furnish to the Holder such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as the Holder may request in order to facilitate the disposition of the shares owned by the Holder.
6.3 If at any time or from time to time, the Company proposes to file a registration statement under the Act with respect to an offering of Common Stock (i) for the Company's own account (other than a registration statement on Form S-4 or Form S-8 (or any substitute form that may be adopted by the SEC)) or (ii) for the account of any of its holders of Common Stock, then the Company shall give written notice of such proposed filing to the Holder or its nominee as soon as practicable (but in no event less than thirty (30) days before the anticipated filing date), and such notice shall offer the Holder or its nominee the opportunity to register under such registration statement (and any related qualification under blue sky laws) such number of shares of Common Stock as the Holder or its nominee may request.
7. Restrictions on Transfer.
7.1 Restrictive Legends. This Warrant and each Warrant issued upon transfer or in substitution for this Warrant pursuant to Section 8, each certificate for Common Stock issued upon the exercise of any Warrant and each certificate issued upon the transfer of any such Common Stock shall be transferable only upon satisfaction of the conditions specified in this Section 7 and Section 8.4. Each of the foregoing securities shall be stamped or otherwise imprinted with a legend reflecting the restrictions on transfer set forth in Section 7 and Section 8.4 hereof and any restrictions required under the Act.
7.2 Notice of Proposed Transfer; Opinion of Counsel. Prior to
any transfer of any securities which are not registered under an effective
registration statement under the Act ("RESTRICTED SECURITIES"), the Holder will
give written notice to the Company of the Holder's intention to affect a
transfer and to comply in all other respects with this Section 7.2. Each notice
(i) shall describe the manner and circumstances of the proposed transfer, and
(ii) shall designate counsel for the Holder giving the notice (who may be
in-house counsel for the Holder). The Holder giving notice will submit a copy
thereof to the counsel designated in the notice. The following provisions shall
then apply:
(a) If in the opinion of counsel for the Holder reasonably satisfactory to the Company the proposed transfer may be effected without registration of
Restricted Securities under the Act (which opinion shall state the basis of the legal conclusions reached therein), the Holder shall thereupon be entitled to transfer the Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Company. Each certificate representing the Restricted Securities issued upon or in connection with any transfer shall bear the restrictive legends required by Section 7.1 hereof.
(b) If the opinion called for in (a) above is not delivered, the Holder shall not be entitled to transfer the Restricted Securities until either (x) receipt by the Company of a further notice from such Holder pursuant to the foregoing provisions of this Section 7.2 and fulfillment of the provisions of clause (a) above, or (y) such Restricted Securities have been effectively registered under the Act.
Notwithstanding any other provision of this Section 7, no opinion of counsel shall be necessary for a transfer of Restricted Securities by the holder thereof to any Person holding more than 50% of the equity of an entity or any majority-owned subsidiary of such entity of a Holder, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if the transferee were the original purchaser hereof and such transfer is permitted under applicable securities laws.
7.3 Termination of Restrictions. The restrictions imposed by this Section 7 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities: (a) which Restricted Securities shall have been effectively registered under the Act, or (b) when, in the opinions of both counsel for the holder thereof and counsel for the Company, such restrictions are no longer required in order to insure compliance with the Act or Section 8 hereof. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the Holder thereof shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any), new securities of like tenor not bearing the applicable legends required by Section 7.1 hereof.
8. Ownership, Transfer and Substitution of Warrant.
8.1 Ownership of Warrant. The Company may treat the person in whose name this Warrant is registered to in the Warrant Register maintained pursuant to Section 8.2(b) hereof as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. Subject to Section 7 hereof, this Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.
8.2 Office; Transfer and Exchange of Warrant.
(a) The Company will maintain an office (which may be an agency maintained at a bank) in Stafford, Texas where notices, presentations and demands in
respect of this Warrant may be made upon it. The office shall be maintained at 10701 Corporate Drive #150, Stafford, Texas 77477 until the Company notifies the holders of the Warrant of any change of location of the office.
(b) The Company shall cause to be kept at its office maintained pursuant to Section 8.2(a) hereof a Warrant Register for the registration and transfer of the Warrant. The names and addresses of holders of the Warrant, the transfers thereof and the names and addresses of transferees of the Warrant shall be registered in such Warrant Register. The Person in whose name any Warrant shall be so registered shall be deemed and treated as the owner and holder thereof for all purposes of this Warrant, and the Company shall not be affected by any notice or knowledge to the contrary.
(c) Upon the surrender of this Warrant, properly endorsed, for registration of transfer or for exchange at the office of the Company maintained pursuant to Section 8.2(a) hereof, the Company at its expense will (subject to compliance with Section 7 hereof, if applicable) execute and deliver to or upon the order of the Holder thereof a new Warrant of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face thereof for the number of shares of Common Stock called for on the face of the Warrant so surrendered.
8.3 Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of the Warrant and, in the case of any such loss, theft or destruction of the Warrant, upon delivery of indemnity reasonably satisfactory to the Company in form and amount or, in the case of any mutilation, upon surrender of the Warrant for cancellation at the office of the Company maintained pursuant to Section 8.2(a) hereof, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated the date hereof.
8.4 Restrictions on Transfer. In addition to the restrictions on transfer set forth in Section 7 hereof, neither the Warrant nor any portion of the Warrant may be transferred without the consent of the Company.
9. No Rights or Liabilities as Stockholder. No Holder shall be entitled to vote or receive dividends or be deemed the holder of any shares of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the shares of Common Stock purchasable upon the exercise hereof shall have become deliverable, as provided herein. The Holder will not be entitled to share in
the assets of the Company in the event of liquidation, dissolution or the winding up of the Company.
10. Notices. Any notice or other communication in connection with this Warrant shall be deemed to be given if in writing (or in the form of a facsimile) addressed as hereinafter provided and actually delivered at said address: (a) if to any Holder, at the registered address of such holder as set forth in the Warrant Register kept at the office of the Company maintained pursuant to Section 8.2(a) hereof, or (b) if to the Company, to the attention of its Chief Financial Officer at its office maintained pursuant to Section 8.2(a) hereof; provided, however, that the exercise of any Warrant shall be effective in the manner provided in Section 3 hereof.
11. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common Stock underlying this Warrant upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificate for shares of Common Stock underlying this Warrant in a name other that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof.
12. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register.
13. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of New York. The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to be duly executed as of the date first above written.
GOLD BOND RESOURCES, INC.
By: s/s
-------------------------------
Name: Parrish B. Ketchmark
Title: President
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EXHIBIT A
FORM OF EXERCISE NOTICE
[To be executed only upon conversion of Warrant]
To GOLD BOND RESOURCES, INC.:
The undersigned registered holder of the within Warrant hereby irrevocably exercises the Warrant pursuant to Section 3.1 of the Warrant with respect to __________(1) shares of the Common Stock, at an exercise price per share of Common Stock of $.05, which the holder would be entitled to receive upon the cash exercise hereof, and requests that the certificates for the shares be issued in the name of, and delivered to, whose address is:
Dated: _______________
EXHIBIT B
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto _____________________ the right represented by the Warrant to purchase __________(1) shares of Common Stock of GOLD BOND RESOURCES, INC. to which the Warrant relates, and appoints _____________________ Attorney to make such transfer on the books of GOLD BOND RESOURCES, INC. maintained for the purpose, with full power of substitution in the premises.
Signed in the presence of:
Signed in the presence of:
MEMORANDUM OF UNDERSTANDING
The following represents an understanding regarding the terms of an agreement ("Agreement") between RubyCat Technology ("RCT") and its subsidiaries, and direct and indirect affiliates and the EnerTeck Chemical Corporation and its subsidiaries, and direct and indirect affiliates ("EnerTeck"). (RCT and EnerTeck, each a "Party", and collectively referred to herein as "Parties") for the sale by RCT and purchase and marketing by EnerTeck of RCT's diesel fuel additive products for the diesel fuel market (such products from RCT will hereinafter be referred to as "EnerBurn"). Such marketing of RCT's diesel fuel additive products will be supported by RCT with its associated application services and technology. Also presented herein are the basic terms of agreement for a purchase option for EnerTeck to acquire RCT's EnerBurn products and related Technology as more fully discussed in Section 2, below.
The Parties shall each give best effort to cause this endeavor to reach fruition and will not engage in any activity or representation that would circumvent, impede, conflict or compete with this Agreement.
RCT and EnerTeck agree as follows:
1. SUPPLY AND MARKETING AGREEMENT The Parties agree that the term "mutual exclusivity" for the purposes of this agreement means that EnerTeck will collaborate with and purchase EnerBurn products and services exclusively from RCT and RCT will collaborate with and sell EnerBurn Diesel products and services exclusively to EnerTeck as outlined herein and neither party will have third party relationships that would compete with or impede the Agreement herein. This mutual exclusivity in Diesel fuel markets specifically excludes Diesel aftertreatment hardware and technology. The Parties agree to mutual exclusivity for developing substantial sales of RCT's EnerBurn products and application services in Diesel fuel markets as follows:
(a) EnerTeck and RCT are currently collaborating in the development of Diesel transportation and various industrial sales of EnerBurn in Diesel applications in the USA, South America, and Europe for highway, rail, marine, mining, power generation, and other related Diesel applications. Collaboration for marketing EnerBurn in other geographic regions is contemplated. The Parties herein agree to collaborate on a Global basis (excluding China) with mutual exclusivity to develop Diesel market sales and new markets for a period of eleven months from the effective date of this agreement and evergreen year to year thereafter so long as EnerTeck's purchases of EnerBurn from RCT have met the following minimums (as specified in the pre-existing Exclusive Market Segment Development Agreement) in the preceding year:
Year One ending December 31, 2003 180,000 Gallons Year Two ending December 31, 2004 270,000 Gallons Year Three ending December 31, 2005 400,000 Gallons And Each Year thereafter 500,000 Gallons |
(b) In consideration of a payment of $100,000 by EnerTeck to RCT, the Parties agree to a temporary extension of, and expansion to, the scope of the Exclusive Market Segment Development Agreement already existing between the Parties for the Diesel fuel market which would expand the exclusive marketing rights granted to EnerTeck. The consideration is to be paid no later than February 3, 2003, and the term of which shall continue until the option of Section 2 below is exercised or December 31, 2003, whichever occurs first.
Should EnerTeck's purchases of EnerBurn fail to meet the minimum volume requirements for any annual period, RCT will protect EnerTeck's relationship with its existing customers and distributors and will sell EnerBurn to EnerTeck for any and all of said customers but EnerTeck will forfeit Global exclusivity as described herein.
(c) The Parties reserve the right to review cost/price quarterly. If this review reveals that a price adjustment is necessary, the Parties will meet and negotiate a price adjustment to be agreed by the Parties. Parties agree to negotiate in good faith on all/any such negotiations.
This agreement does not replace, but only temporarily (through extension of the option period expiring December 31, 2003) compliments the Exclusive Market Segment Development Agreement between RCT and EnerTeck dated July 3, 2001 and September 7, 2001. Additionally, this Agreement does not modify, alter or supercede any prior confidentiality agreements between the Parties, and/or their affiliates that relate to proprietary data, know-how and/or computer modeling (the Technology); or proprietary customer and distributor information. Each Party will use the same care and prudence with the other Party's confidential information as it would reasonably expect the other Party to use with its own confidential information.
2. PURCHASE OPTION AGREEMENT
(a) The Parties agree to the granting of an option to EnerTeck to purchase from RCT the EnerBurn technology, which technology is specifically limited to the elements listed in Attachment I.
RCT grants to EnerTeck a unilateral one-year option to purchase the technology, including the information specified in Attachment 1 relating to the use of the principal EnerBurn chemical in all Diesel fuel applications (excluding diesel aftertreatment). The option purchase price ranges as follows:
If exercised in January, 2003 - $6,000,000 If exercised in February, 2003 - $6,055,000 If exercised in March, 2003 - $6,110,000 If exercised in April, 2003 - $6,165,000 If exercised in May, 2003 - $6,220,000 If exercised in June, 2003- $6,275,000 If exercised in July, 2003- $6,330,000 If exercised in August, 2003 - $6,385,000 If exercised in September, 2003 - $6,440,000 If exercised in October, 2003 - $6,495,000 If exercised in November, 2003 - $6,550,000 If exercised in December, 2003 - $6,600,000
(b) This option expires on December 31, 2003 if not exercised by funds transfer by EnerTeck to RCT prior to that date. Payment will be made in full to RCT in readily available funds without deduction or set off at the time of closing on or prior to December 31, 2003.
The Parties agree, in good faith, to enter into a definitive purchase agreement for the Technology as outlined in this Section 2. Subsequent to EnerTeck's payment in full for RCT's Technology, i.e. the exercise of the aforementioned option, EnerTeck shall expressly and permanently own all rights and royalties to the Diesel fuel portion of RCT's Technology; and RCT, its subsidiaries, shareholders, officers, and beneficiaries will protect the confidentiality of the purchased Technology and will not engage in competition with EnerTeck or transfer said Technology to an active or potential Diesel competitor of EnerTeck. Furthermore, subsequent to EnerTeck's fulfillment of the purchase option, RCT's President, will enter into an agreement with EnerTeck to provide to EnerTeck consulting, data analysis and training, for a minimum period of two years,
the actual term and reimbursement rate for this agreement to be negotiated between the Parties. The Parties will, in good faith, negotiate the terms of the consulting agreement prior to executing the option to purchase RCT's Technology unless mutually agreed otherwise.
The Parties recognize that EnerTeck is attempting to secure sufficient outside funding to enable it to complete the acquisition of RCT's Technology for diesel applications as provided for in Section 2 herein and that demonstrable EnerBurn sales metrics must be met to secure said funds to exercise the option. In the event that EnerTeck does not exercise the option referred to in Section 2, above, for any reason whatsoever, this memorandum of understanding as it relates to the Supply and Marketing Agreement (Section 1, above) reverts to the still valid, binding and primary terms and conditions of the Exclusive Market Segment Agreement dated July 3, 2001 and September 7, 2001, as simply extended by the $100,000 fee payment.
The laws of the State of Colorado shall govern this Agreement. The effective date of this Agreement is February 1, 2003.
In witness whereof, the Parties have caused this Agreement to be signed by their duly authorized representatives:
For RubyCat Technology: s/s Date: 2-07-03 -------------------------------------------- ------- By: Jack Kracklauer President, RubyCat Technology For EnerTeck Chemical Corporation. s/s Date: 2-04-03 -------------------------------------------- ------- By: Dwaine Reese |
Chairman Of The Board, EnerTeck Chemical Corporation, Inc.
ATTACHMENT 1
The elements and components of the EnerBurn diesel technology covered by this eleven-month option are specifically limited to the following items.
RCT TECHNOLOGY
1. Formula for diesel EnerBurn.
2. The analytical protocols required to analyze Key Chemicals to qualify them for safe and effective use in Diesel engine applications.
3. Transfer exclusively to EnerTeck all (RCT will continue to own and use these protocols in non-diesel and diesel aftertreatment applications) rights to the proof of performance statistical analysis procedures for Diesel engine applications.
4. The rights to test documentation and test reports of performance of Enerburn in Diesel equipment.
5. Authorization to use RCT's EPA Diesel Fuel Product Registration to the full extent permitted by EPA regulations and policies. Any transfer short of out right sale of the permits will be exclusive to EnerTeck.
6. Transfer of all rights and responsibilities of the Exclusive Market Segment Development Agreement dated July 31, 2001 and September 7, 2001.
7. Proprietary RCT Technology to produce the Key Chemicals in the EnerBurn Formulation for EnerTeck's use exclusively in formulating and marketing EnerBurn or EnerBurn related Products in diesel fuels markets. Any sale to third parties of Key Chemicals produced using RCT's Proprietary Technology will require the prior written consent of RCT.
RCT SUPPLY AGREEMENT
A guaranteed, full requirements supply contract for Proprietary Key Chemicals from RCT to EnerTeck Corporation for uses in formulating and marketing Diesel EnerBurn Products. The full requirement commitment for each Key Chemical from RCT is contingent on EnerTeck purchasing, during a contract year, a minimum of 80% of Key Chemicals requirements from RCT for Diesel EnerBurn Products. RCT will be given the option to meet any competitive offer for supply of a Key Chemical to EnerTeck prior to EnerTeck purchasing the Key Chemical from another source.
LEASE AGREEMENT
The Atrium Building
10701 Corporate Drive
STAFFORD, TEXAS
Lessor:
HSO CORPORATE DRIVE LIMITED PARTNERSHIP
Lessee:
Enerteck Chemical Corp.
TABLE OF CONTENTS
Section 1. Premises.....................................................4
Section 2. Term.........................................................4
Section 3. Base Rental..................................................4
Section 4. Adjustment to Base Rental....................................5
Section 5. Lessee's Occupancy...........................................6
Section 6. Services to be Furnished by Lessor...........................6
Section 7. Keys, Locks and Access Cards.................................6
Section 8. Signage and Lobby Directory..................................7
Section 9. Relocation of Lessee.........................................7
Section 10. Maintenance and Repairs by Lessor...........................7
Section 11. Repairs by Lessee...........................................7
Section 12. Care of the Premises........................................7
Section 13. Parking.....................................................7
Section 14. Lessor's Exclusive Covenant.................................7
Section 15. Holding Over................................................8
Section 16. Alterations, Additions, and Improvements....................8
Section 17. Legal Use and Violations of Insurance Coverage..............8
Section 18. Laws and Regulations; Building Rules........................8
Section 19. Nuisance....................................................8
Section 20. Entry by Lessor.............................................8
Section 21. Assignment and Subletting...................................8
Section 22. Transfer of Lessor..........................................9
Section 23. Subordination to Mortgage...................................9
Section 24. Mechanic's Lien.............................................9
Section 25. Estoppel Certificate.......................................10
Section 26. Events of Default..........................................10
Section 27: Lessor's Right to Relet....................................12
Section 28. Lien for Rent..............................................12
Section 29. Attorney's Fees............................................13
Section 30. No Implied Waiver..........................................13
Section 31. Casualty Insurance.........................................13
Section 32. Liability Insurance........................................13
Section 33. Indemnity..................................................13
Section 34. Rent Tax...................................................13
Section 35. Waiver of Claims and Subrogation...........................14
Section 36. Casualty Damage............................................14
Section 37. Condemnation...............................................14
Section 38. Notices and Cure...........................................14
2
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Section 39. Personal Liability.........................................15 Section 40. Notice.....................................................15 Section 41. Surrender..................................................15 Section 42. Captions...................................................15 Section 43. Entirety and Amendments....................................15 Section 44. Severability...............................................16 Section 45. Binding Effect.............................................16 Section 46. Number and Gender of Words.................................16 Section 47. Recordation................................................16 Section 48. Commissions................................................16 Section 49. Confidentiality............................................16 Section 50. Governing Law..............................................16 Section 51. Force Majeure..............................................16 Section 52. Relationship of Parties....................................16 Section 53. Security Deposit...........................................16 Section 54. Financial Information Of Lessee............................16 Section 55. ADA........................................................17 Section 56. Hazardous Materials........................................17 Section 57. No Lessor Obligation to Provide Security...................17 Section 58. Exhibits...................................................18 |
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease"), made and entered into on this 1st___ day of February, 2001, between HSO Corporate Drive Limited Partnership ("Lessor"), and Enerteck Chemical Corp. ("Lessee").
W I T N E S S E T H:
Section 1. Premises
Subject to and upon the terms and conditions hereinafter set forth, and each in consideration of the covenants and obligations of the other hereunder, Lessor does hereby lease and demise to Lessee, and Lessee does hereby lease from Lessor, those certain premises (the "Premises") in the building known as The Atrium Building, 10701 Corporate Drive (the "Building") constructed on the real property situated in the City of Stafford, Fort Bend County, TEXAS, more particularly described on EXHIBIT A attached hereto and made a part hereof for all purposes (the "Property"). The Premises shall mean that (those) certain space(s) on the Second (2nd) floor-(s) of the Building being Suite-s 293 and comprising 557 square feet of Net Rentable Area, as more specifically identified in EXHIBIT B attached hereto. The term "Net Rentable Area" shall be defined as 1.17% of multi-tenant usable area whether or not the floors are actually utilized for multiple tenant occupancy. Usable area shall be computed by measuring to the inside finish of permanent outer building walls, or the glass line if at least 50% of the outer building wall is glass, to the outer side of corridors and/or other permanent partitions, and to the center of partitions that separate the Premises from adjoining usable areas. No deduction shall be made for columns and projections necessary to the Building. The Net Rentable Area in the Building shall mean 108,490 square feet.
Section 2. Term
(a) Subject to and upon the terms and conditions set forth herein, or in any Rider or exhibit hereto, this Lease shall Continue in force for a term of Thirty Six Months (36/Mnths.) beginning on the 1st day of February, 2001, ("Commencement Date") and ending on the 31st day of January, 2004, unless sooner terminated or extended to a later date under any other term or provision hereof.
(b) If for any reason the Premises are not ready for occupancy by Lessee on the commencement date specified in Paragraph 2(a) above, Lessor shall not be liable or responsible for any claims, damages, or liabilities in connection therewith or by reason thereof, and this Lease and the obligations of Lessee shall nonetheless commence and continue in full force and effect; provided, however, if the Premises are not ready for occupancy for any reason other than omission, delay, or default on the part of Lessee or anyone acting under or for Lessee, the rent herein provided shall not commence until the Premises are ready for occupancy by Lessee. Such abatement of rent shall constitute full settlement of all claims that Lessee might otherwise have against Lessor by reason of the Premises not being ready for occupancy by Lessee on the date of the commencement of the term hereof. Should the term of this Lease commence on a date other than that specified in Paragraph 2(a) above, Lessee will, at the request of Lessor, execute an amendment to this Lease on a form provided by Lessor specifying the beginning date of the term of this Lease. In such event, rental under this Lease shall not commence until such revised commencement date, and the stated term of this Lease shall thereupon commence, and the expiration date shall be extended so as to give effect to the full stated term. If work is required of the Landlord pursuant to EXHIBIT C , the Premises shall be deemed to be ready for occupancy on the first to occur of (i) the date that there is delivered to Lessee a certificate of substantial completion from Lessor's architect, which certificate shall be binding and conclusive upon Lessee in the absence of bad faith and collusion on the part of or between Lessor and Lessor's architect, or (ii) upon the date on which Lessee begins occupancy of the Premises.
Section 3. Base Rental
(a) Lessee hereby agrees to pay to Lessor, without setoff or
deduction whatsoever, in accordance with the Schedule of Base Rent attached
hereto as EXHIBIT D ("Base Rental). Lessee shall also pay, as additional rent
[or Forecast Additional Rent ], all such other sums of money as shall become due
from and payable by Lessee to Lessor under this Lease (Base Rental, any
adjustment thereto pursuant to Section 4 hereof, and all such other sums of
money due from and payable by Lessee pursuant to this Lease are sometimes
hereinafter collectively called "rent"), for the nonpayment of which Lessor
shall be entitled to exercise all such rights and remedies as are herein
provided in the case of the nonpayment of Base Rental. The annual Base Rental,
together with any adjustment or increase thereto then in effect, shall be due
and payable in advance in twelve (12) equal installments on the first 1st day of
each calendar month during the term of this Lease, and Lessee hereby agrees so
to pay such Base Rental and any adjustment or increase thereto to Lessor at
Lessor's address provided herein (or such other address as may be designated by
Lessor in writing from time to time) monthly, in advance, and without demand. If
the term of this Lease commences on a day other than first (1st) day of a month
or terminates on a day other than the last day of a month, then the installments
of Base Rental and any adjustments thereto for such month or months shall be
prorated, and the installment or installments so prorated shall be paid in
advance.
(b) In the event any installment of the Base Rental, or any other sums which may become owing by Lessee to Lessor under the provisions hereof are not received within Five (5) days after the due date thereof (without in any way implying Lessor's consent to such late payment), Lessee, to the extent permitted by law, agrees to pay, in addition to said installment of the Base Rental or such other sums owed, a late payment charge equal to ten percent (10%) (Late Fee) of the installment of the Base Rental or such other sums owed. Notwithstanding the foregoing, the foregoing late charges shall not apply to any sums which have been advanced by Lessor to or for the benefit of Lessee pursuant to the provisions of this Lease, it being understood that such sums shall bear interest, which Lessee hereby agrees to pay to Lessor, at the lesser of fifteen percent (15%) per annum or the maximum rate of interest permitted by law to be charged Lessee for the use or forbearance of such money.
Section 4. Adjustment to Base Rental
(a) For purposes of ascertaining the adjustment to Base Rental, the following terms shall have the following meanings:
(i) "Base Amount" (Base Year Expense Stop) shall mean the Basic Cost to operate the Building for the Calendar Year 2001 (Base Year );
(ii) "Basic Costs" shall mean all Building and Complex Operating Expenses determined as if the building is fully occupied;
(iii)"Complex" shall mean the Building and any other land or improvements, including related parking facilities, now or hereafter operated, in whole or in part, in common with the Building;
(iv) "Estimated Basic Costs" shall mean a good faith projection of Basic Costs for the forthcoming calendar year;
(v) "Lessee's Share" shall mean the ratio determined by dividing Net Rentable Area in the Premises by Net Rentable Area in the Building. Lessee is deemed to occupy 0.005% percent ("Proportionate Share) of the Net Rentable area of the Building;
(vi) "Operating Expenses" shall mean all expenses, costs, and disbursements (but not replacement of capital investment items nor specific costs especially billed to and paid by specific tenants) of every kind and nature which Lessor shall pay or become obligated to pay because of or in connection with the ownership and operation of the Building and/or Complex, including, but not limited to, the following:
(A) Wages, salaries, and fees of all personnel engaged in the operation, maintenance, leasing (but not to include third party leasing commissions), or security of the Building and/or Complex and personnel who may provide traffic control relating to ingress and egress from the parking areas for the Building to adjacent streets. All taxes, insurance, and benefits relating to employees providing these services shall also be included;
(B) All supplies and materials used in the operation and maintenance of the Building and/or Complex;
(C) Costs of all utilities for the Building and/or Complex, including but not limited to, the cost of water and power, heating, lighting, air conditioning, and ventilation;
(D) Cost of all maintenance, janitorial, and service agreements for the Building and/or Complex and the equipment therein, including but not limited to, alarm service, window cleaning, and elevator maintenance;
(E) Cost of all insurance relating to the Building and/or Complex, including but not limited to, the cost of casualty and liability insurance and Lessor's personal property used in connection therewith;
(F) All taxes, assessments, and other governmental charges, whether federal, state, county, or municipal, and whether they be by taxing districts or authorities presently taxing the Premises or by others, subsequently created or otherwise, and any other taxes and assessments attributable to the Building and/or Complex or its operation. Lessee will be responsible for taxes on its personal property and on the value of leasehold improvements to the extent that same exceeds standard Building allowances;
(G) Cost of labor and materials in performing repairs and general maintenance in connection with the Building and/or Complex, including without limitation, Lessor's share of all maintenance for the access road to the Building and Lessor's share of maintenance of the underground storm drainage system, but excluding capital repairs or replacement and general maintenance paid by proceeds of insurance or by Lessee or other third parties, and alterations attributable solely to tenants of the Building other than Lessee;
(H) Amortization of the cost of installation of capital investment items which are primarily for the purpose of reducing operating costs of the Building and/or Complex (e.g. energy saving devices) or which may be required by governmental authority. All such costs shall be amortized over the reasonable life of the capital investment items by an additional charge to be added to rent and paid by Lessee as additional rent, with the reasonable life and amortization schedule being determined by Lessor in accordance with generally accepted accounting principles, but in no event to extend beyond the reasonable life of the Building;
(I) Lessor's accounting, auditing, and legal expenses applicable to the Building and/or Complex;
(a) Such Operating Expenses shall be computed on the accrual basis. All Operating Expenses shall be determined in accordance with generally accepted accounting principles which shall be consistently applied.
(b) For each calendar year during the term of this Lease, Base Rental shall be adjusted upward by the amount of Lessee's Share of the increase, if any, of Basic Costs over the Base Amount. Prior to January 1, 2002 and January 1st of each calendar year during the term of this Lease, or as soon as practicable thereafter, Lessor shall provide Lessee with Estimated Basic Costs for the calendar year ahead and Lessee's Share of the increase of Estimated Basic Costs over the Base Amount; thereafter, Lessee's Share of the increase of Estimated Basic Costs over the Base Amount shall be paid in twelve equal monthly installments together with the monthly installment of rental due hereunder. However, for the first calendar year during which the Lease is in effect, if the term of this Lease commences on a day other than January 1, , as soon as practicable thereafter, Lessor shall provide Lessee with Estimated Basic Costs for that calendar year and Lessee's Share of the increase of such Estimated Basic Costs over the Base Amount. Notwithstanding anything to the contrary contained in this Lease, if the Building is less than ninety-five percent (95%) occupied (on average) during any calendar year Operating Expenses for that year shall be increased to an amount that Lessor in good faith projects would have been incurred by Lessor for Operating Expenses for that year had the Building been ninety-five percent (95%) occupied during that year (as an average. Lessee shall pay in equal monthly installments together with the monthly installment of rental due hereunder Lessee's Share of the increase of Estimated Basic Costs over the Base Amount prorated on the basis which the number of days from the commencement of the Lease to and including December 31 bears to 365.
(c) By June 1, 2002 and by June 1st of each calendar year
thereafter during the term of this Lease, or as soon thereafter as practicable,
Lessor shall furnish to Lessee a statement of Basic Costs for the previous
calendar year. A lump sum payment (which payment shall be deemed a payment of
rent hereunder for all purposes) will be made from Lessee to Lessor, or, as the
case may be, from Lessor to Lessee within thirty (30) days after the delivery of
such statement equal to the difference between Lessee's Share of the increase of
actual Basic Costs over the Base Amount and Lessee's Share of the increase of
Estimated Basic Costs over the Base Amount for the previous calendar year. The
effect of this reconciliation payment is that Lessee will pay during the term of
this Lease its share of Basic Cost increases over the original $ (Please see
Section 4(a)(i), above) /square foot Base Amount and no more. The failure of
Landlord to require payment of Tenant's Pro Rata Share of any Excess or
Landlord's failure to adjust Additional Rent for any calendar year shall not
prejudice Landlord's right to receive such payment nor constitute a waiver of
Landlord's right to require such payment or adjustment at any later date, nor
shall any delay in demanding or collecting such charges be deemed a waiver
thereof.
(d) Lessor shall maintain records concerning Estimated and Actual Operating Costs for twelve (12) months following the period covered by the statement or statements furnished Lessee, after which Lessor may dispose of such records. Lessee may at its sole cost and expense inspect Lessors records during Lessors normal business hours upon first furnishing Landlord fifteen (15) days advance written notice. Lessee shall, however be entitled to only one such inspection each calendar year. All of the information obtained through the Lessee's audit with respect to financial matters (including, without limitations, costs, expenses, income) and any other matters pertaining to the Lessor and/or the building as well as any compromise, settlement, or adjustment reached between Lessor and Lessee relative to the results of the audit shall be held in strict confidence by the Lessee and its officers, agents, and employees; and Lessee shall cause its auditor and any of its officers, agents, and employees to be similarly bound. As a condition precedent to Lessee's exercise of its right to audit, Lessee must deliver to Lessor a signed covenant from the auditor acknowledging that all of the results of such audit as well as any compromise, settlement, or adjustment reached between Lessor and Lessee shall be held in strict confidence and shall not be revealed in any manner to any person except upon the prior written consent of the Lessor, which consent may be withheld in Lessor's sole discretion, or if required pursuant to any litigation between Lessor and Lessee materially related to the facts disclosed by such audit or if required by law. Lessor shall have all rights allowed by law or equity if Lessee, Its Officers, agents, or employees and/or the auditor violate the terms of this provision, including, without limitation, the right to terminate this Lease or the right to terminate Lessee's right to audit in the future pursuant to this Clause. Lessee shall indemnify, defend upon request, and hold Lessor harmless from and against all costs, damage, claims, liabilities, expenses, losses, court costs, and attorney's fees suffered by or claimed against Lessor, based in whole or in part upon the breach of this Paragraph by Lessee and/or its auditor; and shall cause its auditor to be similarly bound. The obligations within the Paragraph shall survive the expiration or earlier termination of the lease.
(e) If this Lease shall terminate on a day other than the last day of a calendar year, the amount of any adjustment between Estimated Basic Costs and actual Basic Costs with respect to the calendar year in which such termination occurs shall be prorated on the basis which the number of days from the commencement of such calendar year to an including such termination date bears to 365; and any amount payable by Lessor to Lessee or Lessee to Lessor with respect to such adjustment shall be payable within thirty (30) days after delivery by Lessor to Lessee of the statement of actual Basic Costs with respect to such calendar year.
Section 5. Lessee's Occupancy
Lessee shall occupy the Premises and conduct its normal
business operations therefrom and the Premises shall be used by Lessee solely
for standard office purposes as offices for the following type of business:
Chemical Products and for no other purpose or use.
Section 6. Services to be Furnished by Lessor
Lessor shall furnish to Lessee while occupying the Premises the following services:
(a) hot and cold water at those points of supply provided for general use of the tenants in the Building;
(b) heated and refrigerated air conditioning in season, during
normal business hours for the Building, 6:00 A.M. to 6:00 P.M. weekdays and 8:00
A.M. to 1:00 P.M. on Saturdays (exclusive of Sundays and State and National
Holidays) and at such temperatures and in such amounts as are considered by
Lessor to be standard. Such service at times other than normal business hours
shall be optional on the part of Lessor; provided that upon twenty-four hour
advance notice. Such service will be provided to Lessee at Lessee's expense;
(c) elevator service in common with other tenants for ingress and egress to and from the Premises;
(d) janitorial service as may in the judgment of the Lessor be reasonably required;
(e) electric current for normal office usage in the Premises and electric lighting service for all public areas and special service areas of the Building in the manner and to the extent considered by Lessor to be standard; and
(f) access to the Premises at all times through keys, or any other devise used in lieu of keys, to the front and rear doors of the Building for Lessee or, if Lessee is a corporation, a reasonable and limited number of designated officers of Lessee.
Failure by Lessor to any extent to furnish, or any stoppage of, these defined services, and resulting from causes beyond the control of Lessor or from any other cause, shall not render Lessor liable in any respect for damages to either person or property, nor be construed as an eviction of Lessee, nor work an abatement of rent, nor relieve Lessee from fulfillment of any covenant or agreement hereof. Should any equipment or machinery break down, or for any cause cease to function properly, Lessor shall use reasonable diligence to repair the same promptly. Lessee shall have no claim for rebate of rent or damages on account of any interruptions in service occasioned thereby or resulting therefrom.
Section 7. Keys, Locks and Access Cards
Lessor shall furnish Lessee One (1) key and One (1) access card per designated employee. Additional keys will be furnished at a charge by Lessor on receipt of an order signed by Lessee or Lessee's authorized representative. All such keys shall remain the property of Lessor. Any lost, stolen or damaged cards and keys will be replaced at Lessors then current charge per card or key. No additional
locks shall be allowed on any door of the Leased Premises without Lessor's written permission, and Lessee shall not make or permit to be made any duplicate keys, except those furnished by Lessor. Upon termination of this Lease, Lessee shall surrender to Lessor all keys to the Leased Premises and give to Lessor the explanation of the combination of all locks for safes, safe cabinets, and vault doors, if any, in the Leased Premises.
Section 8. Signage and Lobby Directory
(a) Lessor shall provide and install a Lessee identification sign on the entry door to the Lease Premises. All letters and numerals shall be in the standard graphics that are used throughout the Building. Only such standard graphics may be used in any public area or openings to public areas. The cost of any changes to such suite sign will be charged to Lessee.
(b) Lessee shall not place signs or any other item on the Premises which may be visible from outside the Building or make any modifications to the identification sign referenced in (a) above, without first obtaining the written consent of Lessor in each such instance.
(c) Lessor agrees to identify Lessee on the Lobby Directory Board. The cost of any changes requested by Lessee to such directory will be charged to Lessee.
Section 9. Relocation of Lessee
Lessor reserves the right, at its option, to transfer and remove Lessee from the Premises to any other available space in the Building of substantially equal size, and area, and equivalent Base Rental per square foot. Lessor shall bear the expense of said removal as well as the expense of any renovations or alterations necessary to make the new space substantially conform in layout and appointment with the original Premises.
Section 10. Maintenance and Repairs by Lessor
Unless otherwise stipulated herein, Lessor shall be required to maintain and repair only the structural portions of the Building, both exterior and interior, including the heating, ventilating, and air conditioning systems and equipment, the plumbing and electrical systems and equipment, the public foyers and lobbies, the corridors, parking areas, elevators, stairwells and restrooms and all other areas serving more than one tenant of the Building; provided, however, that interior partitioning walls, carpeting and other portions of the Premises which might otherwise be considered building standard items shall not be the obligations of Lessor. Such building standard items and any other leasehold improvements of Lessee will, at Lessee's written request, and upon Lessor's written approval, be maintained by Lessor at Lessee's expense, at a cost or charge equal to all costs incurred in such maintenance plus an additional 15% charge to cover overhead, which costs and charges shall be payable by Lessee to Lessor promptly upon being billed therefor. In no event will Lessor be required to make any repairs to the aforementioned structural portions of the Building, if such repairs are occasioned by an act of negligence, or misconduct by the Lessee, its agents, employees, subtenants, licensees or concessionaires.
Section 11. Repairs by Lessee
Lessee covenants and agrees with Lessor, at Lessee's own cost and expense, to repair or replace any damage or injury done to the Premises, Building, or any part thereof, or to the Complex, caused by Lessee or Lessee's agents, employees, invitees, or visitors, and such repairs shall restore the Premises, Building or Complex, as the case may be, to the same or as good a condition as it was prior to such injury or damage, and shall be effected in compliance with all building and fire codes and other applicable laws and regulations; provided, however, if Lessee fails to make such repairs or replacements promptly, Lessor may, at its option, make such repairs or replacements, and Lessee shall repay the cost thereof, plus an additional 15% charge to cover overhead, to Lessor on demand.
Section 12. Care of the Premises
Lessee covenants and agrees with Lessor to take good care of the Premises and Building, and the fixtures and appurtenances therein and, at Lessee's expense, to make all nonstructural repairs thereto as and when needed to preserve them in good order and condition except for ordinary wear and tear. Lessee shall not commit or allow any waste or damage to be committed on any portion of the Premises, and at the termination of this Lease, by lapse of time or otherwise, shall deliver up the Premises to Lessor in as good a condition as at the date of the commencement of the term of this Lease, ordinary wear and tear excepted, and upon any termination of this Lease, Lessor shall have the right to re-enter and resume possession of the Premises.
Section 13. Parking
Lessee shall have the non-exclusive use of the Building surface parking lot for its customers, invitees, and visitors automobiles, subject to rules and regulations for the use thereof as prescribed from time to time by Lessor. During the initial Term of this Lease, Lessee shall be permitted to use Two (2) unreserved vehicle parking spaces in the Buildings surface lot at no charge allowing the parking of Two (2) automobiles by Lessee. Lessee agrees to provide and continually update the name and make, model, color and automobile license numbers of each employee vehicle parked in the Building parking facility. Lessee agrees to cooperate with any parking identification program including compelling its employees to display a "parking sticker in a prominent location as designated by Lessor. Lessor shall have sole control over the parking of all vehicles (including but not limited to cars, trucks, recreational vehicles, trailers, bicycles and motorcycles) and shall designate parking areas and building service areas. A copy of the current parking rules and regulations is attached to this lease as EXHIBIT E. Lessee agrees to provide and continually update the name and automobile license numbers of each employee who will be parking in the Buildings Garage.
Section 14. Lessor"s Exclusive Covenant.
Upon payment by Lessee of the rents provided for in this Lease, and upon the observance and performance of all the covenants, terms and conditions on Lessees part to be observed and performed, Lessee shall, subject to the terms and provisions of this Lease, peaceably and quietly hold and enjoy the Leased Premises for the term hereby demised, only, however, against (i) interference therewith by the affirmative acts of Lessor, its employees or agents, and (ii) interference therewith by any person who may claim superior title
to the Leased Premises by, through or under Lessor, but not otherwise. Lessor shall under no circumstances be held responsible for restriction or disruption of access to the Building from public streets caused by construction work or other actions taken by or on behalf of governmental authorities, or for actions taken by other tenants (their employees, agents, visitors, contractors or invitees), or any other cause not entirely within Lessors direct control, and same shall not constitute a constructive eviction of Lessee or give rise to any right or remedy of Lessee against Lessor of any nature or kind. This covenant of quiet enjoyment is in lieu of any covenant of quiet enjoyment provided or implied by law, and Lessee expressly waives any such other covenant of quiet enjoyment to the extent broader than the covenant contained in this Section 14.
Section 15. Holding Over
In the event of holding over by Lessee without the written consent of Lessor, after the expiration or other termination of this Lease and without execution of a new Lease, Lessee shall, throughout the entire holdover period, pay rent equal to 150% of the Base Rental, as adjusted herein and additional rent which would have been applicable had the term of this Lease continued through the period of such holding over by Lessee. No holding over by Lessee after the expiration of the term of this Lease shall be construed to extend the term of this Lease; and in the event of any unauthorized holding over, Lessee shall indemnify Lessor against all claims for damages by any other Lessee or prospective Lessee to whom Lessor may have leased all or any part of the Premises effective before or after the expiration of the term of this Lease, resulting from delay by Lessee in delivering possession of all or any part of the Premises. Any holding over with the written consent of Lessor shall thereafter constitute a lease from month-to-month, under the terms and provisions of this Lease to the extent applicable to a tenancy from month-to-month. Any holding over without Lessors prior written consent shall constitute Lessee a tenant-at-sufferance of Lessor, subject to immediate eviction.
Section 16. Alterations, Additions, and Improvements
Lessee covenants and agrees with Lessor not to permit the Premises to be used for any purpose other than that stated in Section 5 hereof or make or allow to be made any alterations or physical additions in or to the Premises without first obtaining the written consent of Lessor in each such instance. All alterations, structural or non structural, must have Lessor's consent which consent may be withheld in Lessor's sole discretion. Lessee shall be responsible for any lien filed against the Premises or any portion of the Building for work claimed to have been done for, or materials claimed to have been furnished to Lessee. Any and all such alterations, physical additions, or improvements, when made to the Premises by Lessee, shall be at Lessee's expense and shall at once become the property of Lessor and shall be surrendered to Lessor upon termination of this Lease by lapse of time or otherwise unless Lessor requests their removal, in which event Lessee shall remove the same and restore the Premises to their original condition at Lessee's expense; provided, however, this clause shall not apply to the movable fixtures, office equipment, and other personal property owned by Lessee. All construction work done by Lessee within the Premises shall be performed in a good and workmanlike manner, in compliance with all governmental requirements, and in such manner as to cause a minimum of interference with other construction in progress and with the transaction of business in the area adjacent to the Premises. Lessee agrees to indemnify Lessor and hold Lessor harmless against any loss, liability or damage resulting from such work, and Lessee shall, if requested by Lessor, furnish bond or other security satisfactory to Lessor against any such loss, liability or damage.
Section 17. Legal Use and Violations of Insurance Coverage
Lessee covenants and agrees with Lessor not to occupy or use, or permit any portion of the Premises to be occupied or used, for any business or purpose which is unlawful, disreputable, or deemed to be extra-hazardous on account of fire, or permit anything to be done which would in any way invalidate or increase the rate of fire, liability, or any other insurance coverage on the Building and/or its contents. All property kept, stored or maintained within the Premises by Lessee shall be at Lessee's sole risk.
Section 18. Laws and Regulations; Building Rules
Lessee covenants and agrees with Lessor to comply with all laws, ordinances, rules, and regulations of any state, federal, municipal, or other government or governmental agency having jurisdiction of the Premises that relate to the use, condition, or occupancy of the Premises. Lessee will comply with the rules of the Building adopted and altered by Lessor from time to time for the safety, care, and cleanliness of the Premises and Building and for the preservation of good order therein, all changes to which will be sent by Lessor to Lessee in writing and shall be thereafter carried out and observed by Lessee. Lessor shall not be responsible to Lessee for the non-performance by any other Lessee or occupant of the Building of any said rules and regulations. In the event of a conflict or inconsistency between the provisions of this Lease and any such rules, the provisions of this Lease shall control. See EXHIBIT F.
Section 19. Nuisance
Lessee covenants and agrees with Lessor to conduct its business and control its agents, employees, invites, and visitors in such manner as not to create any nuisance, or interfere with, annoy, or disturb any other tenant or Lessor in its operation of the Building.
Section 20. Entry by Lessor
Lessee covenants and agrees with Lessor to permit Lessor or its agents or representatives to enter into and upon any part of the Premises at all reasonable hours (and in emergencies at all times) to inspect the same, or to show the Premises to prospective purchasers, lessees, mortgagees, or insurers, to clean or make repairs, alterations, or additions thereto, as Lessor may deem necessary or desirable, and Lessee shall not be entitled to any abatement or reduction of rent by reason thereof.
Section 21. Assignment and Subletting
(a) Lessee shall not, without the prior written consent of Lessor, (i) assign or in any manner transfer Lessee's interest in this Lease or any estate or interest therein, or (ii) permit any assignment or transfer of this Lease or any estate or interest therein by operation of law, merger or consolidation, or (iii) sublet the Premises or any part thereof, or (iv) grant any license, concession, or other right of occupancy of any portion of the Premises. Consent by Lessor to one or more assignments or subletting shall not operate as a waiver of Lessor's rights as to any subsequent assignments and subletting. Notwithstanding any approved assignment or subletting, Lessee shall at all times remain fully responsible and liable for the payment of the rent herein specified and for compliance with all of Lessee's other obligations under this Lease and in the event of any assignment, by operation of law, merger, consolidation or otherwise, any assignee shall assume and agree to perform
all obligations of Lessee hereunder. If an event of default, as hereinafter defined, should occur while the Premises or any part thereof are then assigned or sublet, Lessor, in addition to any other remedies herein provided or provided by law, may at its option, collect directly from such assignee or sublessee all rents becoming due to Lessee under such assignment or sublease, and apply such rent against any sums due to Lessor by Lessee hereunder, and Lessee hereby authorizes and directs any such assignee or sublessee to make such payments of rent directly to Lessor upon receipt of notice from Lessor. No direct collection by Lessor from any such assignee or sublessee shall be construed to constitute a novation or a release of Lessee from the further performance of its obligations hereunder. Receipt by Lessor of rent from any assignee, sublessee, or occupant or the Premises shall not be deemed a waiver of the covenant contained in this Lease against assignment and subletting or a release of Lessee under this Lease. Lessee shall not mortgage, pledge, or otherwise encumber its interest in this Lease or in the Premises. Any attempted assignment or sublease by Lessee in violation of the terms and covenants of this paragraph shall be void, or (v) cause, allow or permit to occur any transfer or assignment of the ownership interest in the entity comprising the Lessee, if the transfer or assignment would either (i) in the aggregate with other transfers of ownership interest which have taken place since the execution of this Lease, result in more than twenty percent (20%) of the ownership interests in the entity comprising Lessee to have been transferred outside the original ownership group since the date of execution of this Lease, or (ii) resulted in the transfer of any interest as a general partner in a general or limited partnership or as a joint venturer in any joint venture; provided, however, that if the entity that comprises Lessee "goes public (in a securities offering registered under applicable securities laws) during the term of this lease, the same will not be deemed an assignment in violation of this Section, nor shall any transfer or sale of publicly traded stock of any publicly traded entity comprising Lessee ever be deemed an impermissible assignment hereunder.
(b) In the event Lessee desires Lessor's consent to an assignment of the Lease or subletting of all or a part of the Premises and as a condition to the granting of such consent, Lessee shall submit to Lessor in writing the name of the proposed assignee or sublessee, the proposed commencement date of such assignment or subletting, the nature and character of the business of the proposed assignee or sublessee and such financial information as shall be reasonably necessary for Lessor to determine the credit-worthiness of such proposed assignee or sublessee. Lessor shall have the option in its sole and absolute discretion (to be exercised within thirty (30) days from submission of Lessee's written request), (i) to refuse to consent to Lessee's assignment or subleasing of such space and to continue this Lease in full force and effect as to the entire Premises; or (ii) to permit Lessee to assign or sublet such space; subject, however, to provision satisfactory to Lessor for payment to Lessor of any consideration to be paid by such proposed assignee or sublessee in connection with such assignment or subletting in excess of Base Rental otherwise payable by Lessee and for payment to Lessor of any lump sum payment in connection with such assignment or subletting; or (iii) terminate this Lease as to the portion of the Premises requested to be sublet (or the entire Premises in the case of a request for permission to assign), thereby releasing Tenant from any further obligations with respect to the terminated space from and after the effective date of the termination, and lease the portion of the Premises so recaptured by Lessor to any party Lessor desires (including any proposed assignee or sublessee identified in Lessees request for consent). If Lessor should fail to notify Lessee in writing of its election as described above within such thirty (30) day period, Lessor shall be deemed to have elected option (i) above.
(c) Lessor's acceptance of any name for listing on the Building Directory (-ies) will not be deemed, nor will it substitute for, Lessor's consent, as required by this Lease, to any sublease, assignment, or other occupancy of the demised premises.
Section 22. Transfer of Lessor
Lessor shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Building and property referred to herein, and provided Lessor's transferee assumes the duties and obligations of Lessor arising from and after the date of any such transfer or assignment, upon such transfer or assignment, Lessor shall be released from any further obligations hereunder, and Lessee agrees to look solely to such successor in interest of Lessor for the performance of such obligations.
Section 23. Subordination to Mortgage
This Lease shall be subject and subordinate to any mortgage or deed of trust which may hereafter encumber the Building, and to all renewals, modifications, consolidations, replacements, and extensions thereof, which contain (or which are included in a separate agreement) provisions to the effect that if there should be a foreclosure or sale under power under such mortgage or deed of trust, Lessee shall not be made a party defendant thereto. Lessor shall be liable to Lessee only for Lessees actual, direct, but not consequential damages for any breach by Lessor or its obligations hereunder. This clause shall be self-operative and no further instrument of subordination need be required by any mortgagee. In confirmation of such subordination, however, Lessee shall, at Lessor's request, execute promptly any certificate or instrument evidencing such subordination that Lessor may request. Lessee hereby constitutes and appoints Lessor the Lessee's attorney-in-fact to execute any such certificate or instrument for and on behalf of Lessee. In the event of the enforcement by the trustee or the beneficiary under any such mortgage or deed of trust of the remedies provided for by law or by such mortgage or deed of trust, Lessee will, upon request of any person or party succeeding to the interest of Lessor as a result of such enforcement, automatically become the Lessee of such successor in interest without change in the terms or other provisions of this Lease; provided, however, that such successor in interest shall not be bound by (a) any payment of rent or additional rent for more than one (1) month in advance, except prepayment in the nature of security for the performance by Lessee of its obligations under this Lease, or (b) any amendment or modification of this Lease made without the written consent of such trustee or such beneficiary or such successor in interest. Upon request by such successor in interest, Lessee shall execute and deliver an instrument or instruments confirming the attornment provided for herein.
Section 24. Mechanic's Lien
Lessee will not permit any mechanic's lien or liens to be placed upon the Premises or improvements thereon or the Building during the term hereof caused by or resulting from any work performed, materials furnished, or obligation incurred by or at the request of Lessee, and nothing in this Lease contained shall be deemed or construed in any way as constituting the consent or request of Lessor, express or implied, by inference or otherwise, to any contractor, subcontractor, laborer, or materialman for the performance of any labor or the furnishings of any materials for any specific improvement, alteration, or repair of or to the Premises, or any part thereof, nor as giving Lessee any right, power, or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to the filing of any mechanic's or other liens against the interest of Lessor in the Premises. In the case of the filing of any lien on the interest of Lessor or Lessee in the Premises, Lessee shall cause the same to be discharged of record within ten (10) days after the filing of same either by paying the amount claimed to be due or by procuring the discharge of such lien by deposit in court or bonding. If Lessee shall fail to discharge such mechanic's lien within such period, then, in addition to any other right or remedy of Lessor, Lessor may, but shall not be
obligated to, discharge the same, either by paying the amount claimed to be due, or by procuring the discharge of such lien by deposit in court or bonding. Any amount paid by Lessor for any of the aforesaid purposes, or for the satisfaction of any other lien, not caused or claimed to be caused by Lessor, with interest thereon at the rate of eighteen percent (18%) per annum or the highest lawful rate, whichever is the lesser, from the date of payment, shall be paid by Lessee to Lessor demand.
Section 25. Estoppel Certificate
Lessee will, at any time and from time to time, upon not less than ten (10) days' prior request by Lessor, execute, acknowledge, and deliver to Lessor a statement in writing executed by Lessee certifying that Lessee is in possession of the Premises under the terms of this Lease, that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and setting forth such modifications), and the dates to which the rent has been paid, and either stating that to the knowledge of Lessee no default exists hereunder, or specifying each such default of which Lessee may have knowledge, and such other matters as may be reasonably requested by Lessor; it being intended that any such statement by Lessee may be relied upon by any prospective purchaser or mortgagee of the Building.
Section 26. Events of Default
(a) Each of the following occurrences, or acts or omissions of Lessee, shall constitute an event of default by Lessee under this Lease (hereinafter called an "event of default):
(i) Failure or refusal by Lessee to make the timely and punctual payment of any rent or other sums payable under this Lease when and as the same shall become due and payable, and the continuance of such non-payment for Lessee's receipt of Lessor's written notice of non-receipt.
(ii) Abandonment or vacating of all or any material portion of the Premises, or Lessees failure to occupy the Premises within fifteen (15) days after the Commencement Date; or
(iii) The filing or execution or occurrence of a petition in bankruptcy or other insolvency proceeding by or against and not discharged within thirty (30) days Lessee; or petition or answer seeking relief under any provision of the U.S. Bankruptcy Code; or an assignment of all or a material portion of Lessees assets for the benefit of creditors or in composition; or a petition or other proceeding by or against Lessee for the appointment of a trustee, receiver or liquidator of Lessee or of Lessees property; or a proceeding by any governmental authority for the dissolution or liquidation of Lessee; or
(iv) Any assignment or sublease by Lessee (whether or not legal, valid or enforceable and whether or not rendered void by the terms hereof), or the occupation or use of the Premises (or any portion thereof) by persons other than Lessee in a manner that would be equivalent to a sublease or assignment under applicable law, unless consented to by Lessor pursuant to the provisions of Section 21 hereof; or
(v) Lessee uses the Premises or any part in violation of the use restrictions hereof and either (i) such use continues for a period of ten (10) days after written notice of such violation is given by Lessor to Lessee, or (ii) without notice or demand if such violation is repeated or chronic (i.e., occurs after three (3) prior instances in which Lessor has given Lessee written notice of prior violations of the use clause hereof, whether or not cured on those prior occasions and whether or not the current violation is similar to the prior violations); or
(vi) Lessee fails to remove or bond around any materialmans or mechanics lien within thirty (30) days from the date of its filing; or
(vii) Lessee makes a modification, alteration or improvement to the Premises (excluding painting, changes in wall-coverings or other strictly cosmetic changes, to the extent not visible from the interior of the Building common area) without Lessor"s prior written consent as required herein; or
(viii) Chronic or repeated violation of Rules and Regulations of the Building or other provisions of this lease which, by their nature, do not continue from day to day (i.e., any further such violation occurs after repeated prior violations and written notices of such prior violations from Lessor to Lessee at least three times during any twelve-month period); or
(ix)Lessee records this Lease or any memorandum or notation thereof in violation of the provisions of Section 47 hereof:
or
(x) Lessee (A) allows Hazardous Substances on the Premises ((that are not released into or on the Premises or the Building or Property)) but which are not allowed by the terms of this lease and such materials either (i) are not removed from the Premises within ten (10) days after receipt of written notice or demand by Lessor on Lessee, or (ii) are allowed on the Premises after repeated previous occasions (two or more occasions in any given 12-month period) on which Lessor gave Lessee written notice to remove the same (whether or not they were removed on the prior occasions), or (B) allows or causes any release of Hazardous Substances in or upon the Premises or the building or Property (or adjacent property) in violation of this Lease and such contamination is not cleaned up to the satisfaction of Lessor and governmental authorities with jurisdiction within fifteen (15) days after receipt of written notice from Lessor to Lessee; or
(xi) Lessee violates any requirement of applicable law that is Lessees responsibility to comply with under this Lease to the extent that, as a result thereof, Lessor or its property management agent can be held liable for any fine, penalty or assessment, or be the subject to any enforcement action interfering with the operation of the Building, by or of any governmental authority or agency, or to the extent that any mortgages lienholder is entitled to accelerate the indebtedness secured by the Building or Property, and such violation is not fully remedied and cured by Lessee within ten (10) days after receipt of written notice thereof is given to Lessee by Lessor (if such consequences exist and notice is given by Lessor to Lessee under this paragraph (xi), rather than paragraph (xii) immediately below, Lessor will specify in its notice to Lessee that notice is being given under this clause and shall specify the reason that the default by Lessee is of a nature covered by this paragraph); or
(xii) Failure by Lessee in the performance or compliance with any of the agreements, terms, covenants or conditions provided in this Lease, other than those referred to in Section 26(a)(i) through (xi), above (unless Lessor expressly elects to proceed under this paragraph), for a period of fifteen (15) days after receipt of written notice from Lessor to Lessee specifying the items in default; provided, however, that if the cure of such default cannot reasonably be cured by Lessee within such fifteen (15)-day period despite diligent commencement and diligent and continuous prosecution of such cure after receipt of notice of default from Lessor, Lessee shall have such additional time to cure as would be reasonably necessary in the exercise of prompt, diligent and continuous efforts to cure the default in question, but in no event beyond thirty (30) days from the date Lessor gave notice of such default; or
(xiii) Default by Lessee under any other lease made by Lessee (or any party related to or affiliated with Lessee) for any other space in the Building, or any other contractual agreement between Lessor and Lessee of any nature or kin, after Lessor has given Lessee a written notice that such event of default constitutes a default hereunder and such default under such other lease remains uncured for an additional period of ten (10) days following such notice.
(b) This lease is subject to the limitation that if and whenever any event of default shall occur, Lessor may, at its option and without any prior verbal or written notice to Lessee, in addition to all other rights and remedies of Lessor hereunder or by law or equity, continue this Lease in full force and effect and/or do any one or more of the following:
(i) Terminate this Lease by express written notice of such election by Lessor to Lessee, in which event Lessee shall immediately surrender possession of the Premises to Lessor;
(ii) Enter upon and take possession of the Premises and expel or remove Lessee and any other occupant therefrom, with or without having terminated the Lease; and/or
(iii) Alter locks and other security devices at the Premises and terminate Lessees access to the Building and (if applicable) the Building garage.
(c) Exercise by Lessor of any one or more remedies granted under Section 26(b) or otherwise available shall not be deemed to be an acceptance by Lessor or surrender of the Premises by Lessee, either by agreement or by the written agreement of Lessor and Lessee.
(d) In the event Lessor elects to terminate the Lease by
reason of an event of default, then notwithstanding
such termination, Lessee shall be liable for and
shall pay to Lessor the sum of all rent and other
indebtedness accrued to the date of such termination,
and all expenses incurred by Lessor as provided in
Section 26(g), plus, as damages, an amount equal to
the present value (discounted at the rate of 6% per
annum) of the Base Monthly Rental and Lessees share
of any Operating Expenses that Lessee would otherwise
have been required to pay hereunder for the remaining
portion of the Lease term (had such term not been
terminated by Lessor prior to the original date of
expiration stated herein), less the fair market
rental value of the Premises for the remaining
portion of the Lease term, discounted to present
value at the rate of 6% per annum.
(e) In the event that Lessor elects to repossess the Premises
without terminating the Lease, Lessee shall, at Lessors election, be
liable for and shall pay to Lessor, either of the following: (a) All
rent and other indebtedness accrued to the date of such repossession,
plus rent required to be paid by Lessee to Lessor during the remainder
of the Lease term until the date of expiration of the term as stated in
Section 2(a) of the Basic Lease Provisions, diminished by any net sums
thereafter received by Lessor through reletting the Premises during
such period (after deducting expenses incurred by Lessor as provided in
Section 26(g), it being expressly agreed that re-entry by Lessor will
not affect the obligations of Lessee for the unexpired term of the
Lease; in no event shall Lessee be entitled to any excess of the rent
obtained by reletting over and above the rent herein reserved; and
actions to collect amounts due by Lessee as provided in this Section
26(e) may be brought from time to time, on one or more occasions,
without the necessity of Lessors waiting until expiration of the Lease
term; or (b) The sum of all rent and other indebtedness accrued to the
date of such termination, and all expenses incurred by Lessor as
provided in Section 26(g), and, without prior notice to Lessee,
accelerate and declare immediately due and payable the present value
(discounted at the rate of 6% per annum of all Base Monthly Rental and
Operating Expenses that Lessee would otherwise have been required to
pay hereunder for the remaining portion of the Lease term (had such
term not been terminated by Lessor prior to the original date of
expiration stated herein); provided, however, that Lessee shall be
entitled to a credit against such accelerated rentals in an amount
equal to the fair market rental value of the Premises for the remaining
portion of the Lease term discounted to present value at the rate of 6%
per annum.
(f) For purposes of Sections 26(d) and 26(e), above, the fair
market rental value of the Premises shall be the amount of net rent
(meaning the gross basic rental after deductions of concessions and
expenses to the extent not duplicated in Lessors claims under Section
26(g), below) that it is that Lessor could reasonably be expected to
recover from reletting of the Premises, taking into account, among
other market factors (i) likely periods of vacancy based on market
conditions, including periods of vacancy for marketing the space and
construction of tenant finish or modifications, (ii) a reduction of the
basic rent by an amount of any increase that would be required in the
Base Year Expense Stop upon reletting, and (iii) a reduction in basic
rent for the amount of any other concessions that Lessor would likely
be required to grant a tenant in connection with reletting.
(g) If an event of default occurs, Lessee shall, in addition
to all amounts due under Section 26(d) and/or Section 26(e), be liable
for and shall pay to Lessor (to the extent that any such amount is not
also deducted from gross rent for purposes of determining the
appropriate fair market rental value offset under Sections 26(d) and
26(e), at Lessors address as shown in Item 2 of the Basic Lease
Provisions in addition to any sum provided to be paid elsewhere in this
Section 26, any and all of the following described amounts:
(i) Actual brokers fees payable to Lessor or any affiliates of Lessor or any outside broker incurred in connection with reletting the whole or any part of the Premises;
(ii) The cost incurred by Lessor in good faith in removing and storing Lessees or other occupants property;
(iii) The cost incurred by Lessor in good faith in repairing, altering, remodeling or otherwise putting the Premises into a condition acceptable to the new tenant or tenants; and
(iv) All expenses incurred by Lessor in enforcing Lessors remedies, including, but not limited to, reasonable attorneys fees. Past due rental amounts, including, but not limited to, Base Rental, Operating Expenses, indemnity obligations, all late charges and other past-due payments shall bear interest at the maximum rate permitted (as to loans governed thereby) by Article 5069-1.04 of the Texas Revised Civil statutes, as amended, from the due date until paid.
(h) In the event that Lessor is entitled to change the locks at the Premises pursuant to any of the foregoing provisions, Lessee agrees that entry may be gained for that purpose through use of a duplicate or master key or any other peaceable means, that same may be conducted out of the presence of Lessee if Lessor so elects, that no notice shall be required to be posed by the Lessor on any door to the Premises (or elsewhere) disclosing the reason for such action or any other information, and that Lessor shall not be obligated to provide a key to the changed lock to Lessee unless Lessee shall have first:
(i) brought current all payments due to Lessor under this Lease;
(ii) fully cured and remedied to Lessors reasonable satisfaction all other defaults of Lessee under this Lease (but if such defaults are intentional or not reasonably subject to cure, such as assignment or subletting in violation of this Lease or vacating the Premises, then Lessor shall not be obligated to provide the new key to Lessee under any circumstances); and
(iii) given Lessor security and assurance reasonably satisfactory to Lessor that Lessee intends to and is able to meet and employ with its future obligations under this Lease, both monetary and non-monetary;
provided, however, that if Lessor has theretofore formally and permanently repossessed the Premises pursuant to Section 26(e) hereof, or has terminated this Lease pursuant to Section 26(d) hereof, then Lessor shall be under no obligation to provide a key to the new lock(s) to Lessee regardless of Lessees payment of past-due rent or other past-due amounts, damages, or any other payments or amounts of any nature or kind whatsoever, or Lessees subsequent cure or purported cure of any other default.
Lessor will, upon written request by Lessee, at Lessors convenience and
upon Lessees execution and delivery of such waivers and
indemnifications as Lessor may reasonably require relating to liability
associated with such entry or removal of property (provided that Lessee
shall not be required to waive or indemnify Lessor or its contractors
from their respective intentional torts), at Lessors option either (i),
escort Lessee or its specifically authorized employees or agents to the
Premises to retrieve personal belongings and effects of Lessees
employees and Lessees business records and files (as opposed to
property which is an asset of Lessee or any Guarantor), and property of
Lessee that is not subject to the landlords liens and security
interests described in Section 28, below, or (ii) obtain from Lessee a
list of such property described in (i), above, and arrange for such
items to be removed from the Premises and made available to Lessee at
such place and at such time in or about the premises of the Building as
Lessor may designate; provided, however, that if Lessor elects option
(ii), then Lessee shall be required to deliver to Lessor such waivers
and indemnifications as Lessor may require in connection with liability
associated with the removal and delivery of such property (provided
that Lessee shall not be required to waive or indemnify Lessor or its
contractors from their respective intentional torts), and pay in cash
in advance to Lessor (a) the estimated costs that Lessor will incur in
removing such property from the Premises and making same available to
Lessee at the stipulated location, and (b) all moving and/or storage
charges theretofore incurred by Lessor with respect to such property.
The provisions of this Section 26(h) are intended to override and
supersede any conflicting provisions of the Texas Property Code
(including, without limitation, Section 93.002 thereof, as in effect on
January 1, 1997, and any amendments or successor statutes thereto), and
of any other law, to the maximum extent permitted by applicable law.
Section 27: Lessor's Right to Relet
(a) In the event of termination or repossession of the Premises following an event of default, Lessor shall not have any obligation to relet or attempt to relet the Premises, or any portion thereof, or to collect rental after reletting; but Lessor shall have the option to relet or attempt to relet; and in the event of reletting, Lessor may relet the whole or any portion of the Premises for any period, to any tenant, for any rental, and for any use and purpose.
(b) If an event of default should occur under this Lease, Lessor, without being under any obligation to do so and without thereby waiving such default, may make any payment that Lessee failed to make giving rise to such event of default and/or perform the other defaulted obligation of Lessee, for the account of Lessee (and enter the Premises for such purpose), and thereupon Lessee shall be obligated to, and hereby agrees to, pay Lessor, upon demand, all costs, expenses and disbursements (including, but not limited to, reasonable attorneys fees) incurred by Lessor in good faith in taking such remedial action.
Section 28. Lien for Rent
In consideration of the mutual benefits arising under this Lease, Lessee and any Guarantor herein grant to Lessor a lien and security interest on Lessee's (or any Guarantor's) furniture, equipment, machinery and furnishings now or hereafter placed in or upon the Premises and such property shall be and remain subject to such lien and security interest of Lessor for payment of all rent and other sums agreed to be paid by Lessee herein. The provisions of this paragraph relating to such lien and security interest shall constitute a security agreement under the Uniform Commercial Code so that Lessor shall have and may enforce a security interest on such property of Lessee (and any Guarantor). Lessee (and any Guarantor) agrees to execute as debtor such financing statement or statements as Lessor may now or hereafter reasonably request in order that such security interest or interests may be perfected pursuant to the Uniform Commercial Code. Lessor may at its election at any time file a copy of this Lease as a financing statement. Lessor, as secured party, shall be entitled to all of the rights and remedies afforded a secured party under the Uniform Commercial Code in addition to and cumulative of the landlord's liens and rights provided by law or by the other terms and provisions of this Lease.
Upon the occurrence of an event of default by Lessee, Lessor may, in addition to any other remedies provided herein, enter upon the Premises and take possession of any and all goods, wares, equipment, fixtures, furniture, improvements and other personal property of Lessee situated on the Premises, without liability for trespass or conversion, and sell the same at public or private sale, with or without having such property at the sale, after giving Lessee reasonable notice of the time and place of any public sale or of the time after which any private sale is to be made, at which sale the Lessor or its assigns may purchase unless otherwise prohibited by law. Unless otherwise provided by law, and without intending to exclude any other manner of giving Lessee reasonable notice, the requirement of reasonable notice shall be met if such notice is given in the manner prescribed in this Lease at least seven (7) days before the time of sale. Any sale made pursuant to the provision of this paragraph shall be deemed to have been a public sale conducted in commercially reasonable manner if held in the above-described premises or where the property is located after the time, place and method of sale and a general description of the types of property to be sold have been advertised in a daily newspaper published in the county in which the property is located, for five (5) consecutive days
before the date of the sale. The proceeds from any such disposition, less any and all expenses connected with the taking of possession, holding and selling of the property (including reasonable attorney's fees and legal expenses), shall be applied as a credit against the indebtedness secured by the security interest granted in this paragraph. Any surplus shall be paid to Lessee or as otherwise required by law; the Lessee shall pay any deficiencies forthwith. Upon request by Lessor, Lessee agrees to execute and deliver to Lessor a financing statement in form sufficient to perfect the security interest of Lessor in the aforementioned property and proceeds thereof under the provision of the Uniform Commercial Code (or corresponding state statute or statutes) in force in the state in which the property is located, as well as any other state the laws of which Lessor may at any time consider to be applicable.
Section 29. Attorney's Fees
In the event either party hereto institutes any legal or equitable proceeding against the other party hereto, the prevailing party shall be entitled to recover its reasonable attorney's fees.
Section 30. No Implied Waiver
The failure of Lessor to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power, or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. The waiver of or redress for any violation of any term, covenant, agreement, or condition contained in this Lease shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. No express waiver shall affect any condition other than the one specified in such waiver and that only for that one time and in the manner specifically stated. A receipt by Lessor of any rent with knowledge of the breach of any covenant or agreement contained in this Lease shall not be deemed a waiver of such breach, and no waiver by Lessor of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Lessor. No payment by Lessee or receipt by Lessor of a lesser amount than the monthly installment of rent due under this Lease shall be deemed to be other than on account of the earliest rent due hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Lessor may accept such check or payment without prejudice to Lessor's right to recover the balance of such rent or pursue any other remedy in this Lease provided.
Section 31. Casualty Insurance
Lessor shall maintain fire and extended coverage insurance on the Building. Such insurance shall be maintained with an insurance company authorized to do business in Texas, in amounts desired by Lessor and at the expense of Lessor (as a part of the Basic Costs), and payments for losses thereunder shall be made solely to Lessor.
Lessee shall maintain at its expense fire and extended coverage insurance on all of its personal property, including removable trade fixtures, located in the Premises and on all additions and improvements made by Lessee and not required to be insured by Lessor above.
Section 32. Liability Insurance
Lessor shall, at its expense (as a part of the Basic Costs), maintain a policy or policies of comprehensive general liability insurance with the premiums thereon fully paid on or before the due date, issued by and binding upon some solvent insurance company.
Lessee shall, at Lessees expense, obtain and keep in force during the term of this Lease, a policy of commercial general liability insurance in the minimum amount of $1,000,000 combined aggregate limits per occurrence for bodily injury and property damage, including contractual liability coverage, insuring Lessee against any liability arising out of the use, occupancy and/or maintenance of the Premises and/or the Common Areas of the Building or grounds, or arising out of this Lease, and naming Lessor as an additional insured thereon under the form of endorsement providing Lessor with the most coverage available as additional insured. The limit of such insurance shall not and does not limit the liability of Lessee under this Lease. If such policy is a blanket policy covering operations of Lessee at other locations and/or for other operations, it shall contain a "per location endorsement sufficient to ensure that the full amount of the above-required coverage limits are available separately with respect to Lessees operations with the Building. Insurance required of Lessee under this Section 32 and Section 31, above, shall be obtained through companies acceptable to Lessor and licensed to do business in the State of Texas. Throughout the term of this Lease, Lessee shall also maintain in force a policy or policies of business interruption insurance sufficient to cover the total interruption of Lessees business operations at and from the Premises for a period of twelve (12) months, and covering at least the causes of fire, lightning, windstorm, the elements and other events that would be covered by a fire and extended coverage property loss policy ("casualty events).
Within five (5) days of the earlier to occur of the commencement date of this Lease or the date Lessee takes occupancy of any part of the Premises, Lessee shall furnish Lessor with a certificate or certificates of insurance issued by Lessees insurer(s), addressed to Lessor, evidencing that the insurance required by this Lease to be maintained by Lessee is in full force for at least one year and complies with the requirements hereof, and, if Lessor so requests, a copy of the policy. The certificate and the policy, as the case may be, must state that no modification or cancellation of the coverage may be effected without at least thirty (30) days prior written notice to Lessor. If Lessee shall fail to procure and maintain such insurance, Lessor may, but shall not be required to, procure and maintain such insurance at Lessee"s sole expense which amount shall be paid by Lessee to Lessor upon demand as additional rent hereunder.
Section 33. Indemnity
Neither Lessor, nor Lessor's agents, servants, or employees shall be liable to Lessee, or to Lessee's agents, servants, employees, customers, or invitees, for any damage to person or property caused by any act, omission, or neglect of Lessee, its agents, servants or employees, and Lessee agrees to indemnify and hold Lessor and Lessor's agents, servants, and employees harmless from all liability and claims for any such damage. Lessee shall not be liable to Lessor, or to Lessor's agents, servants, employees, customers, or invitees, for any damage to person or property caused by any act, omission, or neglect of Lessor, its agents, servants, or employees, and Lessor agrees to indemnify and hold Lessee harmless from all liability and claims for such damage.
Section 34. Rent Tax
If applicable in the jurisdiction where the Leased Premises are situated, Lessee shall pay and be liable for all rental, sales and use taxes or other similar taxes, if any, levied or imposed by any city, state, county or other governmental body having authority, such payments to be in addition to all other payments required to be paid to Lessor by Lessee under the terms of this Lease. Any such payment shall be paid concurrently with the payment of the rent, additional rent, operating expenses or other charge upon which the tax is based as set forth above.
Section 35. Waiver of Claims and Subrogation
Notwithstanding anything in this Lease to the contrary, Lessor and Lessee each hereby waives any and all rights of recovery, claim, action or cause of action, against the other, its agents (including Lessors property manager), officers and employees, for any loss or damage that may occur to the Premises, or any improvements thereto, or the Building, or any improvements thereto, or any personal property of such party in the Premises or the Building, or on the grounds of the Property, by reason of fire, the elements, or any other cause which is or was required to have been insured against under the terms of Sections 31 and 32 hereof, regardless of cause or origin, including negligence of the other party hereto, its agents, officers or employees (but excluding willful acts of misconduct), and each covenants that no insurer of any such loss shall hold any right of subrogation against such other party. In respect to Lessors waiver, such waiver shall be effective only to the extent of insurance proceeds received or receivable pursuant to any such policy. To the extent of any excess loss or any deductible amount, recovery against Lessee is not hereby waived and released. Lessee also waives, releases and relinquishes any and all recoveries, claims, actions, causes of action or rights of recovery against Lessor, its property manager, and their respective agents, employees, officers and affiliates, for any loss or damage to Lessees business (including loss of profit or revenue) arising from casualty events to the Premises or any property of Lessee on the Property to the extent of the required coverage of Lessees business interruption insurance, whether or not arising from the negligence of Lessor or such other released parties, and Lessee further covenants and warrants to Lessor that no insurance company issuing Lessee a policy of business interruption insurance shall have any rights of subrogation against Lessor by reason of any payment of any such claim made thereon by Lessee.
Section 36. Casualty Damage
If the Premises or any part thereof shall be damaged by fire or other casualty, Lessee shall give prompt written notice thereof to Lessor. In case the Building shall be damaged by fire or other casualty, but shall not be rendered untenantable in whole or in part, Lessor shall, at its sole expense, cause such damage to be repaired with reasonable diligence to substantially the same condition in which it was immediately prior to the happening of the casualty, and the Base Rental hereunder shall not be abated; however, in case the Building shall be so damaged by fire or other casualty that substantial alteration or reconstruction of the Building shall, in Lessor's sole opinion, be required (whether or not the Premises shall have been damaged by such fire or other casualty), or in the event any mortgagee under a mortgage or deed of trust covering the Building should require that the insurance proceeds payable as a result of said fire or other casualty be used to retire the mortgage debt, Lessor may, at its option, terminate this Lease and the term and estate hereby granted by notifying Lessee in writing of such termination within sixty (60) days after the date of such damage. If Lessor does not thus elect to terminate this Lease, Lessor shall within seventy-five (75) days after the date of such damage commence to repair and restore the Building and shall proceed with reasonable diligence to restore the Building (except that Lessor shall not be responsible for delays outside its control) to substantially the same condition in which it was immediately prior to the happening of the casualty, except that Lessor shall not be required to rebuild, repair, or replace any part of Lessee's fixtures, equipment or other personal property removable by Lessee under the provisions of this Lease, and Lessor shall not in any event be required to spend for such work an amount in excess of the insurance proceeds actually received by Lessor as a result of the fire or other casualty. Lessor shall not be liable for any inconvenience or annoyance to Lessee or injury to the business of Lessee resulting in any way from such damage or the repair thereof, except that, subject to the provisions of the next sentence, Lessor shall allow Lessee a fair diminution of rent during the time and to the extent the Premises, or any portion thereof, are unfit for occupancy. If the Premises or any other portion of the Building be damaged by fire or other casualty resulting from the fault or negligence of Lessee or any of Lessee's agents, employees, or invites, the rent hereunder shall not be diminished during the repair of such damage, and Lessee shall be liable to Lessor for the cost and expense of the repair and restoration of the Building caused thereby to the extent such cost and expense is not covered by insurance proceeds. Any insurance, which may be carried by Lessor or Lessee against loss or damage to the Building or to the Premises, shall be for the sole benefit of the party carrying such insurance and under its sole control.
Section 37. Condemnation
If the whole or substantially the whole of the Premises should be taken for any public or quasi-public use under any governmental law, ordinance, or regulation, or by right of eminent domain, or should be sold to the condemning authority in lieu of condemnation, then this Lease shall terminate as of the date when physical possession of the Premises is taken by the condemning authority. If less than the whole or substantially the whole of the Complex, Building or the Premises is thus taken or sold, Lessor (whether or not the Premises are affected thereby) may terminate this Lease by giving written notice thereof to Lessee within sixty (60) days after the right of election accrues, in which event this Lease shall terminate as of the date when physical possession of such portion of the Complex or Building or Premises is taken by the condemning authority. If upon any such taking or sale of less than the whole or substantially the whole of the Complex or Building or the Premises this Lease shall not be thus terminated, the Base Rental payable thereunder shall be diminished by an amount representing that part of the Base Rental as shall properly, in Lessor's reasonable judgment, be allocable to the portion of the Premises which was so taken or sold or affected, if any, and Lessor shall, at Lessor's sole expense, restore and reconstruct the Complex, Building or the Premises, as the case may be, to substantially their former condition to the extent that the same, in Lessor's judgment, may be feasible; Lessor shall not in any event be required to spend for such work an amount in excess of the amount received by Lessor as compensation awarded upon a taking of any part or all of the Complex, Building or the Premises, and Lessee shall not be entitled to and expressly waives all claim to any such compensation.
Section 38. Notices and Cure
In the event of any act or omission by Lessor which would give Lessee the right to damages from Lessor or the right to terminate this Lease by reason of the constructive or actual eviction from all or part of the Premises or otherwise, Lessee shall not sue for such damages or exercise any such right to terminate until it shall have given written notice of such act or omission to Lessor and to the holder(s) of any indebtedness or other obligations secured by any mortgage or deed of trust affecting the Premises (to the extent Lessor provides Lessee with appropriate notice addresses for any such persons), and a reasonable period of time (but in not event fewer than 30 days) for remedying such act or omission shall have elapsed following the giving of such notice, during which time Lessor and such holder(s) or either of them, their agents or employees, shall be entitled to enter upon the Premises and do therein whatever may be necessary to remedy such act or omission. During the period after the giving of such notice and during the remedying of such act or omission, the Base Rental payable by Lessee for such period as provided in this Lease shall be abated and apportioned only to the extent that any part of the Premises shall be untenantable.
Section 39. Personal Liability
The liability of Lessor to Lessee for any default by Lessor under the terms of this Lease shall be limited to the interest of Lessor in the Building and the land on which the Building is situated, and Lessee agrees to look solely to Lessor's interest in the Building and the land on which the Building is situated for the recovery of any judgment from Lessor, it being expressly understood and agreed that Lessor shall never be personally liable for any judgement or deficiency, whether or not the claim in question arose from the negligence of Lessor or any party for whose actions Lessor is legally liable. This clause shall not be deemed to limit or deny any remedies, which Lessee may have in the event of a default hereunder, which do not involve the personal liability of Lessor. Lessor and Lessors agents and employees shall not be liable to Lessee for any injury to person or damage to property caused by the Premises becoming out of repair or by defect or failure of any structural element of the Premises or of any equipment, pipes or wiring, or broken glass, or by the backing up of drains, or by gas, water, steam, electricity or oil leaking, escaping or flowing into the Premises (except where due to Lessors willful failure to make repairs required to be made hereunder, after the expiration of a reasonable time after written notice to Lessor of the need for such repairs). Lessor shall not be held responsible in any way on account of any construction, repair or reconstruction (including widening) of any private or public roadways, walkways or utility lines.
Section 40. Notice
Any notice, communication, request, reply, or advice (hereinafter severally and collectively called "notice") in this Lease provided for or permitted to be given, made, or accepted by either party to the other must be in writing, and may, unless otherwise in this Lease expressly provided, be given or be served by depositing the same in the United States mail, postpaid and certified and addressed to the party to be notified, with return receipt requested, or by delivering the same in person to any officer of such party, or by prepaid telegram, when appropriate, addressed to the party to be notified. Notice deposited in the mail in the manner hereinabove described shall be deemed given and received for all purposes hereof, unless otherwise stated in this Lease, from and after the expiration of three (3) days after it is so deposited or upon actual receipt at the addressees effective notice address, whichever is earlier (actual receipt being deemed the date of first attempted delivery if the first attempted delivery is not successful). Notice given in any other manner shall be effective only if and when received by the party to be notified.
For purposes of notice, the addresses of the parties shall, until changed as herein provided, be as follows:
For Lessor: Mr. Patrick J. O'Connell
HSO CORPORATE DRIVE LIMITED PARTNERSHIP
9307 W. Sam Houston Parkway, S., Suite 200
Houston, Texas 77099
With a Copy to: Rita Blevins
Exchange Realty Partners
10701 Corporate Drive, Suite #207
Stafford, Texas 77477
For Lessee Dwaine Reese
Enerteck Chemical Corp.
10701 Corporate Drive, #293
Stafford, Texas 77477
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The parties hereto and their respective heirs, successors, legal representatives, and assigns shall have the right from time to time and at any time to change their respective addresses and each shall have the right to specify as its address any other address by at least fifteen (15) days written notice to the other party delivered in compliance with this Paragraph 40.
Section 41. Surrender
On the last day of the term of this Lease, or upon the earlier termination of this Lease, Lessee shall peaceably surrender the Premises to Lessor in good order, repair, and condition at least equal to the condition when delivered to Lessee, excepting only reasonable wear and tear resulting from normal use, and damage by fire or other casualty covered by the insurance carried by Lessor. All movable fixtures, office equipment, and other personal property of Lessee shall remain the property of Lessee, and upon the expiration date or earlier termination of this Lease may be removed from the Premises by Lessee, subject, however, to Lessor's lien for rent; provided, however, that Lessee shall repair and restore in a good and workmanlike manner (reasonable wear and tear excepted), any damage to the Premises or the Building caused by such removal. Any of such movable fixtures, office equipment and other personal property not so removed by Lessee at or prior to the expiration date or earlier termination of this Lease shall become the property of Lessor. All other property as a part of the Premises attached or affixed to the floor, wall, or ceiling of the Premises (including wall-to-wall carpeting, paneling, or other wall covering) are the property of Lessor and shall remain upon and be surrendered with the Premises as a part thereof at the termination of this Lease by lapse of time or otherwise, Lessee hereby waiving all rights to any payment or compensation therefor.
Notwithstanding anything herein to the contrary, Lessee's surrender of the Premises shall in no way affect Lessee's obligation to pay rent to the date of expiration of this Lease, whether or not the amount of such obligation has been ascertained either as of the date Lessee surrenders the Premises or as of the date of expiration of this Lease.
Section 42. Captions
The captions of each Section of this Lease are inserted and included solely for convenience and shall never be considered or given any effect in construing this Lease, or any provisions hereof, or in connection with the duties, obligations, or liabilities of the respective parties hereto, or in ascertaining intent, if any question of intent exists.
Section 43. Entirety and Amendments
This Lease embodies the entire contract between the parties hereto relative to the subject matter hereof. No variations, modifications, changes, or amendments herein or hereof shall be binding upon any party hereto unless in writing, executed by a duly authorized officer or a duly authorized agent of the particular party. All exhibits referred to in this Lease and attached hereto are incorporated herein for all purposes.
Section 44. Severability
If any term or provision of this Lease, or the application thereof to any person or circumstance, shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law.
Section 45. Binding Effect
Subject to Section 21, all covenants and obligations as contained within this Lease shall bind, extend, and inure to the benefit of Lessor, its successors and assigns, and shall be binding upon Lessee, its permitted successors and assigns.
Section 46. Number and Gender of Words
All personal pronouns used in this Lease shall include the other gender, whether used in the masculine, feminine, or neutral gender, and the singular shall include the plural whenever and as often as may be appropriate.
Section 47. Recordation
Lessee agrees not to record this Lease, but Lessee agrees, on request of Lessor, to execute a short form lease in form recordable and complying with applicable Texas laws. In no event shall such document set forth the rental or other charges payable by Lessee under this Lease; and any such document shall expressly state that it is executed pursuant to the provisions contained in this Lease and is not intended to vary the terms and conditions of this Lease. Lessee shall not, under any circumstances (unless requested by Lessor in writing), record this Lease or any memorandum, affidavit or notation referencing this Lease in the Real Property Records of the county where the Property is located.
Section 48. Commissions
Lessee agrees that it has been represented solely by no real estate brokerage firm or broker and, Lessee agrees to indemnify Lessor against any claim with respect to a leasing commission or brokerage fee claimed by any other real estate brokerage firm or broker for the execution and/or renewal or any expansions of or under this Lease.
Section 49. Confidentiality
Lessee agrees to hold this Lease confidential and not to reveal the terms and conditions of the Lease to any other party without the prior written permission of Lessor.
Section 50. Governing Law
This Lease and the rights and obligations of the parties hereto shall be interpreted, construed, and enforced in accordance with the laws of the State of Texas.
Section 51. Force Majeure
Whenever a period of time is herein prescribed for the taking of any action by Lessor, Lessor shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions, or any act, omission, delay, or neglect of Lessee or any of Lessee's employees or agents, or any other cause whatsoever beyond the control of Lessor. Furthermore, the foregoing shall in no manner release, relieve or affect the independent obligation of Lessee to pay rent hereunder.
Section 52. Relationship of Parties
Nothing contained herein shall create any relationship between the parties hereto other than that of landlord and tenant, and it is acknowledged and agreed that Lessor does not in any way or for any purpose intend, nor shall this Lease be construed, to create as between Lessor and Lessee the relation of partner, joint venture or member of a joint or common enterprise with Lessee.
Section 53. Security Deposit
At the time of execution of this lease, and in addition to the
$812.29 tendered herewith for the first month's Base Rent hereunder, Lessee
shall deposit with Lessor $812.29 in the form of cash to secure performance of
Lessee's obligations under this lease during the initial term and renewal or
extension periods, bringing Lessee's total Security Deposit to $812.29. If
Lessee fails to pay rent or other sums when due, the security deposit may at
Lessor's option be applied to such unpaid amounts. If the security deposit is
drawn against in whole or in part, Lessee shall restore the security deposit to
its original amount immediately upon written request by Lessor. The security
deposit (or an accounting thereof) shall be returned to Lessee within thirty
(30) days after surrender of the leased premises by Lessee, less lawful
deductions for damages and other sums due under this lease.
Section 54. Financial Information Of Lessee
Lessee shall at any time and from time to time during the term of this Lease, within fifteen (15) days of written request by Lessor, deliver to Lessor such financial information concerning Lessee and Lessees business operations (and the Guarantor of this Lease, if the Lease be guaranteed) as may be reasonably requested by Lessor. If Lessee fails to provide such information promptly, then, without limiting any other remedy which Lessor may have for such failure, Lessor may thereupon terminate this Lease on not less than ten (10) days written notice.
Section 55. ADA
Lessor covenants and agrees that all new alterations, improvements and additions to the Premises constructed by Lessor pursuant to the terms and provisions of this Lease shall be constructed in accordance with the Americans with Disabilities Act (the "Act"), such that all such alterations, improvements and additions to the Premises constructed by Lessor will be in compliance with the Act as of the date on which Lessee takes possession of the Premises. Lessee covenants and agrees that all alterations, improvements and additions to the Premises constructed by Lessee, whether prior to or after the date Lessee takes possession of the Premises, shall be constructed in accordance with the Act. In the event that, subsequent to the date Lessee takes possession of the Premises, Lessee requests Lessor to perform any alterations, improvements and additions to the Premises, whether by virtue of expansion, extension or otherwise, Lessee agrees to and shall be responsible for all cost and expense incurred in connection with any alterations, improvements and additions necessary to ensure compliance with the Act. It is the intent of this paragraph that any additional alterations, improvements or additions required by the Act with regard to the Premises after the date Lessee takes possession of the Premises, whether resulting from amendments to the Act or otherwise, shall be the sole responsibility of Lessee. Lessee covenants and agrees to and does hereby indemnify, defend and hold Lessor harmless from and against all liability (including, without limitation, attorneys' fees and court costs) that Lessor may actually sustain by reason of Lessee's breach of its obligations under this paragraph. In the event that Lessee fails to comply with its obligations under this paragraph for a period of ten (10) days after written notice from Lessor to Lessee specifying the action required to be taken, Lessor shall have the right, but not the obligation, to enter into the Premises and perform such action on behalf of Lessee. In such event, Lessor shall not be liable for and Lessee hereby waives any and all claims against Lessor arising out of any damage or injury to the Premises or any property situated therein and Lessor shall have no liability to Lessee for any property situated therein and lessor shall have no liability to Lessee for any interruption of Lessee's operations conducted in or about the Premises. Any and all costs and expenses incurred by Lessor in performing such action on behalf of Lessee shall be reimbursed by Lessee to Lessor upon demand and the failure to do so shall, at the option of Lessor, constitute an event of default under this Lease.
Section 56. Hazardous Materials
Lessee shall not cause or permit any Hazardous Material (as hereinafter defined) to be brought upon, kept or used in or about the Premises by Lessee, its agents, employees, contractors or invitees, without the prior written consent of Lessor, which consent may be granted or withheld in Lessor's sole discretion. For the purpose of this Lease "Hazardous Material" shall include oil, flammable explosives, asbestos, urea formaldehyde, radioactive materials or waste, or other hazardous, toxic, contaminated or polluting materials, substances or wastes, including, without limitations, any "hazardous substances," "hazardous wastes," hazardous materials" or toxic substances" as such terms are defined in the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act, and in any other law, ordinance, rule, regulation or order promulgated by the federal or state government, or any other governmental entity having jurisdiction over the Complex or the parties to this Lease. If Lessee breaches the obligations set forth in this paragraph, or if the presence of Hazardous Material in the Premises or at the Complex, or if contamination of the Complex by Hazardous Material otherwise occurs for which Lessee is legally liable to Lessor for damage resulting therefrom, then Lessee shall indemnify, defend and hold Lessor harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses, including, without limitation, diminution in value of the Office Building Project, damages for the loss or restriction on use of rentable or useable space in or of any amenity of the Office Building Project, damages arising from any adverse impact on leasing space in the Office Building Project, sums paid in settlement of claims, and any attorneys' fees, consultant fees and expert fees which arise during or after the term of this Lease as a result of such contamination. This indemnification of Lessor by Lessee shall survive expiration or termination of this Lease and includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state, or local governmental agency or political subdivision because of Hazardous Material present in, on or under the Premises. Without limiting the foregoing, if the presence of any Hazardous Material caused or permitted by Lessee results in any contamination of the Complex, Lessee shall promptly take all actions, at its sole expense, as are necessary to return the Complex to the condition existing prior to the introduction of any such Hazardous Material; provided that Lessor's approval of such actions shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term or short-term effects on the Complex.
Section 57. No Lessor Obligation to Provide Security
(a) NEITHER LESSOR NOR ITS PROPERTY MANAGEMENT AGENT SHALL HAVE ANY LIABILITY TO LESSEE OR ANY THIRD PARTY WHOMSOEVER, INCLUDING, WITHOUT LIMITATION, LESSEE'S EMPLOYEES, OFFICERS, AGENTS, REPRESENTATIVES, CONTRACTORS, CUSTOMERS, INVITEES OR LICENSEES, FOR DAMAGE, INJURY OR LOSS TO PERSONS OR PROPERTY RESULTING FROM CRIMINAL ACTIVITY OCCURRING UPON THE PREMISES, THE BUILDING, THE PROPERTY, OR ADJACENT THERETO, WHETHER SUCH CRIMINAL ACTIVITY IS BY OTHER TENANTS, THEIR EMPLOYEES, AGENTS, OFFICERS, REPRESENTATIVES, CUSTOMERS, INVITEES, LICENSEES, CONTRACTORS OR OTHERS, OR IS BY ANY THIRD PARTIES WHOMSOEVER Lessee shall fully insure itself, as it may deem appropriate, to protect itself from claims for any such possible injury, loss or damage to persons or property resulting from criminal activity, including claims asserted by its employees, agents, officers, representatives, customers, invitees, licensees and contractors. LESSEE SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS LESSOR AND ITS PROPERTY MANAGEMENT AGENT FROM AND AGAINST ANY CLAIMS FOR DAMAGE, LOSS OR INJURY TO PERSONS OR PROPERTY ASSERTED BY LESSEE'S EMPLOYEES, AGENTS, OFFICERS, REPRESENTATIVES, CUSTOMERS, INVITEES, LICENSEES OR CONTRACTORS RESULTING FROM ANY SUCH CRIMINAL ACTIVITY, WHETHER BASED ON ALLEDGED NEGLIGENCE OF LESSOR OR OTHERWISE.
(b) Subject to Lessor's prior written approval, which shall not be unreasonably withheld, Lessee may at its cost take whatever precautions may be necessary in the Premises and in the common areas of the Building and Property to protect its employees, officers,
agents, representatives, customers, visitors, contractors, suppliers, invitees and licensees from criminal activity when on the Property and in the Building, or in the vicinity thereof, but nothing herein shall be deemed or construed as an undertaking or obligation enforceable against Lessee by any such third party. Lessee shall be responsible for informing itself as to the risk of crime from time to time on and in the vicinity of the Property and Lessee shall not rely on Lessor to obtain, monitor or disseminate such crime information. Any dissemination of crime information by Lessor or its management agent shall be without obligation or liability on the part of Lessor or its management agent to do so in the future, and neither Lessor nor its management agent shall have liability or responsibility for the accuracy or completeness of any such information as the parties understand and acknowledge that such information shall be from sources the reliability of which Landlord does not undertake to verify or investigate. Lessee acknowledges that it is in an equal position to Lessor in terms of its ability to investigate or obtain further verification of the facts surrounding any particular crime reported by Lessor or otherwise coming to the attention of Lessee. Lessee agrees to at all times comply, and cause its employees, agents, contractors, invitees and licensees to comply, with all security regulations from time to time in effect in the Building and on the Property, but Lessor does not undertake any obligation to promulgate security regulations nor does Lessor warrant or represent that any existing or future security regulations will be effective to deter, reduce or prevent criminal activity.
Section 58. Exhibits
The following numbered Exhibits are attached hereto and incorporated herein and made a part of this Lease for all purposes:
Exhibit A - Building Legal Description Exhibit B - Floor Plan of the Premises. Exhibit C - Tenant Improvements and Specifications Exhibit D - Base Rental Schedule Exhibit E - Parking Rules and Regulations Exhibit F - Building Rules and Regulations Exhibit H - Corporate Resolution Exhibit I - Renewal Option Exhibit J - Special Provisions
EXECUTED in multiple counterparts, each which shall have the force and effect of an original, on this 1st day of _February, 2001
LESSOR: HSO CORPORATE DRIVE LIMITED PARTNERSHIP
BY ITS SOLE GENERAL PARTNER HSO OFFICE HOLDINGS, LLC
By: Patrick J. O'Connell
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S/s
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Title:
Manager
Date: February 1, 2001
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LESSEE: ENERTECK CHEMICAL CORP.
S/s
Title: President
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Date: January 29, 2001
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SUBMISSION OF THIS INSTRUMENT FOR EXAMINATION OR SIGNATURE BY LESSEE DOES NOT CONSTITUTE A RESERVATION OF OR AN OPTION FOR LEASE, AND IT IS NOT EFFECTIVE AS A LEASE OR OTHERWISE UNTIL EXECUTION AND DELIVERY BY BOTH LESSOR AND LESSEE.
EXHIBIT A
Page One
BUILDING LEGAL DESCRIPTION
BEING, A THREE STORY ATRIUM OFFICE BUILDING LOCATED AT 10701 CORPORATE DRIVE IN STAFFORD, TEXAS. IT IS LEGALLY DESCRIBED AS 5.2361 BEING UNRESTRICTED RESERVE D CORPORATE BUSINESS PARK, OUT OF UNRESTRICTED RESERVE F OF CORPORATE BUSINESS PARK AND OUT OF UNRESTRICTED RESERVE E OF THE REPLAT OF EXECUTIVE PARK. SAID TRACT ALSO BEING IN THE H.J. DEWITT SURVEY, ABSTRACT 162, CITY OF STAFFORD, FORT BEND COUNTY, TEXAS, AND BEING IN THE W, M. STAFFORD, 1 """ LEAGUE GRANT, ABSTRACT 89, SUGAR LAND, FORT BEND COUNTY, TEXAS
EXHIBIT B
FLOOR PLAN OF THE PREMISES
EXHIBIT C
TENANT IMPROVEMENTS AND SPECIFICATIONS
Lessee Improvements and Specifications: Landlord shall tender and Tenant shall accept possession of the Lease Premises in an "AS-IS" condition, with all, and without any warranty, express, implied, or statutory (including implied warranties of habitability, suitability, condition, and fitness for a particular purpose) with the exception of the Tenant Improvements listed on the attached Exhibit "B" to be performed and completed in a workmanlike manner at the sole expense of the Landlord up to a $2.00psf Tenant Improvement Allowance. All other tenant improvements not shown or specified per Exhibit "B" will be at the sole cost to Lessee, and paid upon demand to the Landlord. Tenant Improvements are as follows:
1) Replace existing carpet in entire space with Building Standard Carpet.
2) Paint all existing walls with new building standard paint.
3) Add new door name to front door and directory strip on front and back
entrance
4) Rekey front door lock only. All inside private locks are a cost to the
tenant.
EXHIBIT D
BASE RENT SCHEDULE
To Lease Agreement for: Enerteck Chemical Corp.
Rentable Square Footage (RSF): 557
SCHEDULE
Annual Base Monthly Rent Annual Base
Time Period Rental Rate Rental Amount
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1-36MNTHS. 02/01/01 TO 01/31/04 $ 17.50 $ 812.29 $ 9,747.49
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$ 29,242.48
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TOTAL OF BASE RENTAL PAYMENTS UNDER LEASE AGREEMENT:
EXHIBIT E
PARKING RULES AND REGULATIONS
It is the desire of Lessor to maintain and operate the parking garage and parking areas in an orderly manner. The following rules and regulations apply to all tenants in the Building and their agents, employees, family, licensees, invitees, visitors, and contractors unless otherwise stated.
Lessor reserves the right to rescind these rules, make reasonable changes, or make other reasonable rules and regulations for the safety, care, and cleanliness of the parking garage and parking areas and for the preservations of good order.
1. Traffic Signs. All persons parking in the parking garage or parking areas shall observe posted signs and markings regarding speed, stop signs, traffic lanes, reserved parking, no parking, stripes separating parking spaces, etc.
2. Control Devices. Lessor reserves the right to install or utilize any reasonable system of entry and exit control devices, Lessee identification cards, or vehicle identification cards or stickers; and all persons parking in the garage or parking areas shall comply with such system. Lessor may make reasonable charges for replacement of control device cards or other parking identification cards, which are lost or damaged.
3. Tenant Guest Parking. Lessor reserves the right to utilize any reasonable system by which building Lessee may pay for parking of their guests or customers.
4. Trash. All persons parking in the parking garage or parking areas shall refrain from throwing trash, ashtray contents, or other debris on the garage floor or parking areas.
5. Flat Tires. All vehicle owners and all persons parking in the parking garage or parking areas shall be responsible for promptly repairing flat tires or other conditions of the vehicle which cause unsightliness in the reasonable judgement of Lessor.
6. Removal of Unauthorized Vehicles. If vehicles are blocking driveways or passageways or parked in violation of these rules and regulations or state statutes, Lessor may exercise vehicle removal remedies under Article 6701g-1 and 6701g-2 of the Texas Civil Codes upon compliance with statutory notice.
7. Security. Lessor shall use reasonable diligence in the maintenance of existing lighting in the parking garage or parking areas. Lessor shall not be responsible for additional lighting or further security measures in the parking garage or other parking areas.
8. Timely Payment of Parking Rent. Lessee shall be entitled to monthly parking rights in the parking garage pursuant to Section 13 of the Lease and, only upon timely payment of the then current monthly parking rent.
9. Designated Parking. In the event Lessee is expressly granted rights and/or privileges in and to specific parking areas or facilities under this Lease, the following shall apply: Lessee and Lessees employees and/or permitted subtenants shall park their cars only in those portions of the Parking Garage and areas that are from time to time designated for that purpose by Lessor. Lessor shall have the right from time to time to relocate parking areas within the Property for use by Lessee. Lessee shall furnish in writing the make, model, color and state automobile license number (automobile license numbers to be submitted on a yearly basis) assigned to Lessees cars within five (5) days after taking possession of the Premises and shall thereafter notify Lessor in writing of any changes within two (2) days. In the event Lessee, or its employees, agents and/or licensees fail to park their cars in the parking areas so designated from time to time by Lessor, then any requirements in the Lease regarding prior notice to Lessee or the expiration of any grace period, or both, shall not apply and Lessor at its option shall (a) have the immediate right to charge Lessee, or its permitted subtenants Ten Dollars ($10.00) per car per day parked in any areas other than that so designated (which charges shall be deemed Additional Rental hereunder and subject to all of the provisions relating thereto), and/or (b) tow such vehicle away each at Lessees cost and expense. Parking areas shall be used only for parking vehicles no longer than full size passenger automobiles or " ton pick up trucks, herein called "PERMITTED SIZE VEHICLES." Vehicles other than Permitted Size Vehicles are herein referred to as "OVERSIZED VEHICLES." The maintenance, washing, waxing or cleaning of vehicles in the parking structure or elsewhere in the Property is prohibited. Such parking use as is herein provided is intended merely as a license only and no bailment is intended or shall be created hereby.
EXHIBIT F
PAGE ONE OF FOUR
BUILDING RULES AND REGULATIONS
The following rules and regulations, hereby accepted by Lessee, are prescribed by Lessor and shall be consistently applied to all tenants in order to provide and maintain, to the best of Lessors ability, orderly, clean and desirable Leased Premises and Property for the tenants of the Building, to protect tenants, so far as reasonably possible, and to regulate conduct in and use of the Property and Leased Premises in such manner as to minimize interference by others in the proper use of the Leased Premises by Lessee. In the following rules and regulations, all references to Lessee include not only Lessee, but also Lessees officers, agents, servants, employees, invitees, licensees, visitors, contractors, permitted assignees, and/or permitted subleases. Lessor has reserved the right to amend and supplement these Building Rules and Regulations as it may from time to time deem necessary or desirable for appropriate operation and safety of the Property and its occupants. These Rules shall not, however, be modified or supplemented in any way so as to impair, in any material respect, the beneficial use and enjoyment of the Leased Premises by Lessee for the uses permitted under this Lease. Lessor reserves the right to waive any of these rules or regulations as to any particular Lessee, and any such waiver shall not constitute a waiver of any other rule or regulation or any subsequent application thereof to such Lessee.
1. Lessee shall not block or obstruct any of the sidewalks, corridors, entries, passages, doors, elevators, elevator doors, hallways, stairways or other similar areas of the Property, and shall not place, empty, or throw away any rubbish, litter, trash, or material of any nature into such areas, and shall not use or permit such areas to be used at any time except for normal ingress and egress of tenants and Lessor to and from the Property and the Leased Premises.
2. The movement by Lessee of furniture, equipment, merchandise, freight, and other items and materials within, into, or out of the Leased Premises or the Property shall be restricted to after 6:00 p.m. and to the day, time, method and route of movement as prescribed in writing by Lessor upon prior written request from Lessee, and Lessee shall assume all liability and risk to persons and property, the Leased Premises, and Property in such movement. Lessee must notify Lessor in writing at least one (1) full business day in advance of the movement of said property so that Lessor may designate and prepare any elevator for such transportation or notify Lessee that such movement will not be permitted under the Lease. Safes and other heavy equipment shall be moved into, out of and within the Leased Premises only with Lessors prior written consent and only to places designated by Lessor in writing. Lessee shall protect all common area flooring during any such moves. Lessees moving company must be a licensed commercial mover and must be pre-approved by the Lessor in writing and must provide a certificate of liability insurance from a solvent insurance company licensed to do business in Texas. If a move requires after hours supervision by the Lessor, the Lessee will be charged a reasonable fee to be set by Lessor. All hand carts used in the Building must be equipped with rubber tires and rubber side guards.
3. Lessor will not be responsible for or liable for lost or stolen property, equipment, money, or any other item or article taken from the Leased Premises or Property, including but not limited to parking areas, regardless of how or when the loss or theft occurs.
4. Lessee shall not install or operate any refrigerating, heating, or air conditioning apparatus in the Leased Premises and shall not carry on any mechanical operation into the Leased Premises or Property. Flammable, explosive or other hazardous fluids or materials shall not be brought into the Property or the Leased Premises without the prior written permission of Lessor.
5. Lessee shall not use the Property or the Leased Premises for housing, lodging, or sleeping purposes, or for the cooking, preparation or distribution of food. If Tenant's approved plans and specifications for its Lessee Finish Out include a kitchen or coffee bar, Lessee may use such designated areas only for microwave oven preparation of food, hot plates to heat food and simple meal preparation for the enjoyment of Lessee, its employees and guests, but nothing contained herein will authorize Lessee to prepare food for resale or for profit or to operate a cafeteria, snack bar, restaurant or other public or private eating facility.
6. Lessee shall not bring into the Property or the Leased Premises or keep on, in or about the Leased Premises any bird or animal (other than animals trained to assist and which are assisting persons with visual impairment). Lessee shall not bring into the Property or keep on or in the Leased Premises any bicycle, boat, trailer, or commercial delivery or transport vehicle or any other vehicle without the prior written consent of Lessor.
EXHIBIT F
PAGE TWO OF FOUR
BUILDING RULES AND REGULATIONS
7. Except as expressly permitted in the Lease, Lessee shall not make any alterations or improvements to the Leased Premises without the prior written consent of Lessor. All alterations and improvements and the methods of installing and constructing such alterations and improvements must be approved in writing by Lessor prior to commencement of installation or construction. Lessee shall not paint or decorate in the Leased Premises, and shall not mark, paint, or cut into, drive nails, or screw into or in any way deface any part of the Leased Premises or Property without the prior written consent of the Lessor. If Lessee desires signal, communication, alarm, or other utility service connection installed or changed, such work shall be done at expense of Lessee (including an administration fee equal to 15% of the total cost of such work), only with the prior written approval of the Lessor and only under the direction of the Lessor. All contractors and technicians performing work for Lessee within the Leased Premises and the Property must be approved in writing by Lessor prior to the commencement of any such work.
8. For purposes of this Lease, Building Holidays are as follows:
New Years Day Presidents Day
Good Friday Memorial Day
Independence Day Labor Day
Thanksgiving Day and the following Friday Christmas Day
If a Building Holiday falls on a Sunday, the Building will close on the preceding Saturday at 1:00 PM and remain closed until the following Tuesday morning. When Christmas falls on Saturday, the building will close on the preceding Friday and not reopen until the following Monday morning.
9. No furniture, equipment, or similar articles shall be moved into or from the Property without a removal permit from the Building Manager's office authorizing same, and after a permit is issued, movement shall be at the sole risk and responsibility of Lessee and shall otherwise be in accordance with Rule 2 above.
10. Lessee shall, before leaving the Leased Premises unattended, close and lock all outside doors and shut off all utilities; damage and any extra expense resulting from failure to do so shall be paid by Lessee.
11. Lessee shall give Lessor prompt notice of all accidents involving heating and air conditioning equipment, plumbing, electrical facilities or any part or appurtenance of the Premises, including without limitation damages to or defects in such equipment, plumbing, facilities or other appurtenance of the Property.
12. The plumbing facilities shall not be used for any other purpose than that for which they are constructed, and no liquids or other materials or substances which might cause injury to the plumbing, foreign substance of any kind shall be placed therein, and the expense of any breakage, stoppage, or damage resulting from a violation of this provision by Lessee or Lessees agents, employees or invitees shall be borne by Lessee and Lessor shall not be liable therefor.
13. All contractors and technicians performing work for Lessee within the Building shall be referred to Lessor for approval before performing such work. Lessor shall not unreasonably withhold or delay its approval of Lessees contractors or technicians. This preapproval requirement shall apply to all work, including, but not limited to, installation of telephones, telegraph equipment, electrical devices and attachments, and all installations affecting floor, walls, windows, doors, ceilings, equipment or any other physical feature of the Property or the Leased Premises. None of this work shall be done by or on behalf of Lessee without Lessors prior written consent.
14. Should Lessee desire to place in the Property any unusually heavy equipment, including but not limited to, large files, safes, and electronic data processing equipment, it shall first obtain written approval of Lessor for the use of Building elevators and of the proposed location in which such equipment is to be installed or placed. Maximum live floor loads (excluding partitioning only) shall not exceed fifty (50) pounds per square foot. Lessee, at Lessees sole cost and expense, shall repair all damage done to the Property, including without limitation, the Leased premises, arising by reason of or in connection with the placement of heavy items, which over-stress the floor.
15. There shall not be used in any space, or in the public halls, sidewalks, corridors, or passageways of the Property, either by any Lessee or by jobbers or others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and rubber side guards.
EXHIBIT F
PAGE THREE OF FOUR
BUILDING RULES AND REGULATIONS
16. No person or contractor not employed by Lessor shall be used to perform janitor work, window washing, cleaning, repair or other work in the Leased Premises. Lessors janitors shall not be hindered by Lessee after 6:00 p.m. daily. Nothing shall be swept or thrown into the corridors, halls, elevator shafts, stairways or similar areas.
17. Lessee must dispose of crates, boxes and the like which are associated with the initial move-in and occupancy of the Premises, the purchase of any other furniture or equipment during the term of the Lease or any other items which are in excess of normal office supplies and stationery. In no event shall Lessee set such items in the public hallways or other areas of the Property for disposal.
18. Lessee, at Lessees sole cost and expense, shall repair all damage to flooring as a result of rust or corrosion of file cabinets, plants, pot holders, roller chairs, and metal objects.
19. Lessees employing laborers or others outside of the Leased Premises shall not have their employees paid in the Property.
20. Lessee shall not advertise the business, profession or activities of Lessee in any manner which violates the letter or spirit of any code of ethics adopted by any recognized association or organization pertaining thereto or use the name of the Property for any purpose other than that of the business address of Lessee or use any picture or likeness of the Property or the Property name in any letterheads, envelopes, circulars, notices, advertisements, containers, or wrapping materials, without Lessors prior written consent.
21. Lessor reserves the right to refuse access to any persons Lessor in good faith judges to be a threat to the safety, reputation, or property of the Property and its occupants.
22. Lessee shall not make or permit any noise or odors that annoy or interfere with other Lessees or persons having business within or at the Property. Lessee shall not otherwise interfere in any way with other tenants, leases, or other persons having business at or in the Property.
23. Lessee shall not do any thing in or around the Leased Premises or the Property that may cause or that causes excessive vibration in any part of the Property.
24. No Lessee, employee or invitee shall go upon the roof of the Property.
25. Lessee shall not suffer or permit smoking or carrying of lighted cigar, pipes or cigarettes in areas designated by Lessor or by applicable governmental rules, ordinances, regulations or agencies as non-smoking areas.
26. Lessee shall not install, maintain or operate any vending machines upon the Premises without Lessors written consent, which consent shall not be unreasonably withheld, unless the Property contains vending machines in the Building Common Areas, in which case, such consent may be denied or withheld in Lessors sole discretion.
27. Lessee shall comply with all safety, fire protection and evacuation regulations established by Lessor or any applicable governmental rules, ordinances, regulations or agency.
28. Lessee and Lessees employees, agents and invitees shall not enter the mechanical rooms, air conditioning rooms, electrical closets, janitorial closets, or similar areas and shall not go upon the roof of the Property without the prior written consent of Lessor.
29. Any additional services as are routinely provided to lessees, not required by the Lease to be performed by Lessor, which Lessee requests Lessor to perform, and which are performed by Lessor, shall be billed to Lessee at Lessors cost plus 15% and Lessee shall pay such bill on the next maturing date as an installment of Base Rental. The requests of Lessees for building services, maintenance and repair shall be made in writing to the Lessor and will be attended to only upon written application at the Management Office of the Property. Employees of Lessor shall not perform any work or do anything outside of their regular duties, unless under special instructions from the Management Office of the Building.
30. Lessee shall not change locks or install additional locks on doors without the prior written consent of Lessor. Lessee shall not make or cause to be made duplicates of keys to the Property or the Leased Premises without the prior written consent of Lessor. All keys to the Leased Premises shall be surrendered to Lessor upon termination of the Lease.
EXHIBIT F
PAGE FOUR OF FOUR
BUILDING RULES AND REGULATIONS
31. No sign, advertisement, notice or hand bill shall be exhibited, distributed, painted or affixed by Lessee, its employees or agents, on, about or from any part of the Leased Premises or the Property without the prior written consent of Lessor. Lessor will provide and maintain a directory in the Property and no other directory shall be permitted.
32. Lessee shall place solid pads under all rolling chairs.
33. Lessee agrees to cooperate and assist Lessor in the prevention of canvassing, soliciting and peddling within the Property.
34. Lessee shall comply with parking rules and regulations as may be posted and distributed from time to time.
35. Lessee shall not place or install any window treatments without Landlords prior written consent.
36. Lessor reserves the right to: (a) change the name and address of the
Property; (b) use the roof; (c) have pass keys to the Leased Premises;
(d) install any signs on the exterior or interior of the Property; and
(e) make changes to the common areas or other parts of the Property.
37. Lessor may prevent access to the Property by any person who in Lessors judgment may be detrimental to the safety, character, reputation or interest of the Property or any tenant or lessee of the Property, or any part thereof.
38. Except as expressly permitted in the Lease, Lessee shall not use the Leased Premises or the Property to offer or to sell any items or services at retail price or cost without prior written approval of Lessor. The sale of services for stenography, typewriting, blueprinting, duplicating and similar businesses shall not be conducted from or within the Leased Premises or the Property for the service or accommodation of occupants of the Property without the prior written consent of Lessor. Lessee shall not conduct any auction on the Leased Premises nor store goods, wares, or merchandise on the Leased Premises, except for Lessees own use.
39. Lessee, its employees, agents and invitees, and anyone else who desires
to enter the Property after normal working hours, will be required to
identify themselves and to sign in upon entry and sign out upon
leaving, giving their location during their stay and their time of
arrival and departure. Property will normally be open for business form
7:00 a.m. until 6:00 p.m. daily, Monday through Friday, and from 8:00
a.m. until 1:00 p.m. on Saturdays, holidays excepted.
40. Lessee must obtain Lessors prior written approval for installation of any solar screen material, window shades, blinds, drapes, awnings, window ventilators, or other similar equipment and any window treatment of any kind whatsoever. Lessor will control all internal lighting that may be visible from the exterior of the Property and shall have the right to change any unapproved lighting, without notice to Lessee, at Lessees expense.
EXHIBIT H
CORPORATE RESOLUTION
The undersigned, as secretary of the corporation named below, does hereby certify that at a special meeting of the board of directors of the corporation, duly called and held on the , day of ________ 20___ at which a quorum of the directors were present and acting through out the following resolutions were unanimously adopted and are still in force and effect:
RESOLVED that the president or the vice president of the corporation shall be authorized to execute a lease for office space on behalf of the corporation and/or to guarantee performance of a lease for office space, described below:
Date of Lease:
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Lessor: HSO Corporate Drive Limited Partnership
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Lessee: Enerteck Chemical Corp.
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Building Name: THE ATRIUM BUILDING
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Suite No.: Suite #293
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Address: 10701 Corporate Drive
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City/State/Zip Stafford, Texas, 77477
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RESOLVED FURTHER, that the president or vice president shall be authorized on behalf of the Corporation to execute and deliver to the Lessor thereunder all instruments reasonably necessary for such lease. Lessor under such lease shall be entitled to rely upon the above resolutions until the board of directors of the corporation revokes, alters, or countermands same in written form, certified by the secretary of the corporation, and deliver same, certified mail, return receipt requested, to the Lessor, Said corporation is duly organized and is in good standing under the laws of the State of Texas.. The undersigned further certifies that on the meeting date referred to above, the names and respective titles of the officers of the corporation were as follows:
------------------------------------- --------------------------------
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WITNESS MY HAND this day of , 20 .
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S/s Signature of secretary of corporation Tom Kaminsky --------------------------------------- Printed Name |
THE STATE OF________________
COUNTY OF___________________
This instrument was acknowledged before me on _____________, ____ 2001, by ___________________, Secretary of ___________________________________, Inc., a ___________corporation, on behalf of said corporation.
Notary Public in and
My Commission Expires:_______
EXHIBIT I
RENEWAL OPTION
(MARKET)
Intentially Left Blank.
EXHIBIT J
SPECIAL PROVISIONS
Intentially left blank.
FIRST AMENDMENT TO LEASE AGREEMENT
THIS AMENDMENT (the "First Amendment") is made effective the 31st day of March, 2003 (the "Effective Date") by and between HSO Corporate Drive Limited Partnership (herein referred to as "Lessor") and Enerteck Chemical Corp. (herein referred to as "Lessee") on the following terms and conditions;
WITNESSETH:
WHEREAS, Lessor, as Lessor therein, and Lessee as Lessee therein, entered into that certain Lease Agreement (the "Lease") and all subsequent amendment containing approximately 557 square feet of NRA in Suite 293 (the "Leased Premises") in that certain office building known as The Atrium Building (the "Building") located at 10701 Corporate Dr., Stafford, Texas 77477; and
WHEREAS, Lessor and Lessee desire to amend, modify and supplement the Lease to relocate Tenant and expand into the Premises known as suites 150 and 152 located on the First (1st) floor of the building consisting of a total of approximately 2,692 square feet (the "Premises"), which will be designated as Suite 150. Lessee is presently in Premises known as Suite 293 and desires to vacate the Premises for approximately 557 square feet of net rentable area, as stated in the original Lease dated the 1st day of February, 2001, and will relocate and take possession of Suite 150 on the 1st day of April, 2003 and ending March 31, 2006;
NOW, THEREFORE, for and in consideration of the sum of TEN DOLLARS and NO/100 ($10.00) and other valuable consideration respectively paid by each party to the other the receipt and sufficiency of which is hereby acknowledged, Lessor and Lessee do hereby supplement and amend the Lease as follows:
1. All of the recital clauses hereinabove set forth are hereby incorporated by reference as though set forth verbatim and at length herein.
2. Section 2. TERM shall be amended as follows:
Subject to and upon the conditions as set forth herein, or any addenda or exhibits hereto this First Amendment to Lease Agreement shall amend the term to continue in force for Thirty Six (36) months, commencing on the 1st day of April and ending on the 31st day of March, 2006.
3. Section 3. BASE RENTAL: Of the Lease Agreement, is hereby revised:
BASE RENT SCHEDULE:
Rentable Square Footage (RSF): 2,682 SF - Commencement Date:
March 31, 2003
ANNUAL BASE MONTHLY BASE ANNUAL BASE RENTAL
MONTHS TIME PERIOD RENTAL RATE RENTAL AMOUNT AMOUNT
------ ------------ ----------- ------------- ------
Twelve (12) Mos. 4/1/03- 3/31/04 $ 16.50 $ 3,687.75 $ 44,253.00
Twelve (12) Mos. 4/1/04- 3/31/05 $ 17.00 $ 3,799.50 $ 45,594.00
Twelve (12) Mos. 4/1/05- 3/31/06 $ 17.50 $ 3,911.25 $ 46,935.00
Total of Base Rental Payments Under Lease Agreement $ 136,782.00
----------------------------------------------------------------------------------------------------
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4. EFFECT: This First Amendment shall be binding on the parties hereto, their heirs, successors, guarantors, administrators and assigns.
Page 1 Lessor Initials _____ Lessee Initials _____
5. EXHIBIT "C"-TENANT IMPROVEMENT ALLOWANCE: Landlord shall tender and Tenant shall accept possession of the Premises in an "AS-IS CONDITION without any warranty expressed, implied, or statutory (including implied warranties of habitability, suitability, condition, and fitness for a particular purpose) Landlord to provide a Five Dollar ($5.00) per net rentable square foot Tenant Improvement Allowance. All cost over and above the ($5.00) Tenant Improvement Allowance will be at the sole cost to tenant. Tenant and architects plans and specifications are as follows:
SCOPE OF WORK:
1) Install new walls as shown on plans and specifications.
2) Paint all existing and tape, float and paint new walls with Building
Standard paint.
3) Add and relocate doors per plans and specifications.
4) Install new glued down Building Standard Carpet throughout the
Premises.
5) Install Glass Block half wall in reception area.
6) Install Double Wooden Doors with glass inserts.
7) Electrical-regular duplex outlets will be furnished in new walls.
6. CONFIDENTIALITY: Tenant agrees to hold this First Amendment confidential and not to reveal the terms and conditions of this First Amendment to any other party without the prior written permission of Landlord.
7. Lessor represents and warrants to Lessor that Lessor is in compliance with all its duties and obligations under the Lease as of the date hereof.
8. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, accept and amended hereby, the "Lease" will remain in full force and effect in accordance with its original terms with the exception of the changes noted in this First Amendment to Lease.
EXCEPT, as expressly hereby amended, the terms and conditions of the Lease are ratified and Affirmed in all respects.
IN WITNESS THEREOF, the undersigned has caused this First Amendment to Lease to be duly executed effective on this 31st day of March, 2003.
LESSOR: LESSEE:
HSO CORPORATE DRIVE LIMITED PARTNERSHIP ENERTECK CHEMICAL CORP.
BY ITS SOLE GENERAL PARTNER, HSO OFFICE HOLDINGS,
LLC
By: s/s By:s/s
----------------------------- ------------------------------
Name: Patrick J. O'Connell Name: Dwaine Reese
-------------------------- ---------------------------
Title: Manager Title: Chairman & COO
------------------------- --------------------------
Page 2 Lessor Initials _____
Lessee Initials _____
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EXHIBIT "B
FLOOR PLAN OF PREMISES
SUITE 150-2,682SF
ENERTECK CHEMICAL CORP.
Page 3 Lessor Initials _____
Lessee Initials _____
DISTRIBUTION AGREEMENT
BETWEEN
MITSUBISHI INTERNATIONAL CORPORATION
AND
WAXTECH INTERNATIONAL, INC.
EXECUTION COPY
This Agreement ("Agreement") is entered into as of December, 15, 2002(the "Effective Date") by and between MITSUBISHI INTERNATIONAL CORPORATION, a corporation organized under the laws of New York hereinafter referred to as "MIC") and WAXTECH INTERNATIONAL, INC., a corporation organized under the laws of the State of Texas in the United States of America (hereinafter referred to as WXT).
PRELIMINARY STATEMENTS
WXT has a long and close business relationship with EnerTeck and holds certain exclusive distribution rights for products manufactured by the EnerTeck Chemical Corporation (EnerTeck).
MIC is a general trading company with extensive expertise in buying and selling a wide variety of products and services throughout the World, and desires to market and sell certain products of EnerTeck in the Territory (as defined herein), and WXT is willing to grant MIC certain rights to market and sell such products in the Territory on the terms and conditions set forth herein.
1. APPOINTMENT
(a) WXT hereby appoints MIC as its sub-distributor in the country (countries) listed in Appendix "A" hereto ("Territory") for the sale of products and services of EnerTeck as defined in Appendix "B" hereto (the Products). This appointment is subject to all of the provisions of this Agreement. Provisions relating to exclusivity are set forth in Section 15 below.
(b) MIC shall not, without the consent of WXT sell, rent or distribute, directly or indirectly, any WXT products or services in any country or other location outside the Territory.
(c) MIC hereby accepts its appointment on the terms and conditions herein set forth.
(d) The Parties understand and agree that MIC will be working with one or more of its affiliates in performing its duties under this Agreement, provided however that: (i.) MIC notifies EnerTeck in advance of its intentions to engage any such affiliates and/or disclose Confidential Information, and (ii.) such affiliate executes EnerTeck's Confidentiality and Non Analysis Agreement prior to working with MIC or receiving Product or Confidential Information, and (iii.) such affiliates' actions and obligations shall be bound by MIC's obligations set forth herein.
Page 1 of 13 1
2. DUTIES OF MIC
In consideration of the above appointment, MIC agrees to perform the following duties:
(a) MIC shall establish and maintain a sales program for the sale of Products in the Territory and shall maintain facilities and personnel as are reasonably adequate to perform its obligations under this Agreement.
(b) MIC shall make no warranties, representations or certifications with respect to Products without the prior consent of WXT. MIC shall hold WXT free and harmless from any claims, lawsuit, damages and cost and expenses caused by it having made any such unauthorized warranties and representations.
(c) MIC, at its sole expense, shall comply with all the laws, regulations and rules applicable to its operations and to its performance of this Agreement. MIC shall hold WXT free and harmless from any claims, damages, lawsuits, penalties and costs and expenses caused by MIC's failure to comply with any such laws, regulations and rules.
(d) MIC shall not directly or indirectly, infringe or contest the validity of or the title of to any of the patents, trademarks and trade names owned by WXT or under which WXT is licensed.
(e) MIC shall make best efforts to expedite and obtain registration numbers, or any other government compliance required to bring WXT's products into MIC's Territory.
(f) MIC will not sell, rent or distribute, indirectly or directly, any Products for use or sale in any area in or to which WXT itself would be prohibited by applicable law, regulations or order of the United States of America, or any of the governmental agencies thereof, from selling, distributing renting or otherwise permitting the use of said products and services. Without limiting the foregoing, it is understood and agreed that sales of Products by MIC to India and the People's Republic of China are not allowed under this agreement.
3. AUTHORITY / LIMITATIONS
Each Party understands and agrees that it is an independent contractor and not an employee of the other party hereto, and that this agreement does not establish a partnership between the parties, and that neither party has the authority to act on behalf of or bind the other party in any way except as otherwise expressly agreed in writing.
4. PURCHASE AND SALE OF PRODUCTS
All purchases of Products by MIC hereunder shall be made pursuant to purchase orders issued by MIC to WXT based on orders received by MIC from customers in the Territory. Each purchase and sale hereunder shall be evidenced by a contract of purchase substantially in the form of the standard contract of sale attached hereto as Exhibit A. In the event of any discrepancy between the provisions of any such contract or purchase order and the provisions of this Agreement, it is
Page 2 of 13 2
expressly understood by the Parties that the terms of this Agreement
shall prevail. In the event of any and all discrepancies between MIC's
General Terms and Conditions of Purchase and the provisions of this
Agreement, it is expressly understood by the Parties that the terms of
this Agreement shall prevail.
5. CONFIDENTIALITY
Both parties shall maintain as confidential all information relating to
their respective products, personnel, customers, business operations,
financial condition, supplied by either party separately and/or
developed jointly by the parties. Both parties further agree to
safeguard as confidential all price books, customer lists, quotations,
discount schedules, product formulations and engineering data, in any
form, and will not permit their use in any way which would be
detrimental to either party. Each party also agrees to return all
confidential data received from the other party hereunder back to the
other party on cancellation or termination of this agreement, and will
not retain copies or memoranda of said information in any form
whatsoever. This clause shall remain effective even after the
cancellation or termination of this agreement for any reason.
6. RIGHT OF REFUSAL
It is the right of WXT, at its sole discretion, to accept or refuse any
order placed by MIC hereunder; provided that any such refusal by WXT
will automatically revive or extend the exclusivity period with respect
to the particular country of the Territory involved for an additional
six months. Any decision to refuse a potential contract will not
entitle MIC to any recourse except as provided herein.
7. PRICES, TERMS AND CONDITIONS OF SALE
All sales shall be subject to WXT's offered prices, terms and
conditions as listed in Appendix B of this agreement; and such prices,
terms and conditions are subject to change with sixty days notice, as
described in Appendix B, unless otherwise agreed by WXT in actual term
sales contracts with MIC's customers.
8. ORDERS AND REPORTS
Without limiting the exclusivity rights set forth herein, MIC will from
time to time, furnish to WXT a list reflecting the correct name and
address of all customers to whom MIC has supplied any of the Products.
9. ADVERTISING
MIC will not issue or publish any form of advertising or literature
which in any way relates to the Products without first submitting the
form and content thereof, in English, together with information
relating to the proposed dates and places of publication, to WXT's
notification address listed in Appendix "C".
Prior to publication or distribution of the advertising or literature,
MIC will obtain WXT's approval and authorization of the form, content
and specifications of the proposed advertising or literature. MIC will
comply with all directions for changes in the form, content or
specifications of such advertising or literature requested by WXT. WXT
will provide to MIC current sales literature, brochures, promotional
items and technical information on the products and services
Page 3 of 13 3
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covered by this Agreement, as necessary to assist in obtaining business
per the Agreement. This material will be written in the English
language only and will be provided at no charge to MIC. All such
information, brochures, literature, promotional items and technical
information in the possession of MIC shall be returned to WXT upon
request and/or upon the termination of this agreement.
10. RELATIONSHIP OF THE PARTIES
MIC is now and will at all times act as and represent itself as an
independent contractor with respect to WXT. MIC and WXT, hereby agree
that neither this Agreement nor any activity undertaken in accordance
with it shall create any other relationship between the MIC and WXT.
Neither party has been granted by the other any right or authority to
assume or create any obligation or responsibility for or on behalf of
the other unless agreed otherwise in writing.
11. COMPETITION
MIC agrees that it nor its affiliated companies to which MIC has
disclosed Confidential Information or Product shall (i) not furnish
products similar to or that competes with the Products being provided
by MIC to WXT pursuant to this agreement to any third party in
competition with WXT, (ii) not directly engage in, (iii) not enter into
a joint venture, or (iv) not acquire a company or other entity which
engages in the particular market(s) of the Product(s) as described
herein.
12. INDEMNITY
WXT agrees to protect, defend, indemnify and hold harmless and release
MIC, its parent, subsidiary and affiliated companies, its officers,
directors and employees, from and against any manner of loss,
liability, claim, damage, penalty or cost, including but not limited
to, reasonable attorney's fees arising in connection with this
Agreement that is asserted by any third party to the extent that such
loss is caused by any act or omission of WXT.
MIC agrees to protect, defend, indemnify and hold harmless and release
WXT, its parent, subsidiary and affiliated companies, its officers,
directors and employees, from and against any manner of loss,
liability, claim, damage, penalty or cost, including but not limited
to, reasonable attorney's fees arising in connection with this
Agreement or that is asserted by any third party to the extent that
such loss is caused by any act or omission of MIC.
The Parties understand and agree that any and all representations and
warranties about the Products are made solely by EnerTeck directly to
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each party pursuant to separate agreements and EnerTeck as manufacturer will be solely liable for any and all product liability claims relating to the Products. Neither party hereto will assert against the other party hereto any product liability claim relating to the Products. It is understood that EnerTeck shall be solely responsible for all product liability claims and each Party will be responsible for obtaining an appropriate indemnity directly from EnerTeck.
13. COMPLIANCE WITH U.S. LAW
Page 4 of 13 4
Notwithstanding anything to the contrary contained elsewhere in this Agreement or in any Exhibit hereto, performance by WXT or of any of its obligations under the provisions of this Agreement shall be strictly in compliance with all applicable laws and regulations of the U.S., including, without limitation, U.S. Department of State, Treasury or Commerce Export Control or other U.S. Government.
Non-performance in whole or in part by either party because of said applicable laws shall not constitute a default or breach by such party of its obligations hereunder, or subject such party to liability to the other party for damage or convey any right to the other Party to terminate this Agreement.
MIC covenants that it is familiar with the U.S. Foreign Corrupt Practices Act of 1977, as amended, "the Act", and it proposes and represents that neither MIC nor any of its shareholders, officers, directors, or employees will perform any service or action related to this Agreement that would or might constitute any such violation.
14. AMENDMENTS
This Agreement may be amended only by written agreement of both MIC and
WXT.
15. ASSIGNMENT
This Agreement is assignable by WXT to EnerTeck upon giving reasonable written notice to MIC and subject to EnerTeck agreeing to appropriate changes to reflect that the Agreement would be between EnerTeck and the distributor. Otherwise, neither party shall have the right to assign all or any part of its rights, duties or obligations hereunder without the prior written consent of the other party, which shall not be unreasonably withheld.
This Agreement is binding and enforceable against the parties and their respective successors, and permitted assigns.
16. GEOGRAPHIC EXCLUSIVITY
In consideration of MIC's efforts in newly developing the business of marketing the Products in the Territory, MIC shall have exclusive sales and distribution rights throughout the Territory for an initial period of one year from the effective date of this agreement. WXT agrees to provide to MIC marketing and technical support commensurate with that provided to WXT's other International distributors of EnerBurn products. After such initial exclusivity period, MIC shall retain the right of geographic exclusivity for all countries listed in Exhibit "A" as long as MIC is providing a satisfactory service to WXT. If the minimal annual purchase volumes outlined in Exhibit "B" are not met in any given year, WXT, by its sole decision may terminate the extended geographic exclusivity for MIC.
During the period of exclusivity for the Territory, WXT shall not sell Products either directly or indirectly to any entity in the Territory and shall refer to MIC any inquiries it may receive from any such entity.
In the event geographic exclusivity is terminated for less than minimum sales as provided for in Appendix "B" of this Agreement, MIC shall have extended exclusivity for any customer who has
Page 5 of 13 5
either commenced commercial trials or has committed to purchase the
Products in commercial quantities prior to the end of the Geographic
exclusivity period as long as this Agreement is in force.
17. TERM AND TERMINATION
(a) This Agreement shall be effective as of the Effective Date and
shall continue in force for an initial term of five (5) years
and thereafter and shall be automatically renewed for
successive one-year terms unless terminated by either party by
giving a written one-year cancellation notice to the other
party.
(b) Notwithstanding the foregoing, this Agreement may be
terminated by either party with immediate effect and without
recourse against the terminating party upon the occurrence of
any of the following events:
(i) The other party breaches any material obligation
imposed by this Agreement providing that such
material breaches are not reasonably remedied within
sixty (60) days of written notice of breach.
(ii) The other party fails to make any payment of sums
owed by it hereunder when due.
(iii) The other party becomes insolvent, or subject to a
petition in bankruptcy filed by or against it or is
placed under the control of receiver, liquidator or
committee of creditors.
(iv) The other party assigns transfers or attempts to
assign or transfer this Agreement without the
terminating party's prior consent.
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(c) Notwithstanding the foregoing, the Agreement may be terminated by WXT with immediate effect upon the occurrence of any of the following events:
(i) A period of one hundred eighty days (180 days) from the Effective Date of this agreement passes without WXT receiving a valid and acceptable purchase order of commercial quantities for the Products in the Territory.
(d) Notwithstanding any termination of this agreement, WXT agrees to honor any orders for products placed by MIC prior to the effective date of termination.
18. NOTICES
All notices and other communications provided for herein shall be validly given, made or served, in writing and delivered personally or sent by certified mail postage prepaid, to the addresses listed in Appendix "C"
Or to such other address as any party hereto, may, from time to time, designate in writing delivered in like manner - reference Appendix "C". Notice given by mail, as set out above shall be deemed delivered when actually received at the appropriate address.
Page 6 of 13 6
19. ARBITRATION
Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in the United States and conducted in the English language in Harris County, Texas, United States, pursuant to the Rules of Commercial Arbitration of the American Arbitration Association, and the award rendered therein shall be final and binding on the Parties and shall be enforceable in any Texas court having jurisdiction. The prevailing party shall be entitled to receive, in addition to any other remedy, all costs and expenses incurred in such proceedings, including reasonable attorney's fees.
This Agreement shall be constructed and enforced in accordance with the laws of the State of Texas in the United States of America without regard for any conflicts of law principles.
20. SEVERABILITY
If any provision or provisions of this Agreement shall be held to be in whole or in part invalid, illegal or unenforceable in any jurisdiction, or if any governmental agency or authority shall require the parties to delete any provision of this Agreement, such invalidity, illegality, unenforceability or deletion shall not impair or affect the remaining provisions of this Agreement or the validity or enforceability of such provision in any other jurisdiction.
The parties shall endeavor, in good faith negotiations, to replace the invalid, illegal unenforceable or deleted provision by valid provisions the economic effect of which comes as close as legally possible to that of the invalid, illegal, unenforceable or deleted provision.
21. DESCRIPTIVE HEADINGS
Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement.
22. COUNTERPARTS
For the convenience of the parties, any number of counterparts of this Agreement may be requested by one or more parties hereto and each such counterpart shall be deemed to be an original instrument if agreed to and signed by both parties.
23. PRIOR AGREEMENTS
The Parties have entered into non-disclosure agreements. This agreement does not replace or negate the obligations of the Parties relevant to those non-disclosure agreements (NDA) and the NDA agreements and obligations thereunder are not modified by this agreement.
The foregoing terms and conditions represent the entire agreement between WXT and MIC with respect to the subject matter and supersede all prior and contemporaneous agreements or understanding that parties may have, subject to the preceding paragraph.
Page 7 of 13 7
24. GENERAL PROVISIONS
(a) This agreement is made in the English language and in the event of doubt in interpretation between this and any other version into which this agreement may be translated; the English language shall prevail.
(b) The parties agree that either party shall keep its own personnel and equipment insured and each party will cover all of its own insurance costs.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective authorized representatives as of the effective date,
WAXTECH INTERNATIONAL, INC. MITSUBISHI INTERNATIONAL CORPORATION /S/ V. PATRICK KEATING /S/ TOMOHITO HANADA ----------------------------------- -------------------------------------- V. Patrick Keating Tomohito Hanada Manager, Catalysts and Specialty President & CEO Chemicals Unit Date:_December 23, 2002 Date: 12/23/2002 |
APPENDIX "A"
TO
AGENCY AGREEMENT
BETWEEN
MITSUBISHI INTERNATIONAL CORPORATION
AND
WAXTECH INTERNATIONAL, INC.
Page 8 of 13 8
TERRITORY
Page 9 of 13 9
APPENDIX "B"
TO
AGENCY AGREEMENT
BETWEEN
MITSUBISHI INTERNATIONAL CORPORATION
AND
WAXTECH INTERNATIONAL, INC.
PRICE SCHEDULE, MINIMUM PURCHASES AND MARGIN SHARING
The Base Price of EnerBurn 5805C (or equivalent) to MIC shall be USD 66.00 (sixty-six dollars) per US Gallon in bulk. Other packaging such as drums or pails will be price-adjusted as necessary to reflect additional packaging and handling costs to WXT.
WXT can amend the base price with sixty days (60) notice to MIC to reflect changes in WXT's product acquisition cost. Product is offered FOB the Port of Houston, Texas, USA.
The base price will be adjusted for volume incentive for any particular country of destination/sale as follows:
Up to 6500 US Gallons per any given calendar quarter. - No Adjustment.
6500 US Gallons to 12,999 US Gallons per any given calendar quarter. - USD 2.00 Discount.
13,000 US Gallons to 19,999 US Gallons per any given calendar quarter. - USD
4.00 Discount
20,000 plus US Gallons any given calendar quarter - USD 6.00 Discount.
Example: Sales to Japan in 1st quarter 2003 are 13,200 US Gal. (two isotanks). Base price would be adjusted by USD 4.00. At a Base Price of USD 66.00, the net FOB price is USD 62.00 per gallon.
EXCESS MARGIN SHARING FORMULA
If MIC's net sales price to any of MIC's customers exceeds a certain amount per gallon, MIC and WXT agree to share excess margin as follows:
MIC Sales Price to a given customer is at or less than USD 90.00 per US Gallon - No Margin sharing.
MIC Sales Price to a given customer is 90.01 to 100.00 USD, MIC and WXT share the difference between USD 90.00 and the sales price as follows:
50 percent to MIC and 50 percent to WXT
MIC Sales Price to a given customer is 100.00-150.00 MIC and WXT share the
difference between USD 90.01 and the sales price as follows:
60 percent to MIC and 40 percent to WXT
Page 10 of 13 10
APPENDIX "B" CONTINUED (PAGE TWO OF TWO)
MIC Sales price to a given customer is 150.01 or higher, MIC and WXT share the difference between USD 90.01 and the sales price as follows:
75 percent to MIC and 25 percent to WXT.
Example for clarity: MIC's customer purchases EnerBurn 5805C for 105.00 USD per US gallon. MIC shares margin with WXT as follows:
Excess Margin share for MIC = (105.00 - 90.01)*0.60 = USD 8.994 Excess Margin share for WXT = (105.00-90.01)*0.40= USD5.996
MINIMUM PURCHASE VOLUME FOR CONTINUEDGEOGRAPHIC EXCLUSIVITY
YEAR ONE (2003) 15,150 US GALLONS
NOTE: (IN YEAR ONE AND ONLY YEAR ONE, ACTUAL MIC PURCHASES OF PRODUCT AND THE ANNUAL PRODUCT VOLUMES OF BONA-FIDE FULLY RATIFIED CONTRACTS OF FOR SALE OF PRODUCTS SHALL BE CONSIDERED IN THE CALCULATION OF FOR FULFILLMENT OF MINIMUM PURCHASES FOR EXCLUSIVITY PURPOSES HEREIN.)
YEAR TWO (2004) 30,300 US GALLONS
YEAR THREE (2005) 60,600 US GALLONS
EACH YEAR THEREAFTER 60,600 US GALLONS
Page 11 of 13 11
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APPENDIX "C"
TO
AGENCY AGREEMENT
BETWEEN
MITSUBISHI INTERNATIONAL CORPORATION
AND
WAXTECH INTERNATIONAL, INC.
CONTACT INFORMATION
MITSUBISHI (MIC) WAXTECH INTERNATIONAL, INC. (WXT)
Tomohito Hanada V. Patrick Keating
Catalysts and Specialty Chemicals Unit President & CEO
1 Houston Center, #3500 403 Briarpark
Houston, Texas 77010 Houston, Texas 77042
|
Telephone (713) 652-9202 Telephone (713) 339 1122 Fax (713) 652-9340 Fax (713) 339 1133
Page 12 of 13 12
Exhibit "A"
MIC Contract of Sale
attached
Page 13 of 13 13
March 15, 2003
EnerTeck Chemical Corporation
10701 Corporate Drive, Suite 293
Stafford, Texas 77477
Dear Sirs:
WaxTech International Inc. hereby assigns the "Distribution Agreement" between Mitsubishi International Corporation and WaxTech International, Inc., (dated December 15, 2002, and attached) for sales of EnerTeck products and services; and waives any future rights, commissions or receivables arising from EnerTeck's sales to Mitsubishi International Corporation as a result of said Distribution Agreement. WaxTech International, Inc. and EnerTeck have entered into a separate "Warrant Purchase Agreement" as compensation to Waxtech for assignment of the subject Mitsubishi Distribution Agreement, and said assignment is predicated that "Warrant Purchase Agreement".
The above is authorized by the directors of WaxTech International and evidenced below by signature on behalf of WaxTech International, Inc.; and is effective this date. Please acknowledge EnerTeck's acceptance of this assignment with your countersignature below.
/s/_____________________________ V. Patrick Keating President Waxtech International, Inc. /s/_____________________________ Derenda J. Keating Secretary and CFO WaxTech International, Inc. /s/_____________________________ Dwaine D. Reese Chairman and COO EnerTeck Chemical Corporation |
Houston, Texas 77042
713 339 1122 Fax 713 339 1133
March 26, 2003
Mr. Tomohito Hanada
Mitsubishi International Corporation
1 Houston Center, Suite 3500
Houston, TX 77010
Dear Tomohito:
In accordance with Article 15 of our "Distribution Agreement" between Waxtech and MIC, WaxTech has assigned the Agreement directly to EnerTeck. Acceptance on the part of EnerTeck is acknowledged by EnerTeck's duly appointed representative and indicates EnerTeck's agreement to assume the terms and conditions therein to MIC, the distributor.
Regards,
/s/ V. Patrick Keating President and CEO WaxTech International, Inc. |
Agreed and accepted for EnerTeck Chemical Corporation:
/s/ Dwaine D. Reese date: 3/26/03 Chairman and COO |
AGENCY AGREEMENT FEBRUARY 15, 2003
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
&
ENERTECK CHEMICAL COMPANY, INC.
AGENCY AGREEMENT
BETWEEN
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
AND
ENERTECK CHEMICAL COMPANY
This Agreement ("Agreement") is entered into as of February 15, 2003 (the "Effective Date") by and between ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA., its divisions, its affiliate companies and concerns, a corporation organized under the laws of Brazil (hereinafter referred to as " AGENT") and the ENERTECK CHEMICAL COMPANY, INC., a corporation organized under the laws of the state of Texas in the United States of America (hereinafter referred to as EnerTeck).
1. REPRESENTATION
(a) EnerTeck hereby appoints AGENT as its sole agent for the Territory (countries) listed in Appendix "A" hereto ("Territory") for the sale of EnerTeck's products and services as listed in Appendix "B" hereto.
(b) AGENT shall not, without the consent of EnerTeck sell, rent or distribute, directly or indirectly, any EnerTeck products or services in any country or other location outside the Territory.
(c) AGENT hereby accepts its appointment on the terms and conditions herein set forth.
2. DUTIES OF AGENT
In consideration of the above appointment and the commission to be paid by EnerTeck to the AGENT hereunder the:
(a) AGENT shall establish and maintain a sales program for the sale of the EnerTeck products and services covered by this Agreement and shall maintain facilities and personnel as are reasonably adequate to perform its obligations under this Agreement.
(b) AGENT shall promptly transmit to EnerTeck inquiries and orders for EnerTeck products and services in the Territory of the AGENT. Agent shall coordinate negotiations and communication on behalf of EnerTeck for all prospective sales on EnerTeck's products and services within the Territory.
(c) AGENT shall make no warranties, representations or certifications with respect to the EnerTeck products and services without the prior consent of EnerTeck. AGENT shall
AGENCY AGREEMENT FEBRUARY 15, 2003
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
&
ENERTECK CHEMICAL COMPANY, INC.
hold EnerTeck free and harmless from any claims, lawsuit, damages and cost and expenses caused by it having made any such unauthorized warranties and representations.
(d) AGENT, at its sole expense, shall comply with all the laws, regulations and rules applicable to its operations and to its performance of this Agreement. AGENT shall hold EnerTeck free and harmless from any claims, damages, lawsuits, penalties and costs and expenses caused by AGENT's failure to comply with any such laws, regulations and rules.
(e) AGENT shall not, directly or indirectly, infringe or contest the validity of or the title of EchemTrade to any of the patents, trademarks and trade names owned by EnerTeck or under which EnerTeck is licensed. The termination of this Agreement for any reason shall in no way release or discharge AGENT from the estoppel herein set forth.
(f) Agent shall, at the request of EnerTeck, assist in expediting and obtaining import and export permits and licenses, required customs clearance and delivery of shipments to EnerTeck's customers. All costs and charges shall be pre-approved and Enerteck agrees to reimburse AGENT the actual costs and expenses, plus a service charge of five (5) percent of the actual costs and expenses, incurred by AGENT on behalf of EnerTeck in performing these services. Proper documentation should be presented to EnerTeck no later than 90 days from the date that said expenses were incurred.
(g) AGENT will not sell, rent or distribute, indirectly or directly, any of the EnerTeck products and services for use or sale in any area in or to which EnerTeck itself would be prohibited by applicable law, regulations or order of the United States of America, or any of the governmental agencies thereof, from selling, distributing renting or otherwise permitting the use of said products and services.
(h) AGENT shall reasonably assist EnerTeck in tracking and expediting payment of outstanding invoices and receivables as required, advise and assist EnerTeck in the establishment of relationships between EnerTeck and banking institutions and professional advisors in the country of sale, and provide other services similar to those hereinabove described which are appropriate and necessary in connection with EnerTeck's business activities in the country.
(i) AGENT shall perform its services with that standard of care, skill and diligence normally provided by an agent in the performance of similar services. Agent understands that EnerTeck will be relying upon the accuracy, competence and completeness of Agent's services in initially deciding whether to seek to obtain a contract with respect to a qualifying project or customer.
3. AUTHORITY / LIMITATIONS
Services performed or actions taken on behalf of EnerTeck by Agent shall only be as specifically requested and authorized by EnerTeck. Agent understands and agrees that it is an independent contractor and not an employee of EnerTeck, and that this Agreement does not establish
a
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partnership between the parties, and that agent has no authority to act on EnerTeck's behalf or bind EnerTeck in any way except as EnerTeck may expressly direct and confirm in writing.
AGENT shall have no authority to accept direct payments from customers without the express written consent of EnerTeck.
4. CONFIDENTIALITY
Both parties shall maintain as confidential all information relating to their respective products, personnel, customers, business operations, financial condition, supplied by either party separately and/or developed jointly by the parties. Both parties further agree to safeguard as confidential all price books, customers' lists, quotations, discount schedules, product formulations and engineering data, in any form, and will not permit their use in any way which would be detrimental to either party. Both parties also agree to surrender all confidential data to other party on cancellation or termination of this agreement, and will not retain copies or memoranda of said information in any form whatsoever. This clause shall remain effective even after the cancellation or termination of this agreement for any reason.
5. COMMISSIONS
EnerTeck will pay AGENT a commission only for payments from sales actually received as outlined in Appendix "B". The aforesaid will apply to customers for the territory of representation covered by this Agreement, beginning on the effective date of this Agreement. EnerTeck will pay such commission to Agent within five (5) days following receipt of payment of invoices and forward invoice copies to the Agent in order to verify commission amounts owed by EnerTeck.
The commission shall be paid to Agent's bank account in US dollars to any commercial bank in the USA designated by Agent to receive such payments.
EnerTeck shall pay commissions to Agent on all commercial accounts in Agent's territory for as long as this Agreement in force and such commission payment for Active Commercial Accounts at the time of termination shall continue for five years from the effective date of termination of this Agreement, regardless of the reason for termination, or as Parties may mutually agree. An Active Commercial Account shall be defined for these purposes as any account that has purchased and paid for EnerTeck Products within the preceding twelve-month period.
It is the right of EnerTeck, at its sole discretion, to accept or refuse any contract. Any EnerTeck decision to refuse a potential contract will not entitle the Agent to any right to commission.
The Parties agree that from time to time as the Parties may agree, EnerTeck may make advance commission payments to Agent as a draw against future commissions and/or reimburse Agent for extraordinary business expenses. EnerTeck shall reimburse Agent for for business expenses incurred outside of the Territory at the request of EnerTeck.. Any such payments to Agent by EnerTeck do not constitute an obligation by EnerTeck to engage or make payments to Agent except as outlined herein.
AGENCY AGREEMENT FEBRUARY 15, 2003
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6. PRICES: TERMS AND CONDITIONS OF SALE
All sales shall be subject to EnerTeck's agreed prices, terms and conditions and such prices, terms and conditions are subject to change without notice, unless otherwise agreed in actual sales contracts with Agent's customers. EnerTeck shall provide Agent with current product prices on a regular basis, in writing, and such prices will remain effective until fifteen days after Agent receives a written notice of any price change. Agent shall not represent that Agent has authority to bind or commit EnerTeck to any prices or commercial terms other than as communicated in writing to Agent by EnerTeck.
7. ORDERS AND REPORTS
AGENT will, at EnerTeck's request furnish to EnerTeck periodic status reports giving to the fullest extent possible all known information regarding the status of tenders, bids, competitors, business and other relevant information.
8. ADVERTISING
Agent will NOT issue or publish any form of advertising or literature which in any way relates to EnerTeck or its products and services without first submitting the exact form and content thereof, together with information relating to the proposed dates and places of publication, to the EnerTeck notification address listed in Appendix "C".
Prior to publication or distribution of the advertising or literature, AGENT will obtain EnerTeck's approval and authorization of the form, content and specifications of the proposed advertising or literature. AGENT will comply with all directions for changes in the form, content or specifications of such advertising or literature requested by EnerTeck. EnerTeck will provide to AGENT current sales literature, brochures, promotional items and technical information on the products and services covered by this Agreement, as necessary to assist in obtaining business per the Agreement. This material will be written in the English language only and will be provided at no charge to AGENT. All such information, brochures, literature, promotional items and technical information in the possession of AGENT shall be returned to EnerTeck upon request and/or upon the termination of this agreement.
9. RELATIONSHIP OF THE PARTIES
AGENT is now and will at all times act as and hold itself out as an independent entity. AGENT and EnerTeck, hereby agree that neither this Agreement nor any activity undertaken in accordance with it shall create any other relationship between the AGENT and EnerTeck. Neither parties have been granted by the other any right or authority to assume or create any obligation or responsibility for or on behalf of the other unless agreed otherwise to in writing.
AGENCY AGREEMENT FEBRUARY 15, 2003
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10. COMPETITION
AGENT agrees that it shall (i) not furnish services similar to or that competes with the services being provided by AGENT to EnerTeck pursuant to this agreement to any third party in competition with EnerTeck, (ii) not directly engage in, (iii) not enter into a joint venture, or (iv) not acquire a company or other entity which engages in the particular business activities offered by EnerTeck in the territory.
11. INDEMNITY
EnerTeck agrees to protect, defend, indemnify and hold harmless and release AGENT, its parent, subsidiary and affiliated companies, its officers, directors and employees, from and against any manner of loss, liability, claim, damage, penalty or cost, including but not limited to, reasonable attorney's fees arising in connection with this Agreement that is asserted by any third party to the extent that such loss is caused by any product, act, or omission of EnerTeck.
AGENT agrees to protect, defend, indemnify and hold harmless and release EnerTeck, its parent, subsidiary and affiliated companies, its officers, directors and employees, from and against any manner of loss, liability, claim, damage, penalty or cost, including but not limited to, reasonable attorney's fees arising in connection with this Agreement or that is asserted by any third party to the extent that such loss is caused by any act or omission of Agent.
12. COMPLIANCE WITH U.S. LAW
Notwithstanding anything to the contrary contained elsewhere in this Agreement or in any Exhibit hereto, performance by EnerTeck or of any of its obligations under the provisions of this Agreement shall be subject to the laws of the U.S., including, without limitation, U.S. Department of State, Treasury or Commerce Export Control or other U.S. Government regulations pertaining to export and re-export, transfer or disclosure, directly or indirectly, or products and/or technical data supplied under or in accordance with this agreement.
Non-performance in whole or in part by EnerTeck because of said U.S. laws or regulations shall not be construed by any of the parties, and shall not constitute a default by EnerTeck of any obligation applicable to EnerTeck. Such non-performance shall not subject EnerTeck to any liability for damages and convey any right to AGENT to terminate this Agreement. Furthermore, that AGENT does not have the authority to, without prior written consent of EnerTeck, export any product made by the use of such technical data, directly or in-directly, to any such country as may from time to time be specified by the U.S. Department of State, Treasury or Commerce Export Control, as a country to which such exports are limited or to anyone in any such country or any national thereof. It also being understood that EnerTeck's power to give consent to such sales or products or components thereof, or the transfer or disclosure of technical data will be forbidden to give such consent, and in no event shall EnerTeck's failure to give such consent be grounds for a claim right or cause of action on the part of AGENT.
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AGENT covenants that it is familiar with the U.S. Foreign Corrupt Practices Act of 1977, as amended, "the Act", and it proposes and represents that neither Agent nor any of its shareholders, officers, directors, or employees will perform any service or action that would or might constitute any such violation.
13. AMENDMENTS
This Agreement may be amended only by written agreement of both Agent and EnerTeck.
14. ASSIGNMENT
This Agreement is not assignable, by operation of law or otherwise, without the prior written consent of the non-assigning party hereto.
If both parties consent to an assignment, this Agreement is binding and enforceable against successors, successors in office and assigns of both parties. The respective parties agree to get approvals and concurrence of their successors and assigns.
15. TERM AND TERMINATION
(a) This Agreement shall be effective as of the Effective Date and shall continue in force for five (5) years thereafter unless terminated as hereinafter provided. This Agreement shall be evergreen and shall automatically renew for one-year periods unless the terminating party gives a written one-year cancellation notice to the other party. The term may be extended, by mutual consent, for such periods thereafter subject to termination as hereinafter provided.
(b) In the event of the termination at the initiative of Enerteck, orders, letters of intent and contracts obtained through the effort of Agent for EnerTeck's Products and Services at any time within three (3) months following the termination of this Agreement, provided the prospect for such orders with the name of the customer is provided in writing by AGENT to EnerTeck within thirty (30) days after termination of this Agreement, shall entitle AGENT to a commission therein as if this Agreement were still in force.
(c) This Agreement may be terminated by EnerTeck with immediate effect and without recourse against EnerTeck, including but not limited to liability for any damages, or penalty to AGENT upon the occurrence of any of the following events:
(i) Breaches any material obligation imposed by this Agreement providing that such material breaches are not reasonably remedied within sixty (60) days of written notice of breach.
(ii) Becomes insolvent, or subject to a petition in bankruptcy filed by or against it or is placed under the control of receiver, liquidator or committee of creditors
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(iii) Assigns transfers or attempts to assign or transfer this Agreement without EnerTeck's prior consent
(iv) Ceases to function as a going concern or abandons the territory of representation
(v) A period of three hundred sixty five days (365 days) from the Effective Date of this agreement passes without EnerTeck receiving a valid and acceptable purchase order of commercial quantities of EnerTeck products in AGENT's Territory.
Nothing contained in, nor any action taken under, this section (d) shall constitute a waiver of any other right or remedy available against Agent for any breach mentioned under item (i) hereinabove.
(e) Notwithstanding any termination of this agreement, EnerTeck agrees to honor any ongoing contractual commitments that arise pursuant to this Agreement.
16. NOTICES
All notices and other communications provided for herein shall be validly given, made or served, if in writing and delivered personally or sent by certified mail postage prepaid, to the addresses listed in Appendix "C"
Or to such other address as any party hereto, may, from time to time, designate in writing delivered in like manner, reference Appendix "C". Notice given by mail, as set out above shall be deemed delivered when actually received at the appropriate address.
17. ARBITRATION
Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in the United States and conducted in the English language in Harris County, Texas, United States. In accordance with the then current rules of the International Chamber of Commerce, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court sitting in Harris County, Texas, United States. In respect to any such arbitration proceedings, the prevailing party shall be entitled to receive, in addition to any other remedy, all costs and expenses incurred in such proceedings, including reasonable attorney's fees.
This Agreement shall be constructed and enforced in accordance with the laws of the state of Texas in the United States of America and filed with the foreign government to the extent that such government requires.
18. OTHER REPRESENTATION
AGENT shall at EnerTeck's request provide EnerTeck a list of the companies for which it acts as representative or agent. Upon AGENT undertaking to represent any other enterprise during
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the effectiveness of this Agreement, AGENT shall promptly inform EnerTeck of such representation or agency relationship.
19. SEVERABILITY
If any provision or provisions of this Agreement shall be held to be in whole or in part invalid, illegal or unenforceable in any jurisdiction, or if any governmental agency or authority shall require the parties to delete any provision of this Agreement, such invalidity, illegality, unenforceability or deletion shall not impair or affect the remaining provisions of this Agreement or the validity or enforceability of such provision in any other jurisdiction.
The parties shall endeavor, in good faith negotiations, to replace the invalid, illegal unenforceable or deleted provision by valid provisions the economic effect of which comes as close as legally possible to that of the invalid, illegal, unenforceable or deleted provision.
20. DESCRIPTIVE HEADINGS
Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement.
21. COUNTERPARTS
For the convenience of the parties, any number of counterparts of this Agreement may be requested by one or more parties hereto and each such counterpart shall be deemed to be an original instrument if agreed to and signed by both parties.
22. PRIOR AGREEMENTS
The foregoing terms and conditions represent the entire agreement between EnerTeck and AGENT with respect to the subject matter, irrespective of inconsistent or additional terms or conditions included in other documents of AGENT. There are no other promises, terms, conditions or obligations; oral or written, with respect hereto other than those contained herein.
23. GENERAL PROVISIONS
(a) This agreement is made in the English language and in the event of doubt in interpretation between this and any other version into which this agreement may be translated; the English language shall prevail.
(b) The parties agree that either party shall keep its own personnel and equipment insured and each party will cover all of its own insurance costs.
AGENCY AGREEMENT FEBRUARY 15, 2003
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EXECUTED BY:
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA. ENERTECK CHEMICAL COMPANY, INC.
------------------------------- -------------------------------
/S/ /s/
Francisco CS Gularte Kenneth S. O'Neill
President and CEO President & CEO
DATE: 18 FEB. 2003 DATE: 27 FEB. 2003
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AGENCY AGREEMENT FEBRUARY 15, 2003
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
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ENERTECK CHEMICAL COMPANY, INC.
APPENDIX "A"
TO
AGENCY AGREEMENT
BETWEEN
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
AND
ENERTECK CHEMICAL COMPANY, INC.
TERRITORY
MINIMUM ANNUAL SALES VOLUMES TO MAINTAIN GEOGRAPHIC EXCLUSIVITY
Actual sales and/or customer contracts for sales representing the following minimum Territorial sales volumes are required for the Agent to maintain geographic sales exclusivity in the Territory. In the event that Agent does not achieve the minimum sales volume in any given period as provided for herein, EnerTeck may, at its sole option, appoint additional Agents or establish its own sales initiative within the Territory. However, in the event that Agent loses its territorial exclusivity, EnerTeck will respect Agent's active commercial accounts and will not compete with Agent or allow any additionally appointed agents to compete or interfere with Agent's active commercial accounts.
Calendar Year Volume of Enerburn Sold in Territory 2003 20,000 Gallons 2004 60,000 Gallons 2005 and all subsequent years 100,000 Gallons |
AGENCY AGREEMENT FEBRUARY 15, 2003
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
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APPENDIX "B"
TO
AGENCY AGREEMENT
BETWEEN
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
AND
ENERTECK CHEMICAL COMPANY, INC.
COMMISSION SCHEDULES
The following commission schedules and commission basis prices are predicated on bulk/isotank FOB Houston, Texas for EnerTeck products sold in US dollars and supported by a standby letter of credit on a US Bank with net 30BL payment terms. In the event of different terms of sale such as drummed product or CIF sales, etc., the Parties will negotiate in good faith to adjust the commission basis price to reflect the actual changes in netback price to EnerTeck.
FOR COMPANIA VALE DO RIO DOCE (CVRD), Agent shall be paid a commission for volumes sold to CVRD in the amount of the difference between the bulk/isotank FOB Houston, Texas sales price paid by CVRD and/or its subsidiaries and/or affiliate companies to EnerTeck, and the commission basis price of USD 50.00 per US gallon of Enerburn product.
FOR ALL OTHER NON-GOVERNMENT COMMERCIAL ACCOUNTS, Agent shall be paid a commission representing twenty percent (20%) of the amount any invoice paid by a customer in Agent's Territory.
FOR ALL GOVERNMENT ACCOUNTS (INCLUDING BR AND PETROBRAS), agent shall be paid a commission representing twenty-five percent (25%) of the amount of any invoice paid by a customer in Agent's Territory.
AGENCY AGREEMENT FEBRUARY 15, 2003
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APPENDIX "C"
TO
AGENCY AGREEMENT
BETWEEN
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
AND
ENERTECK CHEMICAL COMPANY, INC.
CONTACT INFORMATION
ECHEMTRADE AGENT ---------- ----- Francisco C S Gularte Kenneth S. O'Neill President and CEO President Rua Pio Correia 80, Bl.1 apt. 805 10701 Corporate Drive, Suite 293 Lagoa - Rio de Janeiro- Brasil Stafford, Texas 77477 22.461 240 Telephone 55-21-253-755585 Telephone (281)240-1787 Fax 55-21-253-755585 Fax (281)240-1828 |
AGENCY AGREEMENT FEBRUARY 15, 2003
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
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ENERTECK CHEMICAL COMPANY, INC.
APPENDIX "D"
TO
AGENCY AGREEMENT
BETWEEN
ECHEMTRADETRADE ENERGY & PETROCHEMICALS LTDA.
AND
ENERTECK CHEMICAL COMPANY
EXCLUDED CUSTOMERS / SERVICES
CUSTOMER PRODUCTS/SERVICES -------- ----------------- NONE NONE |
AGREEMENT
THIS SALES AGREEMENT (this "Agreement") is made and entered into on May 1, 2003, by and between, EnerTeck Chemical Corporation, a Texas corporation (the "Company") on the one hand, and Allan F. Dow & Associates, Inc., also a Texas corporation (the "Sales Representative"-SR) on the other hand.
In consideration of the mutual representations, warranties, covenants and promises contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Services. For a period of two (2) year from the date hereof, SR will use its professional and marketing contacts to assist the Company in promoting its EnerBurn(TM) product at key accounts with the potential to purchase at least 40,000 gallons per year (the "SR's Accounts") are at least testing EnerBurn in commercial applications.
2. Compensation. The Company shall compensate SR with payment of $100,000
when the SR's Accounts, which collectively have the potential to purchase 40,000 gallons of EnerBurn, have first introduced the EnerBurn product and it is incorporated into a test and/or it is used on a commercial basis, in a customer's fleet(s). SR and Company will mutually agree upon and determine, case by case, on the potential to purchase EnerBurn, for each SR customer, that shall apply to the aforementioned 40,000 gallon requirement that would trigger the aforementioned $100,000 payment. In addition, SR will be paid up to $250,000 as a commission from the sale of the first 40,000 gallons of EnerBurn sold by SRs; this payment will be made at the rate of $6.25 per gallon of EnerBurn sold. In both cases, payment to SR will be due 30 days from the date of shipment or the date of invoice, which ever is earlier.
For EnerBurn sales effected by the SR in excess of 40,000 gallons, the Company agrees to compensate SR consistent with the Company's Commission and Finder Fee Policy for EnerBurn Sales developed for Company during the Term of this contract. Commissions will be paid for thirty nine (39) months from the date of the first sale to each new account independent of the Term of this SR Agreement. Further, such Commissions, as a percent of revenue, shall be no less than 5% for sales in months 1 thru 15, 3.5% for sales in months 16 thru 27, and 2% for sales in months 28 thru 39. SR will keep Company advised of all sales opportunities identified by SR.
In addition to the foregoing Fees, Company agrees to reimburse SR for reasonable out-of-pocket expenses incurred by SR in performing Services in Paragraph 1., above. All expenses and any charges for Professional Services must be pre-approved by Company.
3. Independent Contractor. SR shall, at all times, render services pursuant to this Agreement as an independent contractor and not as an employee, agent or servant of Company, nor shall SR, by reason of this Agreement or the services performed pursuant hereto, be deemed an employee of Company for purposes of withholding employee payroll taxes, contributions, pensions or otherwise.
4. Termination.
(a) In the event that either party materially or repeatedly defaults in the performance of any of their respective duties or obligations under this Agreement, and within thirty (30) days after written notice is given to the defaulting party specifying the default, and (i) such default is not substantially cured, or (ii) the defaulting party does not obtain the approval of the other party to a plan to remedy the default, then the party not in default may terminate this Agreement by giving written notice to the defaulting party.
(b) If either party becomes or is declared insolvent or bankrupt, is the subject of any proceedings relating to its liquidation, insolvency or for the appointment of a receiver or similar officer for it, makes a general assignment for the benefit of all or substantially all of its creditors, or enters into an agreement for the composition, extension or readjustment of all or substantially all of its obligations, or breaches any warranty or representation contained herein, then the other party, within the conditions of applicable law, may immediately terminate this Agreement by giving written notice.
5. Miscellaneous.
(a) Assignment. SR may not assign any of his rights or obligations hereunder, without the Company's prior written consent, which the Company may withhold in its sole and absolute discretion.
(b) Notice. All notices, demands or other communications to be given to any party hereunder shall be in writing. A notice shall be validly given or made to another party if served either personally or if deposited in the United States mail, certified or registered, return receipt requested, or if transmitted by telegraph, telecopy or other electronic written transmission or if sent by overnight courier service, and if addressed to the applicable party as set forth at the end of this Agreement. If such notice, demand or other communication is served personally, service shall be conclusively deemed made at the time of such personal service. If such notice, demand or other communication is given by mail, service shall be conclusively deemed made seventy-two (72) hours after the deposit thereof in the United States mail. If such notice, demand or other communication is given by overnight courier, or electronic transmission, service shall be conclusively deemed made at the time of confirmation of delivery thereof. Any party may change its address for the purpose of receiving notices, demands and other communications as herein provided, by a written notice given in the aforesaid manner.
(c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to conflicts of law principles.
(d) Entire Agreement. This Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties.
(e) Waivers. No waiver of compliance with any provision of this Agreement shall be binding unless executed in writing by the party making the waiver. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.
(f) Amendments. Any amendment to this Agreement shall be in writing and signed by the parties hereto.
(g) Invalidity. In the event that any one or more of the provisions contained in this Agreement, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement.
(h) Titles. The titles, captions or headings of the Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
(i) Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
(j) Income Tax Consequences. SR acknowledges that the Company has not advised SR regarding the tax implications of this Agreement. Each of the parties hereto has obtained or will obtain his or its own tax advice with respect to the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the day and year first above written.
THE COMPANY THE SR EnerTeck Chemical Corporation Allan F. Dow & Associates, Inc. a Texas corporation a Texas corporation By: /s/ Dwaine Reese By: /s/ Kenneth O'Neill Dwaine Reese Kenneth O'Neill Chief Executive Officer and President Sr. Vice President |
GOBM-SALES-AGREEMENT.AFDcnslt.doc-5-14-032
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into on October 10, 2002, by and between, EnerTeck Chemical Corporation, a Texas corporation (the "Company") on the one hand, and Allan F. Dow & Associates, Inc., also a Texas corporation (the "Consultant") on the other hand. This agreement supercedes any agreements executed by the parties regarding services provided by the Consultant to the Company made on this date or prior thereto.
In consideration of the mutual representations, warranties, covenants and promises contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Consulting Services. For a period of one (1) year from the date hereof, at such times as reasonably requested by the Company, Consultant shall make himself available by telephone or in person to advise and consult with the Company regarding the following: providing advice regarding the recruitment and/or utilization of board members, advisors, consultants, and key executives consistent with the business objectives of the Company, providing advice regarding business and marketing strategies, providing advice in the area of human resources, including in connection with the creation and implementation of employee policies and employee policy manuals, employee benefit programs, affirmative action policies, compensation policies, job descriptions; coordinating and implementing marketing strategies. Furthermore, Consultant will be available upon the request of the Board of Directors to obtain the services of, negotiate with, act as a laison to and coordinate the activities of the various professionals needed to assist the Company in effecting its business plan.
2. Compensation. As consideration for the Consultant hereby agreeing and representing to be available and for being available to provide the services described hereunder to the Company, the Company shall compensate Consultant with payment of a $50,000 retainer fee payable in three (3) installments. The initial payment of $10,000 is due at the time of execution of this Agreement. The second payment of $10,000 will be due November 1, 2002, with the balance of $30,000 due and payable on March 1, 2003.
In addition to the foregoing Fees, Company agrees to reimburse Consultant for reasonable out-of-pocket expenses incurred by Consultant in performing Consulting Services in Paragraph 1., above. All expenses and any charges for Professional Services must be pre-approved by Company.
Finally, the Consultant will be issued five year warrants to purchase up to a seven and one-half percent equity interest in the Company as of this date for a total purchase price of up to $600,000 (the "Warrant Formula").
In the event that the Company, during the term of this agreement, becomes an entity whose common stock becomes publicly traded, and/or merges with, acquires, is acquired by, becomes an affiliate of, or forms any other business combination with a publicly traded corporation (in any case, the "Public Entity"), the Consultant will be issued warrants in the Public Entity based
upon the Warrant Formula as applied to the capital structure of the Public Entity. The shares underlying the warrants issued by the Public Entity shall have registration rights attached to them. The exact warrant exercise price and the number of warrants to be issued by the Public Entity to the Consultant will be determined by mutual agreement subsequent to the event that results in the Public Entity. This mutual agreement shall be made into an amendment to this agreement signed by the Consultant, the Company and the Public Entity and attached to and made a part of hereof. The warrants are hereby deemed to have been earned upon the execution of this Consulting Agreement.
The Company agrees that it will make its obligations hereunder a condition of any transaction it effects with a publicly traded company during the term of this agreement.
3. Independent Contractor. Consultant shall, at all times, render services pursuant to this Agreement as an independent contractor and not as an employee, agent or servant of the Company, nor shall Consultant, by reason of this Agreement or the services performed pursuant hereto, be deemed an employee of Company for purposes of withholding employee payroll taxes, contributions, pensions or otherwise.
4. Representations and Warranties. Consultant represents and warrants that:
(a) the services contemplated, rendered and for which he is compensated hereunder shall at no time include services for:
(i) acting as a broker, dealer or person who finds
investors for the Company;
(ii) providing consulting services involving investor
relations or shareholder communications;
(iii) Arranging or effecting mergers that take a
private entity public;
(iv) identifying or assisting in identifying
acquisition targets which identification results in
the taking of a private company public;
(v) structuring or assisting in structuring mergers
or other acquisitions that take a private company
public;
(vi) rendering services that directly or indirectly
promote or maintain a market for securities;
(vii) arranging financing that involves any
securities issuance, whether equity or debt;
(viii) providing services that are primarily
capital-raising or promotional in nature;
(ix) auditing the Company's financial statements;
(x) preparing or circulating a report or proxy
statement required by the Securities Exchange Act of
1934, as amended, that is part of a promotional
scheme that violates federal securities laws;
(xi) serving as counsel to the Company, its
underwriters or any participating broker-dealer in a
securities offering where the Company is the issuer;
or
(xii) controlling or directing the resale of the Company Common Stock received hereunder in the public market or directly or indirectly receiving a percentage of the proceeds from such resales.
(b) Consultant has not, at any time in his history, been subject to any of the events enumerated in paragraphs (f)(1) through (f)(6) of Item 401 of Regulation S-K under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Energy Policy and Conservation Act of 1975.
5. Termination.
(a) In the event that either party materially or repeatedly defaults in the performance of any of their respective duties or obligations under this Agreement, and within thirty (30) days after written notice is given to the defaulting party specifying the default, and (i) such default is not substantially cured, or (ii) the defaulting party does not obtain the approval of the other party to a plan to remedy the default, then the party not in default may terminate this Agreement by giving written notice to the defaulting party.
(b) If either party becomes or is declared insolvent or bankrupt, is the subject of any proceedings relating to its liquidation, insolvency or for the appointment of a receiver or similar officer for it, makes a general assignment for the benefit of all or substantially all of its creditors, or enters into an agreement for the composition, extension or readjustment of all or substantially all of its obligations, or breaches any warranty or representation contained herein, then the other party, within the conditions of applicable law, may immediately terminate this Agreement by giving written notice.
6. Miscellaneous.
(a) Assignment. Consultant may not assign any of his rights or obligations hereunder, without the Company's prior written consent, which the Company may withhold in its sole and absolute discretion.
(b) Notice. All notices, demands or other communications to be given to any party hereunder shall be in writing. A notice shall be validly given or made to another party if served either personally or if deposited in the United States mail, certified or registered, return receipt requested, or if transmitted by telegraph, telecopy or other electronic written transmission or if sent by overnight courier service, at the address of the applicable party. If such notice, demand or other communication is served personally, service shall be conclusively deemed made at the time of such personal service. If such notice, demand or other communication is given by mail, service shall be conclusively deemed made seventy-two (72) hours after the deposit thereof in the United States mail. If such notice, demand or other communication is given by overnight courier, or electronic transmission, service shall be conclusively deemed made at the time of confirmation of delivery thereof. Any party may change its address for the purpose of receiving notices, demands and other communications as herein provided, by a written notice given in the aforesaid manner.
(c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to conflicts of law principles.
(d) Entire Agreement. This Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties.
(e) Waivers. No waiver of compliance with any provision of this Agreement shall be binding unless executed in writing by the party making the waiver. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.
(f) Amendments. Any amendment to this Agreement shall be in writing and signed by the parties hereto.
(g) Invalidity. In the event that any one or more of the provisions contained in this Agreement, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement.
(h) Titles. The titles, captions or headings of the Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
(i) Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
(j) Income Tax Consequences. Consultant acknowledges that the Company has not advised Consultant regarding the tax implications of this Agreement. Each of the parties hereto has obtained or will obtain his or its own tax advice with respect to the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the day and year first above written.
THE COMPANY THE CONSULTANT EnerTeck Chemical Corporation Allan F. Dow & Associates, Inc. a Texas corporation a Texas corporation By: /s/ Dwaine Reese By: /s/ Kenneth O'Neill Dwaine Reese Kenneth O'Neill Chief Executive Officer and President Sr. Vice President |
AMENDMENT TO THE OCTOBER 19, 2002 CONSULTING AGREEMENT BY AND BETWEEN
ENERTECK CHEMICAL CORPORATION AND ALLAN F. DOW & ASSOCIATES, INC.
THIS AMENDMENT TO the October 10, 2002 Consulting Agreement by and between EnerTeck Chemical Corporation and Allan F. Dow & Associates, Inc. (this "Amendment") is made and entered into as of March 18, 2003, by and among EnerTeck Chemical Corporation, a Texas corporation (the "Company"), Gold Bond Resources, Inc., a Washington State corporation) (the "Public Company") and Allan F. Dow & Associates, Inc., also a Texas corporation (the "Consultant") on the other hand the "Parties").
Paragraph numbered 5 of the October 10, 2002 Consulting Agreement is hereby amended to include the following;
"The five year warrants to be issued to the Consultant by the Public Company pursuant to this Paragraph 5 will be for 4,981,500 shares of the Public Company's Common Stock with an exercise price of $.12 per share."
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written.
THE COMPANY THE CONSULTANT EnerTeck Chemical Corporation Allan F. Dow & Associates, Inc. a Texas corporation a Texas corporation By: /s/ Dwaine Reese By: /s/ Kenneth O'Neill Sr. Dwaine Reese Kenneth O'Neill Sr. Chief Operating Officer and Chairman Vice President |
THE PUBLIC COMPANY
Gold Bond Resources, Inc.
a Washington State corporation
By: ---------------------------------------
Dwaine Reese
Chief Operating Officer and Chairman
GOBM.AFDcnsltAMEND
[LOGO] MAXIM GROUP
Private and Confidential
March 26, 2003
J.D. McGraw
Vice President
EnerTeck Chemical Corporation
c/o Allan F. Dow Assoc.
2100 W Loop South suite 1210
Houston, TX 77027
Dear J.D.:
We are pleased to propose that EnerTeck Chemical Corporation ("EnerTeck" or the "Company") retain Maxim Group LLC ("Maxim") as its exclusive investment banker, strategic advisor and financial advisor. The principal elements of the agreement ("Agreement") between Maxim and the Company are:
1. SERVICES TO BE RENDERED. The services that Maxim will render to the Company under the terms of this Agreement will include the following:
a) Maxim will provide the following strategic advisory services ("Advisory Services"):
i) advise EnerTeck with respect to its strategic planning process and business plans including an analysis of markets, products, positioning, financial models, organization and staffing, potential strategic alliances, capital requirements, valuation and funding. To prepare for this advisory function, Maxim will perform a due diligence review of EnerTeck;
ii) work closely with EnerTeck's management team to develop a set of long and short-term goals with special focus on enhancing corporate and shareholder value. This will also include assisting EnerTeck in completing a "gap analysis" i.e. helping EnerTeck determine key business and actions, including review of financing requirements and EnerTeck's capital structure, intended to help enhance shareholder value and EnerTeck's exposure to the investment community and;
iii) review the Company's presentation and marketing materials and other materials used to present the Company to the investment community. Maxim will provide the following strategic advisory services ("Advisory Services"):
b) Maxim will help EnerTeck develop and evaluate financing or capital raising alternatives including public and private issues of equity or debt, as appropriate from time to time ("Banking Services").
Members NASD & SIPC 405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com New York, NY * Long Island, NY * Chicago, IL
i) Public Offerings: In the event of a public offering, Maxim will act as lead or co-underwriter. Maxim will work with the Company to manage the process of identifying, evaluating and selecting any other underwriters. Maxim will prepare a comprehensive letter of intent for the proposed transaction that will be provided to EnerTeck and will supplement the terms of this Agreement. If Maxim is not selected as the lead manager in a public offering, EnerTeck will use its best efforts to ensure that Maxim receives at least 50 % of the share allocation and 50% of the total underwriting fees.
ii) Private Placements: Maxim will act as placement agent for any private placement. Maxim will prepare a comprehensive letter of intent for the proposed transaction that will be provided to EnerTeck and will supplement the terms of this Agreement.
c) Maxim will provide EnerTeck with merger and acquisition services (the "M&A Services"). Maxim will assist the Company in determining acquisition or strategic partnering strategies and tactics from time to time as appropriate. Maxim will advise and assist EnerTeck in identifying, evaluating, negotiating and structuring acquisitions, or strategic investments or partnerships which may be accomplished through a purchase or sale of all or a portion of the stock or assets, a merger or reverse merger, joint venture, licensing or marketing agreement or arrangement or other business combination or arrangement ("Transaction") with any entity ("Candidate"). A strategic investment will include any investment or exchange of cash, equity, warrants, assets or debt as part of a business relationship with a third party, or any investment made directly by a third party in the Company subject to a term sheet or agreement not marketed or syndicated beyond a specific investor. A separate letter shall be generated for each acquisition.
d) If requested by EnerTeck, Maxim will communicate its willingness to provide an opinion of fairness (a "Fairness Opinion") of a particular Transaction to the Company, and if Maxim determines that it is able to provide such a Fairness Opinion, it will allow it to be used in connection with material filed or submitted to the Securities and Exchange Commission, or included in information mailed to shareholders of EnerTeck in connection with each transaction.
2. COMPENSATION AND EXPENSES.
a) As compensation for providing the Advisory Services hereunder, EnerTeck will pay Maxim a retainer of $50,000, payable upon execution of this Agreement and monthly fee of $6,000 at the beginning of each subsequent month.
b) Upon execution of this Agreement, EnerTeck will grant Maxim a warrant
("Advisory Warrant") representing 25,000 shares of the company's
common stock with an exercise price equal to the closing bid price on
the date this agreement is executed by the Company. The Advisory
Warrant will contain provisions for, among other things, change of
control, registration rights and net issuance, and will expire five
(5) years after the execution of this Agreement.
Members NASD & SIPC 405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com New York, NY * Long Island, NY * Chicago, IL
c) Terms and fees for Banking Services performed under section 1(b) or provision of a Fairness Opinion under 1(d) will be separately proposed by Maxim with respect to each transaction when and if services are provided.
d) For any Transaction completed by the Company with a Candidate EnerTeck shall pay Maxim a fee ("Success Fee") upon closing equal to the sum of: (1) $200,000 and (2) 21/2% of the aggregate transaction value. However, in the event the aggregate transaction value is equal to or less than $1,000,000 the Success Fee will be calculated by multiplying the Aggregate transaction value by 10%, however in no event shall this fee be lower than $50,000. In the event that the aggregate transaction value is between $1,000,000 and $2,000,000 the Success Fee shall be equal to the sum of: (1) $100,000 and (2) 21/2% of the aggregate transaction value. The aggregate transaction value shall include the sum of cash and the fair market value at the time of the closing of a transaction of equity securities; warrants; contingent payments; deferred payments; non-compete agreements; liabilities assumed, acquired, retired or defeased (other than normal working capital liabilities); the face value of any debt securities issued in such a Transaction; the fair market value of any licensing, marketing or other business agreements or arrangements; and any other valuable consideration issued in connection with a Transaction. Fees associated with transactions described in section 1(b) will be subject to negotiation between Maxim and the Company at the time a formal agreement is reached between the parties. In no event however, will these fees exceed 10% commission plus a 2% non-accountable expense allowance as well as warrants to purchase 10% of the securities raised in the transaction on the same terms as the securities offered in the transaction.
e) The Company will reimburse Maxim in a timely manner for any out-of-pocket and legal expenses relating to activities under this Agreement. Pre-approval on expenses exceeding $1,000 shall be obtained by EnerTeck prior to expenditure.
f) In no case will any fee obligations of the Company any other financial advisor or any other person in connection with this transaction reduce the fees owed by the Company to Maxim under Agreement.
g) MAXIM and the Company agree to establish an escrow agreement as soon as practicable to govern the flow of all Transaction related fees.
3. FUTURE INVESTMENT BANKING ACTIVITIES. Upon the successful completion of any Banking Services or Transactions, for a period of two (2) years from the closing of such transaction, the Company grants Maxim the right of first refusal to act as managing underwriter or minimally as co-manager wit at least 50% of the economies; or, in the case of a three-handed deal 33% of the economies, for any and all future public and private equity offerings during such two year period of the Company, or any successor to any subsidiary of the Company.
Members NASD & SIPC 405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com New York, NY * Long Island, NY * Chicago, IL
4. TERM OF AGREEMENT. This Agreement shall continue in effect for a minimum of
twelve months and thereafter until terminated by either the Company or
Maxim (the "Term"). The Term will be automatically extended to one year
upon successful completion of any Banking Services or Transactions as
defined herein. Termination shall become effective thirty (30) days after
the other party receives written notification. Any future obligation that
could be reasonably expected to survive this Agreement will survive
termination of this Agreement. Specific surviving conditions will include,
but not limited to: (I) payment of the monthly retainer and expenses
incurred through termination, (ii) grant and survival of the Advisory
Warrant pursuant to 2(b), (iii) payment of Success Fees earned under
section 2(d) during the Term and for Transactions considered during the
Term and completed within 18 months of the termination of this agreement,
(iv) Section 3, Future Investment Banking Activities and (v) Section 5,
Indemnity.
5. INDEMNITY. The company agrees to indemnify and hold harmless Maxim, including any affiliated companies, and their respective officers, directors, controlling persons and employees and any persons retained in connection with a proposed financing (whether or not consummated) (the "Indemnitees"), from and against all claims, damages, losses, liabilities and expenses as the same are incurred (including any legal or other expenses incurred in connection with investigating or defending against any such loss, claim, damage or liabilities or any action in respect thereof), related to or arising out of its activities hereunder. Notwithstanding the foregoing, the Company shall not be liable for indemnity under this Agreement in respect to any loss, claim, damage, liability or expense arising from Maxim's misconduct in performing the services described above. This provision shall survive any termination of Maxim's engagement as well as the consummation or abandonment of any Transaction, placement or offering. EnerTeck agrees that any and all decisions, actions and responsibility of EnerTeck's management, and that Maxim's engagement will in no way expose Maxim to any liability, including but not limited to, liability for any financing, operating, financial, merger, acquisition, managerial, or other results achieved by the Company, as well as the implementation of, or the results achieved by, strategies or business plans on which Maxim has provided review or advice.
6. DISCLAIMERS.
a) It is understood by Maxim and the Company that the Company's ability to raise capital will be affected by various factors at the time of the proposed offering, including but not limited to, stock market conditions, competitive positioning of EnerTeck's products, achieving business plan goals that have been mutually agreed upon by Maxim and the Company, short- and long-term business prospects, the plans and performance of the management team and the capital structure of the Company. In the event that Maxim does not deem itself able to act as manager for a proposed placement or offering, subject to Maxims sole reasonable discretion, it will advise the Company on an appropriate course of action
b) In performing its M&A Services hereunder, Maxim may rely entirely on publicly available information and such other information as may be furnished to Maxim by the Company or a Candidate, and had not and does not assume any responsibility for
Members NASD & SIPC 405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com New York, NY * Long Island, NY * Chicago, IL
independent verification of such information or independent appraisal or valuation of assets.
7. ENTIRE AGREEMENT AND GOVERNING LAW. This Agreement may be amended or modified expect in writing, and shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.
If the forgoing correctly sets forth your understanding, please so indicate by signing and returning to us the enclosed copy of this letter along with a check for $50,000 representing the first month's retainer. We look forward to working with you and the team at EnerTeck.
Members NASD & SIPC 405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com New York, NY * Long Island, NY * Chicago, IL
Sincerely,
Anthony J. Sarkis
Managing Director
Maxim Group, LLC.
By: s/s Date: 4/22/03
-------------------------------------- ------------
Anthony J. Sarkis
Title: Managing Director
EnerTeck Chemical Corporation
By: s/s Date: 4-30-03
-------------------------------------- ------------
J. D. McGraw
Title: Vice President
|
Members NASD & SIPC 405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com New York, NY * Long Island, NY * Chicago, IL
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
EnerTeck Chemical Corp.
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
EnerTeck Corporation.
Stafford, Texas
We hereby consent to the incorporation by reference in this Form SB-2 Registration Statement of our report dated March 10, 2003 relating to the financial statements of EnerTeck Chemical Corp. for the years ended December 31, 2002 and 2001 appearing herein.
September 15, 2003
/s/Malone & Bailey, PLLC www.malone-bailey.com Houston, Texas |