-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L51u0DL+tvQ4sMgAS6iTWbGj5mOanCeVJTUGbvjbuAYfXADueLmsogno6aLGb7RR qoGnIc4f3dkTiNvwJ3H+Fw== 0001013762-05-000900.txt : 20050727 0001013762-05-000900.hdr.sgml : 20050727 20050727134751 ACCESSION NUMBER: 0001013762-05-000900 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 23 FILED AS OF DATE: 20050727 DATE AS OF CHANGE: 20050727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RECLAMATION CONSULTING & APPLICATIONS INC CENTRAL INDEX KEY: 0001100091 STANDARD INDUSTRIAL CLASSIFICATION: REFUSE SYSTEMS [4953] IRS NUMBER: 840703717 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SB-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-126916 FILM NUMBER: 05976566 BUSINESS ADDRESS: STREET 1: 23832 ROCKFIELD BLVD SUITE 275 CITY: LAKE FOREST STATE: CA ZIP: 92630 BUSINESS PHONE: 9496090590 MAIL ADDRESS: STREET 1: 23832 ROCKFIELD BOULEVARD STREET 2: SUITE 275 CITY: LAKE FOREST STATE: CA ZIP: 92630 FORMER COMPANY: FORMER CONFORMED NAME: RECLAIMATION CONSULTING & APPLICATIONS INC DATE OF NAME CHANGE: 20020529 FORMER COMPANY: FORMER CONFORMED NAME: RECYCLING CENTERS OF AMERICA INC DATE OF NAME CHANGE: 20000228 SB-2 1 rcaajul262005sb2.txt As filed with the Securities and Exchange Commission on July 27, 2005 An Exhibit List can be found on page II-6. Registration No. 333- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 ---------------------------- FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------------------- RECLAMATION CONSULTING AND APPLICATIONS, INC. (Name of small business issuer in its charter) Colorado 4953 58-2222646 (State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer of Incorporation or Classification Code Number) Identification No.) Organization) 23832 ROCKFIELD BOULEVARD, SUITE 275 LAKE FOREST, CALIFORNIA 92630 (949) 609-0590 (Address and telephone number of principal executive offices and principal place of business) GORDON DAVIES, PRESIDENT RECLAMATION CONSULTING AND APPLICATIONS, INC. 23832 ROCKFIELD BOULEVARD, SUITE 275 LAKE FOREST, CALIFORNIA 92630 (949) 609-0590 (Name, address and telephone number of agent for service) Copies to: ANDREA CATANEO, ESQ. SICHENZIA ROSS FRIEDMAN FERENCE LLP 1065 AVENUE OF THE AMERICAS, 21ST FLR. NEW YORK, NEW YORK 10018 (212) 930-9700 (212) 930-9725 (fax) APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after this Registration Statement becomes effective. If any 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, other than securities offered only in connection with dividend or interest reinvestment plans, 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, 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(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. [ ] ________
CALCULATION OF REGISTRATION FEE - -------------------------------------------------- ------------------- ------------------ -------------------- -------------- TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE PROPOSED PROPOSED MAXIMUM AMOUNT OF REGISTERED REGISTERED (1) MAXIMUM AGGREGATE REGISTRATION OFFERING PRICE OFFERING PRICE FEE PER SHARE (2) - -------------------------------------------------- ------------------- ------------------ -------------------- -------------- Common stock, $.01 par value issuable upon 32,000,000 (3) $.19 $6,137,000 $722.32 conversion of the secured convertible notes - -------------------------------------------------- ------------------- ------------------ -------------------- -------------- Common stock, $.01 par value issuable upon 8,000,000 (4) $.28 $2,240,000 $263.65 exercise of warrants - -------------------------------------------------- ------------------- ------------------ -------------------- -------------- Common stock, $.01 par value 5,025,288 $.19 $954,804.72 $112.38 - -------------------------------------------------- ------------------- ------------------ -------------------- -------------- Common stock, $.01 par value issuable upon 3,000,000 (5) $.30 $900,000 $105.93 exercise of stock options - -------------------------------------------------- ------------------- ------------------ -------------------- -------------- Common stock, $.01 par value issuable upon 1,700,000 (6) $.25 $425,000 $50.02 exercise of stock options - -------------------------------------------------- ------------------- ------------------ -------------------- -------------- Total 49,725,288 $10,656,804.72 $1,254.30 - -------------------------------------------------- ------------------- ------------------ -------------------- --------------
(1) Includes shares of our common stock, par value $0.01 per share, which may be offered pursuant to this registration statement, which shares are issuable upon conversion of secured convertible notes and the exercise of warrants held by the selling stockholders. In addition to the shares set forth in the table, the amount to be registered includes an indeterminate number of shares issuable upon conversion of the secured convertible notes and exercise of the warrants, as such number may be adjusted as a result of stock splits, stock dividends and similar transactions in accordance with Rule 416. The number of shares of common stock registered hereunder represents a good faith estimate by us of the number of shares of common stock issuable upon conversion of the secured convertible notes and upon exercise of the warrants. For purposes of estimating the number of shares of common stock to be included in this registration statement, we calculated a good faith estimate of the number of shares of our common stock that we believe will be issuable upon conversion of the secured convertible notes and upon exercise of the warrants to account for market fluctuations, and antidilution and price protection adjustments, respectively. Should the conversion ratio result in our having insufficient shares, we will not rely upon Rule 416, but will file a new registration statement to cover the resale of such additional shares should that become necessary. In addition, should a decrease in the exercise price as a result of an issuance or sale of shares below the then current market price, result in our having insufficient shares, we will not rely upon Rule 416, but will file a new registration statement to cover the resale of such additional shares should that become necessary. (2) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) and Rule 457(g) under the Securities Act of 1933, using the average of the high and low price as reported on the Over-The-Counter Bulletin Board on July 25, 2005, which was $.19 per share. (3) Includes a good faith estimate of the shares underlying secured convertible notes to account for market fluctuations. (4) Includes a good faith estimate of the shares underlying warrants exercisable at $.28 per share to account for antidilution and price protection adjustments. (5) Shares underlying options exercisable at $.30 per share. (6) Shares underlying options exercisable at $.25 per share. 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 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 CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE 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. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JULY 27, 2005 RECLAMATION CONSULTING AND APPLICATIONS, INC. 49,725,288 SHARES OF COMMON STOCK This prospectus relates to the resale by the selling stockholders of up to 49,725,288 shares of our common stock, including up to 32,000,000 shares of common stock underlying secured convertible notes in a principal amount of $2,000,000, up to 8,000,000 shares of common stock issuable upon the exercise of common stock purchase warrants, 4,700,000 shares of common stock issuable upon the exercise of stock options and 5,025,288 shares of common stock. The secured convertible notes are convertible into our common stock at the lower of $0.21 or 50% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. The selling stockholders may sell common stock from time to time in the principal market on which the stock is traded at the prevailing market price or in negotiated transactions. The selling stockholders may be deemed underwriters of the shares of common stock, which they are offering. We will pay the expenses of registering these shares. Our common stock is registered under Section 12(g) of the Securities Exchange Act of 1934 and is listed on the Over-The-Counter Bulletin Board under the symbol "RCAA". The last reported sales price per share of our common stock as reported by the Over-The-Counter Bulletin Board on July 25, 2005, was $.19. INVESTING IN THESE SECURITIES INVOLVES SIGNIFICANT RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 4. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is ________, 2005. The information in this Prospectus is not complete and may be changed. This Prospectus is included in the Registration Statement that was filed by Reclamation Consulting and Applications, Inc. with the Securities and Exchange Commission. The selling stockholders may not sell these securities until the registration statement becomes effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the sale is not permitted. TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements 2 Prospectus Summary 3 Risk Factors 6 Use Of Proceeds 11 Market For Common Equity And Related Stockholder Matters 12 Management's Discussion And Analysis Of Financial Condition And Results Of Operations 16 Description Of Business 20 Description Of Properties 23 Legal Proceedings 23 Management 24 Executive Compensation 25 Certain Relationships And Related Transactions 26 Security Ownership Of Certain Beneficial Owners And Management 27 Description Of Securities 28 Commission's Position On Indemnification For Securities Act Liabilities 29 Plan Of Distribution 30 Selling Stockholders 33 Legal Matters 38 Experts 38 Available Information 39 Index to Consolidated Financial Statements 40
1 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus and any prospectus supplement contain forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. In some cases, you can identify forward-looking statements by words such as "may," "should," "expect," "plan," "could," "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal," or "continue" or similar terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements. 2 PROSPECTUS SUMMARY The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the "risk factors" section, the financial statements and the notes to the financial statements. RECLAMATION CONSULTING AND APPLICATIONS, INC. We are a Colorado corporation that specializes in the production and sales of the AlderoxTM line of products including ASA-12TM, DCR TM, KR-7 TM, TSR TM, and ASA Cleaners. ASA-12TM is an asphalt release agent and DCR TM is an industrial chain lubricant. Both products were developed in response to the asphalt industry's need for effective, economical and environmentally friendly products. KR7TM is a concrete release agent we also developed to meet the industry's same needs. TSRTM was specifically designed as an environmentally friendly non-stick agent for the oil sands industry to reduce the build-up of clay, lime and mud on the undercarriages and sides of transport vehicles and equipment. We were originally formed in 1976 under the name Vac-Tec Systems, Inc. and reorganized as a public shell corporation without significant assets in early 1997, after we ceased operations in the glass vacuum coating business. For the years ended June 30, 2004 and 2003, we generated net revenues in the amount of $289,218 and $261,235 and net losses of $2,542,770 and $1,698,498, respectively. For the nine months ended March 31, 2005, we generated net revenues in the amount of $173,581 and a net loss of $2,397,627. As a result of recurring losses from operations and an accumulated deficit of $11,112,519 as pf June 30, 2004, our Independent Registered Public Accounting Firm, in their report dated September 2, 2004, have expressed substantial doubt about our ability to continue as going concern. Our principal offices are located at 23832 Rockfield Boulevard, Suite 275, Lake Forest, California 92630, and our telephone number is (949) 609-0590. We are a Colorado corporation.
The Offering Common stock offered by selling stockholders................ Up to 49,725,288 shares, including the following: - up to 32,000,000 shares of common stock underlying secured convertible notes in the principal amount of $2,000,000 (includes a good faith estimate of the shares underlying secured convertible notes to account for market fluctuations and antidilution protection adjustments, respectively), - up to 8,000,000 shares of common stock issuable upon the exercise of common stock purchase warrants at an exercise price of $.28 per share (includes a good faith estimate of the shares underlying warrants to account for antidilution protection adjustments), - up to 3,000,000 shares of common stock issuable upon the exercise of stock stocks at an exercise price of $.30 per share, 3 - up to 1,700,000 shares of common stock issuable upon the exercise of stock stocks at an exercise price of $.25 per share, and - 5,025,288 shares of common stock. This number represents 66.93% of our current outstanding stock. Common stock to be outstanding after the offering........... Up to 74,295,813 shares Use of proceeds.......................................... We will not receive any proceeds from the sale of the common stock. However, we will receive the sale price of any common stock we sell to the selling stockholders upon exercise of the warrants. We expect to use the proceeds received from the exercise of the warrants, if any, for general working capital purposes. However, AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC will be entitled to exercise up to 5,200,000 warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. In the event that AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., or New Millennium Partners II, LLC exercise the warrants on a cashless basis, then we will not receive any proceeds from the exercise of those warrants. In addition, we have received gross proceeds $700,000 from the sale of the secured convertible notes and the investors are obligated to provide us with an additional $1,300,000; $600,000 within five days of the filing of this registration statement, and $700,000 within five days of this prospectus being declared effective. The proceeds received from the sale of the secured convertible notes will be used for business development purposes, working capital needs, pre-payment of interest, payment of consulting and legal fees and purchasing inventory. Over-The-Counter Bulletin Board Symbol..................... RCAA
The above information regarding common stock to be outstanding after the offering is based on 29,595,813 shares of common stock outstanding as of July 20, 2005 and assumes the subsequent conversion of our issued secured convertible notes and exercise of warrants by our selling stockholders. EXPLANATORY NOTE: ON JUNE 23, 2005, WE ENTERED INTO A SECURITIES PURCHASE AGREEMENT WITH FOUR ACCREDITED INVESTORS. ANY ISSUANCE OF SHARES OF COMMON STOCK PURSUANT TO THIS AGREEMENT THAT WOULD REQUIRE US TO ISSUE SHARES OF COMMON STOCK IN EXCESS OF OUR AUTHORIZED CAPITAL IS CONTINGENT UPON US OBTAINING SHAREHOLDER 4 APPROVAL TO INCREASE OUR AUTHORIZED SHARES OF COMMON STOCK FROM 75,000,000 TO 150,000,000 AND FILING THE CERTIFICATE OF AMENDMENT TO OUR CERTIFICATE OF INCORPORATION. ON JULY 22, 2005, WE FILED A PRELIMINARY PROXY STATEMENT WITH THE SECURITIES AND EXCHANGE COMMISSION, WHICH IS CURRENTLY BEING REVIEWED, ASKING A MAJORITY OF OUR SHAREHOLDERS TO AUTHORIZE THE INCREASE IN OUR AUTHORIZED SHARES OF COMMON STOCK. IF A MAJORITY OF OUR SHAREHOLDERS APPROVE AN INCREASE IN OUR AUTHORIZED SHARES OF COMMON STOCK, WE INTEND ON FILING THE CERTIFICATE OF AMENDMENT TO OUR CERTIFICATE OF INCORPORATION IMMEDIATELY FOLLOWING OUR SHAREHOLDER MEETING. WE ARE REGISTERING 40,000,000 SHARES OF COMMON STOCK PURSUANT TO THIS PROSPECTUS THAT ARE UNDERLYING THE SECURED CONVERTIBLE NOTES AND WARRANTS ISSUED IN CONNECTION WITH THE SECURITIES PURCHASE AGREEMENT. UPON FILING THE CERTIFICATE OF AMENDMENT, WE WILL AMEND THIS PROSPECTUS TO INCLUDE ADDITIONAL SHARES OF COMMON STOCK THAT ARE ISSUABLE PURSUANT TO THE SECURITIES PURCHASE AGREEMENT. JUNE 2005 SECURITIES PURCHASE AGREEMENT To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with four accredited investors on June 23, 2005 for the sale of (i) $2,000,000 in secured convertible notes and (ii) warrants to buy 8,000,000 shares of our common stock. This prospectus relates to the resale of the common stock underlying these secured convertible notes and warrants. The investors are obligated to provide us with an aggregate of $2,000,000 as follows: o $700,000 was disbursed on June 23, 2005; o $600,000 will be disbursed within five days of the filing of this registration statement; and o $700,000 will be disbursed within five days of the effectiveness of this prospectus. Accordingly, we have received a total of $700,000 pursuant to the Securities Purchase Agreement. The secured convertible notes bear interest at 10%, mature three years from the date of issuance, and are convertible into our common stock, at the selling stockholders' option, at the lower of (i) $0.21 or (ii) 50% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. Accordingly, there is in fact no limit on the number of shares into which the notes may be converted. As of July 26, 2005, the average of the three lowest intraday trading prices for our common stock during the preceding 20 trading days as reported on the Over-The-Counter Bulletin Board was $.19 and, therefore, the conversion price for the secured convertible notes was $.095. Based on this conversion price, the $2,000,000 secured convertible notes, excluding interest, were convertible into 21,052,632 shares of our common stock. AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and New Millennium Partners II, LLC have contractually agreed to restrict their ability to convert or exercise their warrants and receive shares of our common stock such that the number of shares of common stock held by them and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. See the "Selling Stockholders" and "Risk Factors" sections for a complete description of the secured convertible notes. 5 RISK FACTORS This investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus. If any of the following risks actually occur, our business, operating results and financial condition could be harmed and the value of our stock could go down. This means you could lose all or a part of your investment. RISKS RELATING TO OUR BUSINESS: WE HAVE A HISTORY OF LOSSES WHICH MAY CONTINUE, AND MAY NEGATIVELY IMPACT OUR ABILITY TO ACHIEVE OUR BUSINESS OBJECTIVES. We incurred net losses of $2,542,770 and $1,698,498 for the years ended June 30, 2004 and 2003, respectively. For the nine months ended March 31, 2005, we incurred a net loss of $2,397,627. We cannot assure you that we can achieve or sustain profitability on a quarterly or annual basis in the future. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable. Revenues and profits, if any, will depend upon various factors, including whether we will be able to continue expansion of our revenue. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us. IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING, OUR BUSINESS OPERATIONS WILL BE HARMED AND IF WE DO OBTAIN ADDITIONAL FINANCING, OUR THEN EXISTING SHAREHOLDERS MAY SUFFER SUBSTANTIAL DILUTION. We will require additional funds to sustain and expand our sales and marketing activities. We anticipate that we will require up to approximately $2,000,000 to fund our continued operations for the next twelve months from the date of this prospectus, depending on revenues from operations. Additional capital will be required to effectively support the operations and to otherwise implement our overall business strategy. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations. Any additional equity financing may involve substantial dilution to our then existing shareholders. OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS STATED THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN, WHICH MAY HINDER OUR ABILITY TO OBTAIN FUTURE FINANCING. In their report dated September 2, 2004 on our financial statements as of and for the year ended June 30, 2004, our independent registered public accounting firm stated that our recurring losses from operations and our accumulated deficit as of June 30, 2004 raised substantial doubt about our ability to continue as a going concern. Since June 30, 2004, we have continued to experience net operating losses. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining loans and grants from various financial institutions where possible. Our continued net operating losses and stockholders' deficiency increase the difficulty in meeting such goals and there can be no assurances that such methods will prove successful. IF WE ARE UNABLE TO RETAIN THE SERVICES OF MESSRS. DAVIES AND DAVIES OR IF WE ARE UNABLE TO SUCCESSFULLY RECRUIT QUALIFIED PERSONNEL HAVING EXPERIENCE IN BUSINESS, WE MAY NOT BE ABLE TO CONTINUE OUR OPERATIONS. Our success depends to a significant extent upon the continued service of Messrs. Gordon Davies and Michael Davies, our current officers and directors. Loss of the services of either Messrs. Davies' could have a material adverse effect on our growth, revenues, and prospective business. In addition, in order to successfully implement and manage our business plan, we will be dependent upon, among other things, successfully recruiting qualified personnel having experience in business. Competition for qualified individuals is intense. There can be no assurance that we will be able to find, attract and retain existing employees or that we will be able to find, attract and retain qualified personnel on acceptable terms. 6 MANY OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER RESOURCES THAN WE DO AND THOSE ADVANTAGES COULD MAKE IT DIFFICULT FOR US TO COMPETE WITH THEM. The asphalt and concrete lubricant industry is extremely competitive and includes several companies that have achieved substantially greater market shares than we have, and have longer operating histories, have larger customer bases, and have substantially greater financial, development and marketing resources than we do. If overall demand for our products should decrease, it could have a materially adverse affect on our operating results. Our Trademark and Other Intellectual Property Rights May not be Adequately Protected Outside the United States, Resulting in Loss of Revenue. We believe that our trademarks, whether licensed or owned by us, and other proprietary rights are important to our success and our competitive position. In the course of our international expansion, we may, however, experience conflict with various third parties who acquire or claim ownership rights in certain trademarks. We cannot assure that the actions we have taken to establish and protect these trademarks and other proprietary rights will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as a violation of the trademarks and proprietary rights of others. Also, we cannot assure you that others will not assert rights in, or ownership of, trademarks and other proprietary rights of ours or that we will be able to successfully resolve these types of conflicts to our satisfaction. In addition, the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States. RISKS RELATING TO OUR CURRENT FINANCING ARRANGEMENT: THERE ARE A LARGE NUMBER OF SHARES UNDERLYING OUR SECURED CONVERTIBLE NOTES AND WARRANTS THAT MAY BE AVAILABLE FOR FUTURE SALE AND THE SALE OF THESE SHARES MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK. As of July 20, 2005, we had 29,595,813 shares of common stock issued and outstanding, secured convertible notes outstanding that may be converted into an estimated 7,368,422 shares of common stock at current market prices and outstanding warrants to purchase 2,800,000 shares of common stock. Additionally, we have an obligation to sell secured convertible notes that may be converted into an estimated 13,684,211 shares of common stock at current market prices and issue warrants to purchase 5,200,000 shares of common stock in the near future. In addition, the number of shares of common stock issuable upon conversion of the outstanding secured convertible notes may increase if the market price of our stock declines. All of the shares, including all of the shares issuable upon conversion of the secured convertible notes and upon exercise of our warrants, may be sold without restriction. The sale of these shares may adversely affect the market price of our common stock. THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR SECURED CONVERTIBLE NOTES COULD REQUIRE US TO ISSUE A SUBSTANTIALLY GREATER NUMBER OF SHARES, WHICH WILL CAUSE DILUTION TO OUR EXISTING STOCKHOLDERS. Our obligation to issue shares upon conversion of our secured convertible notes is essentially limitless. The following is an example of the amount of shares of our common stock that are issuable, upon conversion of our secured convertible notes (excluding accrued interest), based on market prices 25%, 50% and 75% below the market price, as of July 25, 2005 of $0.19. Number of % of % Below Price Per With Discount of Shares Outstanding Market Share at 50% Issuable Stock - ------- --------- ------------- --------- ----------- 25% $.1425 $.07125 28,070,176 48.68% 50% $.095 $.0475 42,105,264 58.72% 75% $.0475 $.02375 84,210,527 73.99% As illustrated, the number of shares of common stock issuable upon conversion of our secured convertible notes will increase if the market price of our stock declines, which will cause dilution to our existing stockholders. 7 THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR SECURED CONVERTIBLE NOTES MAY HAVE A DEPRESSIVE EFFECT ON THE PRICE OF OUR COMMON STOCK. The secured convertible notes are convertible into shares of our common stock at a 50% discount to the trading price of the common stock prior to the conversion. The significant downward pressure on the price of the common stock as the selling stockholders convert and sell material amounts of common stock could have an adverse effect on our stock price. In addition, not only the sale of shares issued upon conversion or exercise of secured convertible notes and warrants, but also the mere perception that these sales could occur, may adversely affect the market price of the common stock. THE ISSUANCE OF SHARES UPON CONVERSION OF THE SECURED CONVERTIBLE NOTES AND EXERCISE OF OUTSTANDING WARRANTS MAY CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION TO OUR EXISTING STOCKHOLDERS. The issuance of shares upon conversion of the secured convertible notes and exercise of warrants may result in substantial dilution to the interests of other stockholders since the selling stockholders may ultimately convert and sell the full amount issuable on conversion. Although AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC may not convert their secured convertible notes and/or exercise their warrants if such conversion or exercise would cause them to own more than 4.99% of our outstanding common stock, this restriction does not prevent AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC from converting and/or exercising some of their holdings and then converting the rest of their holdings. In this way, AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC could sell more than this limit while never holding more than this limit. There is no upper limit on the number of shares that may be issued which will have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock, including investors in this offering. IN THE EVENT THAT OUR STOCK PRICE DECLINES, THE SHARES OF COMMON STOCK ALLOCATED FOR CONVERSION OF THE SECURED CONVERTIBLE NOTES AND REGISTERED PURSUANT TO THIS PROSPECTUS MAY NOT BE ADEQUATE AND WE MAY BE REQUIRED TO FILE A SUBSEQUENT REGISTRATION STATEMENT COVERING ADDITIONAL SHARES. IF THE SHARES WE HAVE ALLOCATED AND ARE REGISTERING HEREWITH ARE NOT ADEQUATE AND WE ARE REQUIRED TO FILE AN ADDITIONAL REGISTRATION STATEMENT, WE MAY INCUR SUBSTANTIAL COSTS IN CONNECTION THEREWITH. Based on our current market price and the potential decrease in our market price as a result of the issuance of shares upon conversion of the secured convertible notes, we have made a good faith estimate as to the amount of shares of common stock that we are required to register and allocate for conversion of the secured convertible notes. Accordingly, we have allocated and registered 37,000,000 shares to cover the conversion of the secured convertible notes. In the event that our stock price decreases, the shares of common stock we have allocated for conversion of the secured convertible notes and are registering hereunder may not be adequate. If the shares we have allocated to the registration statement are not adequate and we are required to file an additional registration statement, we may incur substantial costs in connection with the preparation and filing of such registration statement. IF WE ARE REQUIRED FOR ANY REASON TO REPAY OUR OUTSTANDING SECURED CONVERTIBLE NOTES, WE WOULD BE REQUIRED TO DEPLETE OUR WORKING CAPITAL, IF AVAILABLE, OR RAISE ADDITIONAL FUNDS. OUR FAILURE TO REPAY THE SECURED CONVERTIBLE NOTES, IF REQUIRED, COULD RESULT IN LEGAL ACTION AGAINST US, WHICH COULD REQUIRE THE SALE OF SUBSTANTIAL ASSETS. In June 2005, we entered into a Securities Purchase Agreement for the sale of an aggregate of $2,000,000 principal amount of secured convertible notes. The secured convertible notes are due and payable, with 10% interest, three years from the date of issuance, unless sooner converted into shares of our common stock. Although we currently have $700,000 secured convertible notes outstanding, the investors are obligated to purchase additional secured convertible notes in the aggregate of $1,300,000. In addition, any event of default such as our failure to repay the principal or interest when due, our failure to issue shares of common stock upon conversion by the holder, our failure to timely file a registration statement or have such registration statement declared effective, breach of any covenant, representation or warranty in the Securities Purchase Agreement or related convertible note, the assignment or appointment of a receiver to control a substantial part of our property or business, the filing of a money judgment, writ or similar process against our company in excess of $50,000, the commencement of a bankruptcy, insolvency, 8 reorganization or liquidation proceeding against our company and the delisting of our common stock could require the early repayment of the secured convertible notes, including a default interest rate of 15% on the outstanding principal balance of the notes if the default is not cured with the specified grace period. We anticipate that the full amount of the secured convertible notes will be converted into shares of our common stock, in accordance with the terms of the secured convertible notes. If we were required to repay the secured convertible notes, we would be required to use our limited working capital and raise additional funds. If we were unable to repay the notes when required, the note holders could commence legal action against us and foreclose on all of our assets to recover the amounts due. Any such action would require us to curtail or cease operations. IF AN EVENT OF DEFAULT OCCURS UNDER THE SECURITIES PURCHASE AGREEMENT, SECURED CONVERTIBLE NOTES, WARRANTS, SECURITY AGREEMENT OR INTELLECTUAL PROPERTY SECURITY AGREEMENT, THE INVESTORS COULD TAKE POSSESSION OF ALL OUR GOODS, INVENTORY, CONTRACTUAL RIGHTS AND GENERAL INTANGIBLES, RECEIVABLES, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER, AND INTELLECTUAL PROPERTY. In connection with the Securities Purchase Agreements we entered into in June 2005, we executed a Security Agreement and an Intellectual Property Security Agreement in favor of the investors granting them a first priority security interest in all of our goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual property. The Security Agreements and Intellectual Property Security Agreements state that if an even of default occurs under the Securities Purchase Agreement, Secured Convertible Notes, Warrants, Security Agreements or Intellectual Property Security Agreements, the Investors have the right to take possession of the collateral, to operate our business using the collateral, and have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private sale or otherwise to satisfy our obligations under these agreements. RISKS RELATING TO OUR COMMON STOCK: IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY MARKET. Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: o that a broker or dealer approve a person's account for transactions in penny stocks; and o the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must: o obtain financial information and investment experience objectives of the person; and o make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. 9 The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: o sets forth the basis on which the broker or dealer made the suitability determination; and o that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. 10 USE OF PROCEEDS This prospectus relates to shares of our common stock that may be offered and sold from time to time by the selling stockholders. We will not receive any proceeds from the sale of shares of common stock in this offering. However, we will receive the sale price of any common stock we sell to the selling stockholder upon exercise of the warrants. We expect to use the proceeds received from the exercise of the warrants, if any, for general working capital purposes. However, AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC will be entitled to exercise up to 5,200,000 warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. In the event that AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., or New Millennium Partners II, LLC exercise the warrants on a cashless basis, then we will not receive any proceeds from the exercise of those warrants. In addition, we have received gross proceeds $700,000 from the sale of the secured convertible notes and the investors are obligated to provide us with an additional $1,300,000; $600,000 within five days of the filing of this registration statement, and $700,000 within five days of this prospectus being declared effective. The proceeds received from the sale of the secured convertible notes will be used for business development purposes, working capital needs, pre-payment of interest, payment of consulting and legal fees and purchasing inventory. SECURITIES PURCHASE AGREEMENT To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with four accredited investors on June 23, 2005 for the sale of (i) $2,000,000 in secured convertible notes and (ii) warrants to purchase 8,000,000 shares of our common stock. This prospectus relates to the resale of the common stock underlying these secured convertible notes and warrants. The investors are obligated to provide us with an aggregate of $2,000,000 as follows: o $700,000 was disbursed on June 23, 2005; o $600,000 will be disbursed within five days of the filing of this registration statement; and o $700,000 will be disbursed within five days of the effectiveness of this prospectus. Accordingly, we have received a total of $700,000 pursuant to the Securities Purchase Agreement. The secured convertible notes bear interest at 10%, mature three years from the date of issuance, and are convertible into our common stock, at the investors' option, at the lower of: o $0.21; or o 50% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. We have a call option under the terms of the secured convertible notes. The call option provides us with the right to prepay all of the outstanding secured convertible notes at any time, provided we are not in default and our stock is trading at or below $.21 per share. Prepayment of the notes is to be made in cash equal to either (i) 125% of the outstanding principal and accrued interest for prepayments occurring within 30 days following the issue date of the secured convertible notes; (ii) 135% of the outstanding principal and accrued interest for prepayments occurring between 31 and 60 days following the issue date of the secured convertible notes; and (iii) 150% of the outstanding principal and accrued interest for prepayments occurring after the 60th day following the issue date of the secured convertible notes. Our right to repay the notes is exercisable on not less than ten trading days prior written notice to the holders of the secured convertible notes. For notice purposes, a trading day is any day on which our common stock is traded for any period on the OTC Bulletin Board. Notwithstanding the notice of prepayment, the holders of the secured convertible notes have the right at all times to convert all or any portion of the secured convertible notes prior to payment of the prepayment amount. 11 We also have a partial call option under the terms of the secured convertible notes in any month in which the current price of our common stock is below $0.25. Under the terms of the partial call option, we have the right to pay the outstanding principal amount of the secured convertible notes plus one-month's interest for that month, which will stay any conversions of the secured convertible notes by the holders for that month. The principal amount of the secured convertible notes to be repaid is determined by dividing the then outstanding principal amount of the notes by the maturity of the notes in months, or 36, multiplied by 104%. The full principal amount of the secured convertible notes is due upon default under the terms of secured convertible notes. In addition, we have granted the investors a security interest in substantially all of our assets and intellectual property and registration rights. We are liable for breach of any covenant, representation or warranty contained in the Securities Purchase Agreement for a period of two years from the date that the investors distributed the final $700,000. In the event that we breach any representation or warranty regarding the condition of our company as set forth in the Securities Purchase Agreement, we are liable to pay liquidated damages in shares or cash, at the election of the investors, equal to three percent of the outstanding amount of the secured convertible notes per month plus accrued and unpaid interest. In the event that we breach any covenant as set forth in the Securities Purchase Agreement, including the failure to comply with blue sky laws, timely file all public reports, use the proceeds from the sale of the secured convertible notes in the agreed upon manner, obtain written consent from the investors to negotiate or contract with a party for additional financing, reserve and have authorized the required number of shares of common stock or the maintenance of our shares of common stock on an exchange or automated quotation system, then we are liable to pay liquidated damages in shares or cash, at the election of the investors, equal to three percent of the outstanding amount of the secured convertible notes per month plus accrued and unpaid interest. In connection with the Securities Purchase Agreement, we executed a Security Agreement and an Intellectual Property Security Agreement in favor of the investors granting them a first priority security interest in all of our goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual property. Under the Security Agreement and Intellectual Property Security Agreement, events of default occur upon: o The occurrence of an event of default (as defined in the secured convertible notes) under the secured convertible notes; o Any representation or warranty we made in the Security Agreement or in the Intellectual Property Security Agreement shall prove to have been incorrect in any material respect when made; o The failure by us to observe or perform any of our obligations under the Security Agreement or in the Intellectual Property Security Agreement for ten (10) days after receipt of notice of such failure from the investors; and o Any breach of, or default under, the Warrants. An event of default under the secured convertible notes occurs if we: o Fail to pay the principal or interest when due; o Do not issue shares of common stock upon receipt of a conversion notice; o Fail to file a registration statement within 45 days after June 23, 2005 or fail to have the registration statement effective within 120 days after June 23, 2005; o Breach any material covenant or other material term or condition in the secured convertible notes or the Securities Purchase Agreement; o Breach any representation or warranty made in the Securities Purchase Agreement or other document executed in connection therewith; o Apply for or consent to the appointment of a receiver or trustee for us or any of our subsidiaries or for a substantial part of our of our subsidiaries' property or business, or such a receiver or trustee shall otherwise be appointed; o Have any money judgment, writ or similar process shall be entered or filed against us or any of our subsidiaries or any of our property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the investors; o Institute or have instituted against us or any of our subsidiaries any bankruptcy, insolvency, reorganization or liquidation proceedings or 12 other proceedings for relief under any bankruptcy law or any law for the relief of debtors; o Fail to maintain the listing of our common stock on one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange; or o Default under any other secured convertible note issued pursuant to the Securities Purchase Agreement. Upon occurrence of any event of default under either the Security Agreement or the Intellectual Property Security Agreement, the investors shall have the right to exercise all of the remedies conferred under the Security Agreement, the Intellectual Property and under the secured convertible notes, and the investors shall have all the rights and remedies of a secured party under the Uniform Commercial Code and/or any other applicable law (including the Uniform Commercial Code of any jurisdiction in which any collateral is then located). The investors shall have the following rights and powers: o To take possession of the collateral and, for that purpose, enter, with the aid and assistance of any person, any premises where the collateral, or any part thereof, is or may be placed and remove the same, and we shall assemble the collateral and make it available to the investors at places which the investors shall reasonably select, whether at our premises or elsewhere, and make available to the investors, without rent, all of our respective premises and facilities for the purpose of the investors taking possession of, removing or putting the collateral in saleable or disposable form; and o To operate our business using the collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the investors may deem commercially reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon or notice to us or our right of redemption, which we expressly waived. Upon each such sale, lease, assignment or other transfer of collateral, the investors may, unless prohibited by applicable law which cannot be waived, purchase all or any part of the collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities by us, which we waived and released. The warrants are exercisable until five years from the date of issuance at a purchase price of $0.28 per share. The selling stockholders will be entitled to exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. In the event that the selling stockholder exercises the warrants on a cashless basis, then we will not receive any proceeds. In addition, the exercise price of the warrants will be adjusted in the event we issue common stock at a price below market, with the exception of any securities issued as of the date of this warrant or issued in connection with the secured convertible notes issued pursuant to the Securities Purchase Agreement, dated June 23, 2005. Upon the issuance of shares of common stock below the market price, the exercise price of the warrants will be reduced accordingly. The market price is determined by averaging the last reported sale prices for our shares of common stock for the five trading days immediately preceding such issuance as set forth on our principal trading market. The exercise price shall be determined by multiplying the exercise price in effect immediately prior to the dilutive issuance by a fraction. The numerator of the fraction is equal to the sum of the number of shares outstanding immediately prior to the offering plus the quotient of the amount of consideration received by us in connection with the issuance divided by the market price in effect immediately prior to the issuance. The denominator of such issuance shall be equal to the number of shares outstanding after the dilutive issuance. The conversion price of the secured convertible notes and the exercise price of the warrants may be adjusted in certain circumstances such as if we pay a stock dividend, subdivide or combine outstanding shares of common stock into a greater or lesser number of shares, or take such other actions as would otherwise result in dilution of the selling stockholder's position. The selling stockholders have contractually agreed to restrict their ability to convert their secured convertible notes or exercise their warrants and receive shares of our common stock such that the number of shares of common 13 stock held by them and their affiliates in the aggregate after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. A complete copy of the Securities Purchase Agreements and related documents are incorporated by reference as exhibits to our Form SB-2 registration statement relating to this prospectus. SAMPLE CONVERSION CALCULATION The number of shares of common stock issuable upon conversion of the secured convertible notes is determined by dividing that portion of the principal of the notes to be converted and interest, if any, by the conversion price. For example, assuming conversion of the $2,000,000 of secured convertible notes on July 26, 2005, at a conversion price of $0.095, the number of shares issuable upon conversion would be: $2,000,000/$0.095 = 21,052,632 shares The following is an example of the amount of shares of our common stock that are issuable, upon conversion of the principal amount of our secured convertible notes, based on market prices 25%, 50% and 75% below the market price as of July 25, 2005 of $0.19. Number % of % Below Price Per With Discount of Shares Outstanding Market Share at 50% Issuable Stock - ------- -------- ------------ ---------- ----------- 25% $.1425 $.07125 28,070,176 48.68% 50% $.095 $.0475 42,105,264 58.72% 75% $.0475 $.02375 84,210,527 73.99% MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is quoted on the OTC Bulletin Board under the symbol "RCAA." For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions. High($) Low ($) ------ ------- FISCAL YEAR 2004 First Quarter $ 0.85 0.44 Second Quarter 0.86 0.56 Third Quarter 0.80 0.41 Fourth Quarter 0.53 0.32 FISCAL YEAR 2005 First Quarter 0.49 0.30 Second Quarter 0.40 0.19 Third Quarter 0.38 0.21 Fourth Quarter 0.38 0.19 FISCAL YEAR 2006 First Quarter (1) 0.20 0.19 (1) As of July 25, 2005 14 HOLDERS As of July 20, 2005, we had approximately 680 holders of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. The transfer agent of our common stock is Computershare Trust Company, 350 Indiana Street, Suite 800, Golden, Colorado 80401. We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Some of the information in this prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. You should read statements that contain these words carefully because they: o discuss our future expectations; o contain projections of our future results of operations or of our financial condition; and o state other "forward-looking" information. We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors," "Business" and elsewhere in this prospectus. See "Risk Factors." GENERAL OVERVIEW We are a Colorado corporation that specializes in the production and sales of the AlderoxTM line of products including ASA-12TM, DCR TM, KR-7 TM, TSR TM, and ASA Cleaners. ASA-12TM is an asphalt release agent and DCR TM is an industrial chain lubricant. Both products were developed in response to the asphalt industry's need for effective, economical and environmentally friendly products. KR7TM is a concrete release agent we also developed to meet the industry's same needs. TSRTM was specifically designed as an environmentally friendly non-stick product for the oil sands industry to reduce the build-up of clay, lime and mud on the undercarriages and sides of transport vehicles and equipment. CRITICAL ACCOUNTING POLICIES We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following: Revenue Recognition - ------------------- We recognize revenue when merchandise is shipped to a customer in accordance with SEC Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB 104"). Stock-Based Compensation - ------------------------ We account for employee stock-based compensation under the "intrinsic value" method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), as opposed to the fair value method prescribed by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). Pursuant to the provisions of APB 25, we generally do not record an expense for the value of stock-based awards granted to employees. In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (Revised), "Share-Based Payment". This standard revised SFAS No. 123, APB Opinion No. 25 and related accounting interpretations and eliminates the use of the intrinsic value method for employee stock-based compensation. SFAS No. 123(R) requires compensation costs related to share-based payment transactions to be recognized in financial statements over the period that an employee 16 provides service in exchange for the award. The effective date of this standard for the Company will be January 1, 2006. We are currently assessing the impact that this new standard will have on our financial statements. RECENT ACCOUNTING PRONOUNCEMENTS In November 2004, the FASB has issued FASB Statement No. 151, "Inventory Costs, an Amendment of ARB No. 43, Chapter 4" ("FAS No. 151"). The amendments made by FAS No. 151 are intended to improve financial reporting by clarifying that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and by requiring the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004. The provisions of FAS No. 151 will be applied prospectively. We do not expect the adoption of FAS No. 151 to have a material impact on our consolidated financial position, results of operations or cash flows. In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant- date fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's second quarter of fiscal 2006. We are in process of evaluating the impact of this pronouncement on our financial statements. In December 2004, the FASB issued SFAS Statement No. 153, "Exchanges of Nonmonetary Assets." The Statement is an amendment of APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. We believe that the adoption of this standard will have no material impact on our financial statements. 17 In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments." The EITF reached a consensus about the criteria that should be used to determine when an investment is considered impaired, whether that impairment is other-than-temporary, and the measurement of an impairment loss and how that criteria should be applied to investments accounted for under SFAS No. 115, "ACCOUNTING IN CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES." EITF 03-01 also included accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. Additionally, EITF 03-01 includes new disclosure requirements for investments that are deemed to be temporarily impaired. In September 2004, the Financial Accounting Standards Board (FASB) delayed the accounting provisions of EITF 03-01; however the disclosure requirements remain effective for annual reports ending after June 15, 2004. We will evaluate the impact of EITF 03-01 once final guidance is issued. RESULTS OF OPERATIONS Our revenues are difficult to forecast and may vary significantly from quarter to quarter and year to year. In addition, our expense levels for each quarter are, to a significant extent, fixed in advance based upon our expectation as to the net revenues to be generated during that quarter. We therefore are generally unable to adjust spending in a timely manner to compensate for any unexpected shortfall in net revenues. Further as a result of these factors any delay in product introductions, whether due to internal delays or delays caused by third party difficulties, or any significant shortfall in demand in relation to our expectations, would have an almost immediate adverse impact on our operating results and on our ability to maintain profitability in a quarter. COMPARISON OF THE YEAR ENDED JUNE 30, 2004 WITH THE YEAR ENDED JUNE 30, 2003 We have incurred net losses for twelve months ended June 30, 2004 of $2,272,770 as compared to a net loss of $1,698,498 for the twelve months ended June 30, 2003. The losses for the twelve months ended June 30, 2004 and 2003 can be attributed in part to significant costs incurred in the introduction of our AlderoxTM line of products to the marketplace. We are optimistic that sales of our proprietary AlderoxTM line of products will continue to lead towards contracts which will begin to generate significant revenues to cover our operating expenses. The revenues for the twelve months ending June 30, 2003 are $261,235 and are from the sales of AlderoxTM products. The revenues from the twelve months ending June 30, 2004 are $289,218 and are from the sales of AlderoxTM products. The Cost of Goods Sold represents sixty four percent (64%) as compared to one hundred thirteen percent (113%) of sales for the twelve months ending June 30, 2003. The Costs of Goods are not consistent between years as a result of the varying sources, which created sales revenues in each year. Operating expenses consist primarily of general and administrative expenses. For the twelve months ended June 30, 2004 operating expenses totaled $1,774,600 as compared to $1,823,307 for the twelve months ended June 30, 2003. The decrease in operating expenses between the years of $48,707 can be primarily attributed to the Distribution and Manufacturing Agreements with North American Systems, Inc. Interest expense and other finance charges decreased from $106,454 for the twelve months ended June 30, 2003 to $45,622 for the twelve months ending June 30, 2004. The decrease between years can be attributed to the decrease in Notes payable between years 2003 and 2004. COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2005 WITH THE THREE MONTHS ENDED MARCH 31, 2004 We have incurred losses of $1,794,105 for the three months ended March 31, 2005 as compared to a net loss of $221,153 for the three months ended March 31, 2004. These are primarily non cash losses. The Cost of goods sold represents one hundred thirty four percent (134%) of net revenue for the three months ending March 31, 2005. The cost of sales for the three months ending March 31, 2004 was forty seven percent (47%) of net revenue. Revenues for both of the periods were derived from the sales of the Alderox(R) line of products. 18 Operating expenses consist primarily of general and administrative expenses. For the three months ended March 31, 2005 operating expenses totaled $1,766,895 as compared to $180,368 for the three months ended March 31, 2004. The increase in general and administrative expenses is mainly due to stock issuances for consulting fees and the write off of bad debt of $958,968 from North American Systems, Inc. During the nine months ended March 31, 2005 the Company recognized a $21,975 loss on the settlement of debts. Interest expense increased during the three months ended March 31, 2005 by $18,822 over the same period in 2004. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2005, we had a working capital deficit of $1,097,607. This compares to a working capital deficit of $435,308 as of March 31, 2004. The principal use of cash for the three months ended March 31, 2005 and 2004 was to fund the net loss from operations. We received cash from issuance of notes amounting to $160,501 during the three month period ending March 31, 2005. While we have raised capital to meet our working capital and financing needs in the past, additional financing is required in order to meet our current and projected cash flow deficits from operations and development. By adjusting our operations and development to the level of capitalization, we believe we have sufficient capital resources to meet projected cash flow deficits through the next twelve months. However, if thereafter, we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations, liquidity and financial condition. Our independent certified public accountant has stated in their report, dated as of September 2, 2004, that as a result of accumulated deficit of $11,112,519 as of June 30, 2004 and net losses of $2,542,770 and $1,698,498 for the years ended June 30, 2004 and 2003 respectively, these factors among others may raise substantial doubt about our ability to continue as a going concern. To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with four accredited investors on June 23, 2005 for the sale of (i) $2,000,000 in secured convertible notes and (ii) warrants to buy 8,000,000 shares of our common stock. The investors are obligated to provide us with an aggregate of $2,000,000 as follows: o $700,000 was disbursed on June 23, 2005; o $600,000 will be disbursed within five days of the filing of this registration statement; and o $700,000 will be disbursed within five days of the effectiveness of this prospectus. Accordingly, we have received a total of $700,000 pursuant to the Securities Purchase Agreement. The proceeds received from the sale of the secured convertible notes were used for business development purposes, working capital needs, pre-payment of interest, payment of consulting and legal fees and purchasing inventory. The secured convertible notes bear interest at 10%, mature three years from the date of issuance, and are convertible into our common stock, at the investors' option, at the lower of (i) $0.21 or (ii) 50% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. The full principal amount of the secured convertible notes is due upon default under the terms of secured convertible notes. The warrants are exercisable until five years from the date of issuance at a purchase price of $0.28 per share. In 19 addition, the conversion price of the secured convertible notes and the exercise price of the warrants will be adjusted in the event that we issue common stock at a price below the fixed conversion price, below market price, with the exception of any securities issued in connection with the Securities Purchase Agreement. The conversion price of the secured convertible notes and the exercise price of the warrants may be adjusted in certain circumstances such as if we pay a stock dividend, subdivide or combine outstanding shares of common stock into a greater or lesser number of shares, or take such other actions as would otherwise result in dilution of the selling stockholder's position. The selling stockholders have contractually agreed to restrict their ability to convert or exercise their warrants and receive shares of our common stock such that the number of shares of common stock held by them and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. In addition, we have granted the investors a security interest in substantially all of our assets and intellectual property and registration rights. Since the conversion price will be less than the market price of the common stock at the time the secured convertible notes are issued, we anticipate recognizing a charge relating to the beneficial conversion feature of the secured convertible notes during the quarter in which they are issued, including the fourth quarter of fiscal 2005 when $700,000 of secured convertible notes were issued. We will still need additional investments in order to continue operations to cash flow break even. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and the downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations. ACQUISITION OR DISPOSITION OF PLANT AND EQUIPMENT Other than as provided herein, we do not anticipate the sale or acquisition of any significant property, plant or equipment during the next twelve months. We do not anticipate the acquisition of any significant property, plant or equipment during the next 12 months. INFLATION In the opinion of management, inflation has not had a material effect on our operations. 20 BUSINESS INTRODUCTION We are a Colorado corporation that specializes in the production and sales of the AlderoxTM line of products including ASA-12TM, DCR TM, KR-7 TM, TSR TM, and ASA Cleaners. ASA-12TM is an asphalt release agent and DCR TM is an industrial chain lubricant. Both products were developed in response to the asphalt industry's need for effective, economical and environmentally friendly products. KR7TM is a concrete release agent we also developed to meet the industry's same needs. TSRTM was specifically designed as an environmentally friendly non-stick product for the oil sands industry to reduce the build-up of clay, lime and mud on the undercarriages and sides of transport vehicles and equipment. We were originally formed in 1976 under the name Vac-Tec Systems, Inc. and reorganized as a public shell corporation without significant assets in early 1997, after we ceased operations in the glass vacuum coating business. PRODUCTS AlderoxTM ASA-12TM, DCRTM, KR-7TM, TSRTM and ASA Cleaners - --------------------------------------------------------- We manufacture, sell and service the AlderoxTM line of products throughout the United States, Canada, the United Kingdom and India through independent distributors and sales representatives. AlderoxTM ASA-12TM is a ready-to-use product that allows asphalt to slide easily from truck beds. AlderoxTM DCRTM is a ready-to-use industrial chain lubricant used to reduce start-up power requirements while ensuring that highly polymerized asphalt mixes do not build-up on industrial asphalt drag chains or slats. AlderoxTM KR7TM is a ready-to-use product that allows concrete to easily release from concrete molds and forms. We believe the advantages of the AlderoxTM line of products over its competitors are as follows: - 100% biodegradable - Completely non-hazardous - Easily applied - No negative impact to equipment or asphalt/concrete - Exclusive filming technology AlderoxTM ASA-12TM, DCRTM, KR7TM, TSRTM and ASA Cleaners were designed for use in the asphalt, concrete and oil sands industries. The products are manufactured by RCAI and the formulations are patented in the United States.. Our manufacturing facility is located in West Vally City, Utah. SALES AND MARKETING Our marketing program includes the development of international markets and support of existing distributors and independent sales representatives throughout the United States, Canada, the United Kingdom and India This support includes; the development of compliance data, sales materials, product demonstrations and sales leads. Compliance Data is performance data we generated from on-site pilot testing. This data specifically shows the characteristics of asphalt release from trucks prior to applying AlderoxTM ASA-12TM and after applying AlderoxTM ASA-12TM in comparison with other competitive products currently used by our potential customers.. RAW MATERIALS Our products are produced by using 100% natural ingredients. The formulas used in our AlderoxTM line of products are patented in the United States. 21 COMPETITION We compete with over 60 other companies who have competing products. Our competition consists of companies that are mainly smaller than us and with less financial resources who operate on a strictly regional basis and some companies who are larger, such as Zep Industries and the ChemMark Corporation, with greater financial resources and larger organizations. Competition in this industry focuses on price, quality, features, performance, specialization, expertise, reliability, technology, customer relationships, marketing, advertising, sales, publicity, distribution, serving particular market niches, and appealing to particular consumers. GOVERNMENTAL REGULATION There are certain government regulations through state approvals for asphalt release agents on a state by state basis. Each state has their own approval process, with some being more stringent than others. This process is designed to assure the states that the products that are approved meet certain environmental regulations. Our customers are responsible for compliance with these regulations and we have not assumed any responsibility for compliance as a provider of products to our customers. Not all of the individual states require approval. We are not aware of any government regulations that are required prior to product sale and use of concrete release agents such as AlderoxTM KR7TM, industrial chain lubricants such as AlderoxTM DCRTM, non-stick undercoatings and coatings, such as AlderoxTM TSRTM or cleaners, such as our ASA Cleaners. We have obtained government approval for all of Canada, the United Kingdom and India for both Alderox(TM) ASA-12(TM) and KR7(TM). ASA-12(TM) and KR7(TM) have been recognized as the national standard for asphalt and concrete release agents in Canada and now carry the Canadian Environmental Choice Eco-Logo. We will apply for national standard Eco-Logo status for TSR(TM) and DCR(TM) in the future. We are not aware of any Canadian government approvals necessary for the sale of TSR(TM), DCR(TM) or ASA cleaners. In the United States, we are approved for use in; Washington, Oregon, Idaho, California, Utah, Colorado, Arizona, New Mexico, Oklahoma, Alaska, Hawaii, Florida, Georgia, Tennessee, Pennsylvania, Connecticut, New Jersey and West Virginia. We have applied for approval in; Kansas, Nebraska, Wyoming, Alabama, Arkansas, Louisiana, Missouri, Mississippi, Nevada, New York, North Carolina, South Carolina, Ohio, Virginia, Delaware, Maryland, Vermont, Rhode Island, New Hampshire and Massachusetts. Initial steps are being taken to apply for approval in; Maine, DC, Kentucky, Wisconsin, Illinois, Indiana, Michigan, North Dakota, South Dakota and Texas. We are not aware of any United States government approvals necessary for the sales of Alderox(TM) KR7(TM), DCR(TM) or ASA Cleaners. PATENTS AND PROPRIETARY TECHNOLOGY It is our intention to vigorously protect our proprietary property through the filing of U.S. and international patent applications, both broad and specific, where necessary and reasonable. We believe we will attain both strong and broad patent protection for our technologies. We intend to protect our inventions in all major countries where significant markets for our product may be created. It is our intention that all our products be protected under various pending patents, issued patents, copyrights and trademarks. We have the policy of disclosing our proprietary information only under a confidentiality agreement. This agreement has a special clause regarding ownership by us of all inventions related to, or based in any way upon, our technologies. 22
FILINGS - ----------------------------------------------------- ---------------------------- ------------- --------------------- Application or Patent No. Registration or Patent Country Filing Date - ----------------------------------------------------- ---------------------------- ------------- --------------------- Release Agent Formulas and Methods Pat. #6,902,606 USA June 7, 2005 - ----------------------------------------------------- ---------------------------- ------------- --------------------- Release Agent Formulas and Methods App. #2896/DELNP/2004 India Feb. 26, 2004 - ----------------------------------------------------- ---------------------------- ------------- --------------------- Release Agent Formulas and Methods App. #04775812.3 EPO Jan, 18, 2005 - ----------------------------------------------------- ---------------------------- ------------- --------------------- Release Agent Formulas and Methods App. #PCT/US04/ 05953 Multiple Feb. 26, 2004 - ----------------------------------------------------- ---------------------------- ------------- --------------------- Registration or Trademark Application or Registration No. Country Filing Date Alderox Registration #2905209 USA Nov. 23, 2004 Alderox KR7 Application #78401951 USA Apr. 14, 2004 Application #1214444 Canada Apr. 23, 2004 Application #003775822 EU Apr. 19, 2004 Application #719884 N. Zealand Oct. 14, 2004 Registration #1025053 Australia Oct. 13, 2004 Application # 1315205 India Oct, 18, 2004 ASA 12 Registration #2905208 USA Nov. 23, 2004 Application #1214445 Canada Apr. 23, 2004 Application # 003767357 EU Apr. 15, 2004 Alderox TSR Application #78401946 USA Apr. 14, 2004 Application #1214438 Canada Apr. 23, 2004 Application # 003778156 EU Apr. 19, 2004 Registration #1025054 Australia Feb. 14, 2005 Application # 1315206 India Oct. xx, 2004 Registration # 719883 N. Zealand Apr. 14, 2004
RESEARCH AND DEVELOPMENT The technology and products sold by us are in the early stages of market acceptance. As a result, in order to accomplish a sale, a customer will typically require a significant research and development effort, in the form of testing and trials. These costs are funded in part by us, and expensed as a sales expense. In addition, we believe there may be additional undiscovered applications for the AlderoxTM line of products. We are currently exploring additional markets. EMPLOYEES At July 1, 2005, we had approximately seven employees, including two in management, two in administrative, two in sales, and one in production and shipping. There exist no organized labor agreements or union agreements between 23 our employees and us. We have employment agreements with our executive officers, Gordon Davies and Michael Davies. We believe that our relations with our employees are good. DESCRIPTION OF PROPERTIES Our principal executive offices are located at 23832 Rockfield Boulevard, Suite 275, Lake Forest, California 92630, and our telephone number is (949) 609-0590. We occupy approximately 876 square feet of office space under a month to month informal lease agreement. The monthly rent is $1,850. We believe that our current office space and facilities are sufficient to meet our present needs and do not anticipate any difficulty securing alternative or additional space, as needed, on terms acceptable to us. Our manufacturing warehouse is located at 3752 West 2270 South, West Valley City, Utah 84120. We are under a 30 month lease commencing March 15, 2005 for this 9,020 square feet warehouse. Our monthly lease payments are $5,067. LEGAL PROCEEDINGS From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as disclosed below, we are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results. A former employee sued us for a breach of contract claim arising from an employment agreement entered into between the ex- employee and us on April 7, 2003. The original complaint was filed on Feb. 5, 2004 and asserts the following causes of action: breach of contract, breach of covenant of good faith and fair dealing, and fraud. The plaintiff is demanding compensatory and punitive damages as well as attorneys' fees and costs. We filed our Cross-Complaint on April 15, 2004 alleging breach of contract, negligence, intentional misrepresentation, rescission, and declaratory relief. An amended Cross-Complaint was filed July 6, 2004. The case was settled during the period ending December 31, 2004 and we settled for $1,000. CASE #05CC05777 FILED IN THE SUPERIOR COUNT OF CALIFORNIA SANTA ANA ON MAY 18, 2005. Pacific Business Capital has sued us and our officers, Gordon Davies and Michael Davies, to recover an $55,000 debt allegedly owed under a supposed "partially written and partially oral" agreement by which the total of $80,000 was loaned to us. We filed a Demurrer to all causes of action of complaint filed by plaintiff Pacific Business Capital Corporation. CASE # 050907049 FILED IN THE THIRD JUDICIAL DISTRICT COURT SALT LAKE COUNTY, STATE OF UTAH ON APRIL 15, 2005 Jamestown, L.C. has sued us for breach of a property lease agreement dated May 30, 2002 in the amount of $54,272.58, plus interest and attorney fees and costs of court and $54,272.58 under the second cause of action, unjust enrichment/quantum merit. We filed an Order Staying All Proceedings Pending Mediation and Arbitration and are currently awaiting an arbitration date. 24 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS Name Age Position - -------------------------------------------------------------------------------- Gordon W. Davies 37 President and Director Michael C. Davies 35 Chief Financial Officer, Vice President and Director Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Currently there are three seats on our board of directors, although only two are currently filled. Directors serve without cash compensation and without other fixed remuneration. Officers are elected by the Board of Directors and serve until their successors are appointed by the Board of Directors. Biographical resumes of each officer and director are set forth below. GORDON W. DAVIES - PRESIDENT AND DIRECTOR From 1991 to 1994, Mr. Davies was an Accounts Executive for Innovative Environmental Services, Ltd., located in Vancouver, British Columbia, which is a company in the business of wastewater treatment equipment. From 1993 to 1993 he held a Sales Manager position at Transenviro,Inc. in Irvine, California. From 1994 to 1996, Mr. Davies was the Sales/Marketing & Proposals Manager for Babcock King-Wilkinson, LP in Irvine, California, and in 1996 he was the acting CEO for this company. Babcock King-Wilkinson, LP is in the business of wastewater treatment system process design/engineering and equipment supply operations on a worldwide basis. From 1996 to 2000 Mr. Davies has been the President and a Director of Aquadynamic Technologies, Inc. He is also a Director of Aquatek,Inc., the wholly-owned subsidiary of Aquadynamic Technologies, Inc. Aquatek, Inc. is an engineering design house and supplier of computer-automated process and motor control systems for water and wastewater treatment systems. From 1996 to 1998 Mr. Davies was the General Manager of Wil-Flow, Inc. From 1997 to the present, Mr. Davies has held the position of President and a Director for us. Gordon Davies is the brother of Michael Davies. MICHAEL C. DAVIES - CHIEF FINANCIAL OFFICER, VICE PRESIDENT AND DIRECTOR From 1988 to 1991, Mr. Davies was the Owner/Manager of Fuel Oil Polishing Company located in Vancouver, British Columbia, Canada. Mr. Davies' company was in the sales, marketing and project management of fuel oils polishing within the Province of British Columbia. From 1991 to 1993 he was an Accounts Executive with Innovative Environmental Services, Ltd. in Vancouver, a company in the business of sales and marketing of wastewater treatment equipment. From 1993 to 1994 he was the Marketing Manager for Transenviro, Inc., located in Irvine, California. Transenviro is an international supplier of wastewater treatment equipment and process design engineering. From 1994 to 1996 Mr. Davies was the Marketing Manager for Babcock King-Wilkinson, LP, Irvine, California, a wastewater treatment business. From 1996 to 2000 Mr. Davies has held the positions of Vice President and a Director for Aquadynamic Technologies, Inc. and Aquatek, Inc., which is a wholly owned subsidiary of Aquadynamic Technologies. Aquadynamic Technologies, Inc. was acquired by Registrant and became Registrant's wholly-owned subsidiary in November of 1997. From 1996 to 1998 Mr. Davies held the position of Vice President, Sales/Director for Wil-Flow, Inc., the sole supplier of its patented RGD (Rapid Gravity Dewatering) wastewater sludge dewatering system. From 1997 to the present, Mr. Davies has been the Vice President, Chief Financial Officer and a Director. Mr. Davies is the brother of Gordon Davies. 25 EXECUTIVE COMPENSATION The following tables set forth certain information regarding our CEO and each of our most highly-compensated executive officers whose total annual salary and bonus for the fiscal year ending June 30, 2004, 2003 and 2002 exceeded $100,000: SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION
Other Annual Restricted Options LTIP Name & Principal Salary Bonus Compen- Stock SARs Payouts All Other Position Year ($) ($) sation ($) Awards($) (#) ($) Compensation - ------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ -------------- Gordon Davies 2004 135,200 0 0 - - - - President 2003 135,200 0 0 - - - - 2002 135,200 0 0 $150,000 950,000 - - - ------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ -------------- Michael Davies 2004 135,200 0 0 - - - - Chief Financial Officer 2003 135,200 0 0 - - - - 2002 135,200 0 0 $150,000 950,000 - -
EMPLOYMENT AGREEMENTS On January 6, 2005, we entered into five-year employment contracts with Gordon Davies to serve as Chief Executive Officer and President and Michael Davies to serve as Chief Financial Officer. The employment agreements are identical. The base salary under the agreement is $135,200 per annum, plus benefits. If we realize a minimum net profit for our 12 months ended June 30, 2005 of $250,000 or more, base compensation increases by 20% effective as of the beginning of the second twelve months of the employment agreement. If we realize a net profit of at least $250,000 over the 12 months ended June 30, 2006, 2007, 2008 and 2009, the base compensation increases by an additional 20% over the preceding year's compensation. In addition, the employment agreements provide for bonuses on a sliding scale based on our realizing net profits each fiscal year. A bonus equal to 10% of the base salary will be paid in any fiscal year in which net profits equal or exceed $250,000. This percentage increases on a sliding scale as net profits in any fiscal year over the three year contract term increase above $500,000, with a bonus equal to 100% of base salary to be paid if in any fiscal year we realize a net income of $2,500,000 or more. In addition, the employment contracts grant each employee 1,500,000 options to acquire our common stock. These options are all pre-existing options granted under previous contracts with each employee. All the stock option have vested under the following terms for each employee, 500,000 shares vested on January 15, 2002, 500,000 shares vested on January 15, 2003, and 500,000 shares vested on January 15, 2004. The option exercise price is $.40 per share. These employment contracts have non-compete provisions and various other provisions, including a death disability benefit of 3 months' pay plus 3 months' benefits. OPTION/SAR GRANTS IN LAST FISCAL YEAR During the fiscal year ended June 30, 2004, we granted 150,000 options to one of our employees. STOCK OPTION PLANS None. 26 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Between August 2001 and June 2004, we borrowed a total of $121,763 from seven shareholders. In connection with these loans, we have issued notes payable to each of the shareholders. All of the notes are unsecured and payable on December 31, 2005. $93,763 of the notes bear interest at 10% per annum and $28,000 of the notes bear interest at 20% per annum. 27 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding beneficial ownership of our common stock as of July 20, 2005 o by each person who is known by us to beneficially own more than 5% of our common stock; o by each of our officers and directors; and o by all of our officers and directors as a group.
PERCENTAGE OF PERCENTAGE OF CLASS CLASS NAME AND ADDRESS NUMBER OF PRIOR TO AFTER OF OWNER TITLE OF CLASS SHARES OWNED(1) OFFERING(2) OFFERING(3) - -------------------------------------------------------------------------------------------------- Gordon Davies Common Stock 3,017,400 (4) 9.40% 3.93% 23832 Rockfield Blvd. Suite 275 Lake Forest, California 92630 Michael Davies Common Stock 2,764,500 (4) 8.61% 3.60% 23832 Rockfield Blvd. Suite 275 Lake Forest, California 92630 All Officers and Directors Common Stock 5,781,900 (5) 16.71% 7.29% As a Group (2 persons)
(1) Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of July 20, 2005 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person. (2) Based upon 29,595,813 shares issued and outstanding on July 20, 2005. (3) Percentage based on 74,295,813 shares of common stock outstanding after the offering, assuming that all shares registered are sold. (4) Includes 2,500,000 shares issuable upon currently exercisable stock options. (5) Includes 5,000,000 shares issuable upon currently exercisable stock options. 28 DESCRIPTION OF SECURITIES COMMON STOCK We are authorized to issue up to 75,000,000 shares of common stock, par value $.01. As of July 20, 2005, there were 29,595,813 shares of common stock outstanding. Holders of the common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefor. Upon the liquidation, dissolution, or winding up of our company, the holders of common stock are entitled to share ratably in all of our assets which are legally available for distribution after payment of all debts and other liabilities and liquidation preference of any outstanding common stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares of common stock are validly issued, fully paid and nonassessable. We have engaged Computershare Trust Company, located in Golden, Colorado, as independent transfer agent or registrar. PREFERRED STOCK We are authorized to issue up to 100,000 shares of preferred stock, par value $1.00. As of July 20, 2005, there were no shares of preferred stock issued. OPTIONS There are currently 6,180,000 outstanding options to purchase shares of our common stock that have been issued to our officers, directors and employees. 3,250,000 options were granted pursuant to employment agreements and are exercisable at $0.40 per share. 150,000 options were granted pursuant to an employment agreement and are exercisable at $0.56 per share. The options issued pursuant to the employment agreements have varying expiration dates. We have also issued 2,780,000 options to officers, directors and employees that expire on June 30, 2008 and are exercisable at $0.25 per share. WARRANTS In connection with a Securities Purchase Agreement dated June 23, 2005, we have issued 2,800,000 warrants to purchase shares of common stock and are obligated to issue 5,200,000 additional warrants. The warrants exercisable until five years from the date of issuance exercisable at a purchase price of $0.28 per share. In connection with consulting agreements, we have issued warrants to purchase 4,500,000 shares of our common stock. 3,000,000 of the warrants are exercisable at $0.30 per share and the remaining 1,500,000 warrants are exercisable at $0.25 per share. We are registering shares of common stock underlying all of our warrants in this prospectus. CONVERTIBLE SECURITIES Not including approximately 5,800,000 shares of common stock issuable upon exercise of outstanding options and warrants and 5,200,000 warrants that we are obligated to issue in the near future, approximately 7,368,422 shares of common stock are issuable upon conversion of outstanding secured convertible notes issued pursuant to the Securities Purchase Agreement dated June 23, 2005. The 5,200,000 warrants to shares of common stock that we are obligated to issue in the near future are to be issued pursuant to the Securities Purchase Agreement dated June 23, 2005, which requires that 2,400,000 warrants be issued together with $600,000 in secured convertible notes within five days of the filing of this registration statement and 2,800,000 warrants be issued together with $700,000 in secured convertible notes within five days from the effective date of this prospectus. To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with four accredited investors on June 23, 2005 for the sale of (i) $2,000,000 in secured convertible notes, and (ii) warrants to purchase 8,000,000 shares of our common stock. 29 This prospectus relates to the resale of the common stock underlying these secured convertible notes and warrants. The investors are obligated to provide us with an aggregate of $2,000,000 as follows: o $700,000 was disbursed on June 23, 2005; o $600,000 will be disbursed within five days of the filing of this registration statement; and o $700,000 will be disbursed within five days of the effectiveness of this prospectus. Accordingly, we have received a total of $700,000 pursuant to the Securities Purchase Agreement. The notes bear interest at 10%, mature three years from the date of issuance, and are convertible into our common stock, at the investors' option, at the lower of: o $0.21; or o 50% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. We have a call option under the terms of the secured convertible notes. The call option provides us with the right to prepay all of the outstanding secured convertible notes at any time, provided we are not in default and our stock is trading at or below $.21 per share. Prepayment of the notes is to be made in cash equal to either (i) 125% of the outstanding principal and accrued interest for prepayments occurring within 30 days following the issue date of the secured convertible notes; (ii) 135% of the outstanding principal and accrued interest for prepayments occurring between 31 and 60 days following the issue date of the secured convertible notes; and (iii) 150% of the outstanding principal and accrued interest for prepayments occurring after the 60th day following the issue date of the secured convertible notes. Our right to repay the notes is exercisable on not less than ten trading days prior written notice to the holders of the secured convertible notes. For notice purposes, a trading day is any day on which our common stock is traded for any period on the OTC Bulletin Board. Notwithstanding the notice of prepayment, the holders of the secured convertible notes have the right at all times to convert all or any portion of the secured convertible notes prior to payment of the prepayment amount. We also have a partial call option under the terms of the secured convertible notes in any month in which the current price of our common stock is below $0.25. Under the terms of the partial call option, we have the right to pay the outstanding principal amount of the secured convertible notes plus one-month's interest for that month, which will stay any conversions of the secured convertible notes by the holders for that month. The principal amount of the secured convertible notes to be repaid is determined by dividing the then outstanding principal amount of the notes by the maturity of the notes in months, or 36, multiplied by 104%. The full principal amount of the secured convertible notes are due upon default under the terms of secured convertible notes. The warrants are exercisable until five years from the date of issuance, exercisable at a purchase price of $0.28 per share. In addition, we have granted the investors a security interest in substantially all of our assets and intellectual property and registration rights. COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Our Articles of Incorporation, as amended, provide to the fullest extent permitted by Colorado law, our directors or officers shall not be personally liable to us or our shareholders for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of our Articles of Incorporation, as amended, is to eliminate our rights and our shareholders (through shareholders' derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our Articles of Incorporation, as amended, are necessary to attract and retain qualified persons as directors and officers. 30 Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act" or "Securities Act") may be permitted to directors, officers or persons controlling us 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. PLAN OF DISTRIBUTION The selling stockholders and any of their respective pledgees, donees, assignees and other successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares: o ordinary brokerage transactions and transactions in which the broker-dealer solicits the purchaser; o block trades in which the broker-dealer 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-dealer as principal and resale by the broker-dealer for its account; o an exchange distribution in accordance with the rules of the applicable exchange; o privately-negotiated transactions; o short sales that are not violations of the laws and regulations of any state or the United States; o broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; o through the writing of options on the shares o a combination of any such methods of sale; and o any other method permitted pursuant to applicable law. The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, or Regulation S, rather than under this prospectus. The selling stockholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if they deem the purchase price to be unsatisfactory at any particular time. The selling stockholders may also engage in short sales against the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades. The selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that a selling stockholder will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The selling stockholders cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the selling stockholders. The selling stockholders and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, may be deemed to be "underwriters" as that term is defined under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the rules and regulations under such acts. In such event, any commissions received by such 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. We are required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling stockholders, but excluding brokerage commissions or underwriter discounts. The selling stockholders, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. No selling stockholder has entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into. 31 The selling stockholders may pledge their shares to their brokers under the margin provisions of customer agreements. If a selling stockholders defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The selling stockholders and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations under such act, including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, the selling stockholders or any other such person. In the event that the selling stockholders are deemed affiliated purchasers or distribution participants within the meaning of Regulation M, then the selling stockholders will not be permitted to engage in short sales of common stock. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. In regards to short sales, the selling stockholder can only cover its short position with the securities they receive from us upon conversion. In addition, if such short sale is deemed to be a stabilizing activity, then the selling stockholder will not be permitted to engage in a short sale of our common stock. All of these limitations may affect the marketability of the shares. We have agreed to indemnify the selling stockholders, or their transferees or assignees, against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may be required to make in respect of such liabilities. If the selling stockholders notify us that they have a material arrangement with a broker-dealer for the resale of the common stock, then we would be required to amend the registration statement of which this prospectus is a part, and file a prospectus supplement to describe the agreements between the selling stockholders and the broker-dealer. PENNY STOCK The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: o that a broker or dealer approve a person's account for transactions in penny stocks; and o the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must o obtain financial information and investment experience objectives of the person; and o make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: o sets forth the basis on which the broker or dealer made the suitability determination; and o that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. 32 SELLING STOCKHOLDERS The table below sets forth information concerning the resale of the shares of common stock by the selling stockholders. We will not receive any proceeds from the resale of the common stock by the selling stockholders. We will receive proceeds from the exercise of the warrants. Assuming all the shares registered below are sold by the selling stockholders, none of the selling stockholders will continue to own any shares of our common stock. The following table also sets forth the name of each person who is offering the resale of shares of common stock by this prospectus, the number of shares of common stock beneficially owned by each person, the number of shares of common stock that may be sold in this offering and the number of shares of common stock each person will own after the offering, assuming they sell all of the shares offered.
- ------------------- ----------------- ------------- ------------- ------------ -------------- ------------ ------------- Total Total Shares of Percentage Percentage Common Stock of Common Shares of Beneficial of Common Issuable Upon Stock, Common Stock Beneficial Percentage of Ownership Stock Owned Conversion of Assuming Included in Ownership Common Stock After the After Notes Full Prospectus Before the Owned Before Offering Offering Name and/or Warrants* Conversion (1) Offering** Offering** (4) (4) - ------------------- ----------------- ------------- ------------- ------------ -------------- ------------ ------------- AJW Offshore, Ltd. 14,555,369 32.97% Up to 1,554,395 (2) 4.99% -- -- (3) 22,545,000 shares of common stock - ------------------- ----------------- ------------- ------------- ------------ -------------- ------------ ------------- AJW Qualified 9,819,790 24.91% Up to 1,554,395 (2) 4.99% -- -- Partners, LLC (3) 15,210,000 shares of common stock - ------------------- ----------------- ------------- ------------- ------------ -------------- ------------ ------------- AJW Partners, LLC 4,183,579 12.39% Up to 1,554,395 (2) 4.99% -- -- (3) 6,480,000 shares of common stock - ------------------- ----------------- ------------- ------------- ------------ -------------- ------------ ------------- New Millennium 493,895 1.64% Up to 493,895 1.64% -- -- Capital Partners 765,000 II, LLC (3) shares of common stock ======================================================================================================================== Monarch Bay Capital (4) -- -- 3,384,615 (5) 1,554,395 (5) 4.99% -- -- Canvasback Company -- -- 1,449,340 1,449,340 4.90% -- -- Ltd. (6) Billfighter Investment -- -- 900,000 (8) 900,000 (8) 2.99% -- -- Ltd. (7) Fred Davies (9) -- -- 1,100,000 (10) 1,449,340 (10) 3.60% -- -- PAC Trading Corp. (11) -- -- 200,000 (12) 200,000 (12) 0.67% -- -- Audrey Davies (13) -- -- 200,000 200,000 0.68% -- -- Cooperative Holdings (14) -- -- 150,000 150,000 0.51% -- -- Nick Fagnano -- -- 50,000 50,000 0.17% -- -- Ron Rosegard -- -- 50,000 50,000 0.17% -- -- Tony Wilson -- -- 400,000 400,000 1.35% -- -- Paul Hazell -- -- 525,000 525,000 1.77% -- -- Richard Jurkovac -- -- 25,000 25,000 0.08% -- -- 33 Kelly Welton -- -- 52,500 52,500 0.18% -- -- David McGuire -- -- 300,000 300,000 1.01% -- -- Larry Derr -- -- 100,000 100,000 0.34% -- -- Tracy Matson -- -- 78,000 78,000 0.26% -- -- Jerry Willes -- -- 100,000 100,000 0.34% -- -- Johan Lauw -- -- 320,000 320,000 1.08% -- -- William Ford -- -- 235,000 235,000 0.79% -- -- Jeff Elliott -- -- 95,833 95,833 0.32% -- --
* This column represents an estimated number based on a conversion price as of a recent date of July 26, 2005 of $.095, divided into the principal amount. ** These columns represent the aggregate maximum number and percentage of shares that the selling stockholders can own at one time (and therefore, offer for resale at any one time) due to their 4.99% limitation. The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the selling stockholders has sole or shared voting power or investment power and also any shares, which the selling stockholders has the right to acquire within 60 days. The actual number of shares of common stock issuable upon the conversion of the secured convertible notes is subject to adjustment depending on, among other factors, the future market price of the common stock, and could be materially less or more than the number estimated in the table. (1) Includes a good faith estimate of the shares issuable upon conversion of the secured convertible notes and exercise of warrants, based on current market prices. Because the number of shares of common stock issuable upon conversion of the secured convertible notes is dependent in part upon the market price of the common stock prior to a conversion, the actual number of shares of common stock that will be issued upon conversion will fluctuate daily and cannot be determined at this time. Under the terms of the secured convertible notes, if the secured convertible notes had actually been converted on July 26, 2005, the secured convertible notes would have had a conversion price of $.095. The actual number of shares of common stock offered in this prospectus, and included in the registration statement of which this prospectus is a part, includes such additional number of shares of common stock as may be issued or issuable upon conversion of the secured convertible notes and exercise of the related warrants by reason of any stock split, stock dividend or similar transaction involving the common stock, in accordance with Rule 416 under the Securities Act of 1933. However the selling stockholders have contractually agreed to restrict their ability to convert their secured convertible notes or exercise their warrants and receive shares of our common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock as determined in accordance with Section 13(d) of the Exchange Act. Accordingly, the number of shares of common stock set forth in the table for the selling stockholders exceeds the number of shares of common stock that the selling stockholders could own beneficially at any given time through their ownership of the secured convertible notes and the warrants. In that regard, the beneficial ownership of the common stock by the selling stockholder set forth in the table is not determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. (2) The selling stockholders are affiliates of each other because they are under common control. AJW Partners, LLC is a private investment fund that is owned by its investors and managed by SMS Group, LLC. SMS Group, LLC, of which Mr. Corey S. Ribotsky is the fund manager, has voting and investment control over the shares listed below owned by AJW Partners, LLC. AJW Offshore, Ltd., formerly known as AJW/New Millennium Offshore, Ltd., is a private investment fund that is owned by its investors and managed by First Street Manager II, LLC. First Street Manager II, LLC, of which Corey S. Ribotsky is the fund manager, has voting and investment control over the shares owned by AJW Offshore, Ltd. AJW Qualified Partners, LLC, formerly 34 known as Pegasus Capital Partners, LLC, is a private investment fund that is owned by its investors and managed by AJW Manager, LLC, of which Corey S. Ribotsky and Lloyd A. Groveman are the fund managers, have voting and investment control over the shares listed below owned by AJW Qualified Partners, LLC. New Millennium Capital Partners II, LLC, is a private investment fund that is owned by its investors and managed by First Street Manager II, LLC. First Street Manager II, LLC, of which Corey S. Ribotsky is the fund manager, has voting and investment control over the shares owned by New Millennium Capital Partners II, LLC. We have been notified by the selling stockholders that they are not broker-dealers or affiliates of broker-dealers and that they believe they are not required to be broker-dealers. (3) Assumes that all securities registered will be sold. (4) David Walters has voting and investment control over the shares owned by this entity. (5) Includes 3,000,000 shares of common stock underlying stock options, of which 750,000 options are currently exercisable and 750,000 options become exercisable on each of August 17, 2005, November 17, 2005 and February 17, 2006. The selling stockholder is contractually obligated to not beneficially hold at any one time more than 4.99% of our issued and outstanding shares of common stock. (6) John Benjamine has voting and investment control over the shares owned by this entity. (7) Bernadine Romney has voting and investment control over the shares owned by this entity. (8) Includes 500,000 shares of common stock underlying currently exercisable stock options. (9) Fred Davies is the father of Gordon and Michael Davies, our officers and directors. (10) Includes 1,000,000 shares of common stock underlying currently exercisable stock options. (11) Paul Rademaker has voting and investment control over the shares owned by this entity. (12) Includes 200,000 shares of common stock underlying currently exercisable stock options. (13) Audrey Davies is the mother of Gordon and Michael Davies, our officers and directors. (14) Theodore R. Cohn has voting and investment control over the shares owned by this entity. TERMS OF SECURED CONVERTIBLE NOTES To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with four accredited investors on June 23, 2005 for the sale of (i) $2,000,000 in secured convertible notes and (ii) warrants to buy 8,000,000 shares of our common stock. The investors are obligated to provide us with the funds as follows: o $700,000 was disbursed on June 23, 2005; o $600,000 will be disbursed within five days of the filing of this registration statement; and o $700,000 will be disbursed within five days of the effectiveness of this prospectus. Accordingly, we have received a total of $700,000 pursuant to the Securities Purchase Agreement. The secured convertible notes bear interest at 10%, mature three years from the date of issuance, and are convertible into our common stock, at the investors' option, at the lower of: o $0.21; or o 50% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. 35 We have a call option under the terms of the secured convertible notes. The call option provides us with the right to prepay all of the outstanding secured convertible notes at any time, provided we are not in default and our stock is trading at or below $.21 per share. Prepayment of the notes is to be made in cash equal to either (i) 125% of the outstanding principal and accrued interest for prepayments occurring within 30 days following the issue date of the secured convertible notes; (ii) 135% of the outstanding principal and accrued interest for prepayments occurring between 31 and 60 days following the issue date of the secured convertible notes; and (iii) 150% of the outstanding principal and accrued interest for prepayments occurring after the 60th day following the issue date of the secured convertible notes. Our right to repay the notes is exercisable on not less than ten trading days prior written notice to the holders of the secured convertible notes. For notice purposes, a trading day is any day on which our common stock is traded for any period on the OTC Bulletin Board. Notwithstanding the notice of prepayment, the holders of the secured convertible notes have the right at all times to convert all or any portion of the secured convertible notes prior to payment of the prepayment amount. We also have a partial call option under the terms of the secured convertible notes in any month in which the current price of our common stock is below $0.25. Under the terms of the partial call option, we have the right to pay the outstanding principal amount of the secured convertible notes plus one-month's interest for that month, which will stay any conversions of the secured convertible notes by the holders for that month. The principal amount of the secured convertible notes to be repaid is determined by dividing the then outstanding principal amount of the notes by the maturity of the notes in months, or 36, multiplied by 104%. The full principal amount of the secured convertible notes is due upon default under the terms of secured convertible notes. In addition, we have granted the investors a security interest in substantially all of our assets and intellectual property and registration rights. We are liable for breach of any covenant, representation or warranty contained in the Securities Purchase Agreement for a period of two years from the date that the investors distribute the final $700,000. In the event that we breach any representation or warranty regarding the condition of our company as set forth in the Securities Purchase Agreement, we are liable to pay liquidated damages in shares or cash, at the election of the investors, equal to three percent of the outstanding amount of the secured convertible notes per month plus accrued and unpaid interest. In the event that we breach any covenant as set forth in the Securities Purchase Agreement, including the failure to comply with blue sky laws, timely file all public reports, use the proceeds from the sale of the secured convertible notes in the agreed upon manner, obtain written consent from the investors to negotiate or contract with a party for additional financing, reserve and have authorized the required number of shares of common stock or the maintenance of our shares of common stock on an exchange or automated quotation system, then we are liable to pay liquidated damages in shares or cash, at the election of the investors, equal to three percent of the outstanding amount of the secured convertible notes per month plus accrued and unpaid interest. In connection with the Securities Purchase Agreement, we executed a Security Agreement and an Intellectual Property Security Agreement in favor of the investors granting them a first priority security interest in all of our goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual property. Under the Security Agreement and Intellectual Property Security Agreement, events of default occur upon: o The occurrence of an event of default (as defined in the secured convertible notes) under the secured convertible notes; o Any representation or warranty we made in the Security Agreement or in the Intellectual Property Security Agreement shall prove to have been incorrect in any material respect when made; o The failure by us to observe or perform any of our obligations under the Security Agreement or in the Intellectual Property Security Agreement for ten (10) days after receipt of notice of such failure from the investors; and o Any breach of, or default under, the Warrants. An event of default under the secured convertible notes occurs if we: o Fail to pay the principal or interest when due; 36 o Do not issue shares of common stock upon receipt of a conversion notice; o Fail to file a registration statement within 45 days after June 23, 2005 or fail to have the registration statement effective within 120 days after June 23, 2005; o Breach any material covenant or other material term or condition in the secured convertible notes or the Securities Purchase Agreement; o Breach any representation or warranty made in the Securities Purchase Agreement or other document executed in connection therewith; o Apply for or consent to the appointment of a receiver or trustee for us or any of our subsidiaries or for a substantial part of our of our subsidiaries' property or business, or such a receiver or trustee shall otherwise be appointed; o Have any money judgment, writ or similar process shall be entered or filed against us or any of our subsidiaries or any of our property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the investors; o Institute or have instituted against us or any of our subsidiaries any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors; o Fail to maintain the listing of our common stock on one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange; or o Default under any other secured convertible note issued pursuant to the Securities Purchase Agreement. Upon occurrence of any event of default under either the Security Agreement or the Intellectual Property Security Agreement, the investors shall have the right to exercise all of the remedies conferred under the Security Agreement, the Intellectual Property and under the secured convertible notes, and the investors shall have all the rights and remedies of a secured party under the Uniform Commercial Code and/or any other applicable law (including the Uniform Commercial Code of any jurisdiction in which any collateral is then located). The investors shall have the following rights and powers: o To take possession of the collateral and, for that purpose, enter, with the aid and assistance of any person, any premises where the collateral, or any part thereof, is or may be placed and remove the same, and we shall assemble the collateral and make it available to the investors at places which the investors shall reasonably select, whether at our premises or elsewhere, and make available to the investors, without rent, all of our respective premises and facilities for the purpose of the investors taking possession of, removing or putting the collateral in saleable or disposable form; and o To operate our business using the collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the investors may deem commercially reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon or notice to us or our right of redemption, which we expressly waived. Upon each such sale, lease, assignment or other transfer of collateral, the investors may, unless prohibited by applicable law which cannot be waived, purchase all or any part of the collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities by us, which we waived and released. The warrants are exercisable until five years from the date of issuance at a purchase price of $0.28 per share. The selling stockholders will be entitled to exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement. In the event that the selling stockholder exercises the warrants on a cashless basis, then we will not receive any proceeds. In addition, the exercise price of the warrants will be adjusted in the event we issue common stock at a price below market, with the exception of any securities issued as of the date of this warrant or issued in connection with the secured convertible notes issued pursuant to the Securities Purchase Agreement, dated June 23, 2005. Upon the issuance of shares of common stock below the market price, the exercise price of the warrants will be reduced accordingly. The market price is 37 determined by averaging the last reported sale prices for our shares of common stock for the five trading days immediately preceding such issuance as set forth on our principal trading market. The exercise price shall be determined by multiplying the exercise price in effect immediately prior to the dilutive issuance by a fraction. The numerator of the fraction is equal to the sum of the number of shares outstanding immediately prior to the offering plus the quotient of the amount of consideration received by us in connection with the issuance divided by the market price in effect immediately prior to the issuance. The denominator of such issuance shall be equal to the number of shares outstanding after the dilutive issuance. The conversion price of the secured convertible notes and the exercise price of the warrants may be adjusted in certain circumstances such as if we pay a stock dividend, subdivide or combine outstanding shares of common stock into a greater or lesser number of shares, or take such other actions as would otherwise result in dilution of the selling stockholder's position. The selling stockholders have contractually agreed to restrict their ability to convert their secured convertible notes or exercise their warrants and receive shares of our common stock such that the number of shares of common stock held by them and their affiliates in the aggregate after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. A complete copy of the Securities Purchase Agreements and related documents are incorporated by reference as exhibits to our Form SB-2 registration statement relating to this prospectus. SAMPLE CONVERSION CALCULATION The number of shares of common stock issuable upon conversion of the secured convertible notes is determined by dividing that portion of the principal of the notes to be converted and interest, if any, by the conversion price. For example, assuming conversion of the $2,000,000 of secured convertible notes on June 6, 2005, at a conversion price of $0.095, the number of shares issuable upon conversion would be: $2,000,000/$0.095 = 21,052,632 shares The following is an example of the amount of shares of our common stock that are issuable, upon conversion of the principal amount of our secured convertible notes, based on market prices 25%, 50% and 75% below the market price as of July 25, 2005 of $0.19. Number % of % Below Price Per With Discount of Shares Outstanding Market Share at 50% Issuable Stock - ------ -------- ------------- -------- ----------- 25% $.1425 $.07125 28,070,176 48.68% 50% $.095 $.0475 42,105,264 58.72% 75% $.0475 $.02375 84,210,527 73.99% LEGAL MATTERS Sichenzia Ross Friedman Ference LLP, New York, New York will issue an opinion with respect to the validity of the shares of common stock being offered hereby. EXPERTS Kabani & Company, Inc., independent registered public accounting firm, have audited, as set forth in their report thereon appearing elsewhere herein, our financial statements at June 30, 2004 and for the two years then ended that appear in the prospectus. The financial statements referred to above are included in this prospectus with reliance upon the independent registered public accounting firm's opinion based on its expertise in accounting and auditing. 38 AVAILABLE INFORMATION We have filed a registration statement on Form SB-2 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this prospectus, and reference is made to such registration statement. This prospectus constitutes the prospectus of Reclamation Consulting and Applications, Inc., filed as part of the registration statement, and it does not contain all information in the registration statement, as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission. We are subject to the informational requirements of the Securities Exchange Act of 1934 which requires us to file reports, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information may be inspected at public reference facilities of the SEC at Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed rates. Because we file documents electronically with the SEC, you may also obtain this information by visiting the SEC's Internet website at http://www.sec.gov. 39 INDEX TO FINANCIAL STATEMENTS RECLAMATION CONSULTING AND APPLICATIONS, INC. INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm F-1 Balance Sheets as of June 30, 2004 F-2 Statements of Operations for the years ended June 30, 2004 and 2003 F-3 Statements of Stockholders' Deficit for the years ended June 30, 2004 and 2003 F-4 Statements of Cash Flows for the years ended June 30, 2004 and 2003 F-5 Notes to Financial Statements F-6 to F-14 Balance Sheet as of March 31, 2005 (Unaudited) F-15 Statements of Operations for the three and nine months ended March 31, 2005 and 2004 (Unaudited) F-16 Statements of Cash Flows for the nine months ended March 31, 2005 and 2004 (Unaudited) F-17 Notes to the Financial Statements (Unaudited) F-18 to F-24
40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders Reclamation Consulting and Applications, Inc. We have audited the accompanying balance sheet of Reclamation Consulting and Applications, Inc. (formerly, Recycling Centers of America, Inc.) as of June 30, 2004 and the related statements of operations, stockholders' equity, and cash flows for each of the two years in the period ended June 30, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board ( United States) Those standards require that we plan and perform the audit 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 Reclamation Consulting and Applications, Inc. as of June 30, 2004, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2004, in conformity with accounting principles generally accepted in the United States of America. The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has accumulated deficit of $ 11,112,519 as of June 30, 2004. The Company incurred net losses of $ 2,542,770 and $ 1,698,498 for the years ended June 30, 2004 and 2003 respectively. These factors as discussed in Note 15 to the financial statements, raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 15. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ KABANI & COMPANY, INC. - ------------------------- CERTIFIED PUBLIC ACCOUNTANTS Fountain Valley, California September 2, 2004 F-1 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) BALANCE SHEET JUNE 30, 2004
ASSETS CURRENT ASSETS: Cash & cash equivalents $ 1,043 Accounts receivable 262,844 Notes recivable, net of allowance of doubtful debts of $ 270,000 547,476 Employee advances 16,953 --------------------------------- Total current assets 828,316 PROPERTY AND EQUIPMENT, net 11,942 --------------------------------- $ 840,258 ================================= LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable $ 193,053 Accrued expenses 384,242 Customer deposit 7,542 Convertible loans 50,104 --------------------------------- Total current liabilities 634,941 LONG TERM LIABILITIES: Note payable-related party 121,763 Convertible debentures 55,850 --------------------------------- Total liabilities 812,554 COMMITMENTS STOCKHOLDERS' DEFICIT Common stock, $.01 par value; Authorized shares 75,000,000; 25,492,620 shares issued and outstanding 254,926 Additional paid in capital 10,895,296 Treasury stock (15,000) Shares to be issued 5,000 Accumulated deficit (11,112,519) --------------------------------- Total stockholders' equity 27,704 --------------------------------- $ 840,258 =================================
The accompanying notes are an integral part of these financial statements. F-2 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003 ------------------------------------------------------- Net revenue $ 289,218 $ 261,235 Cost of revenue 185,280 295,675 ------------------------------------------------------- Gross loss 103,938 (34,440) Total operating expenses 2,044,600 1,823,307 ------------------------------------------------------- Loss from operations (1,940,662) (1,857,747) Non-operating income (expense): Interest income 46,284 - Interest expense (45,622) (106,454) Loss on Impairment of inventory (583) (127,034) Loss on disposal of asset (22,692) - Gain (loss) on settlement of debts (578,695) 393,537 ------------------------------------------------------- Total non-operating income (expense) (601,308) 160,049 Loss before income tax (2,541,970) (1,697,698) ------------------------------------------------------- Provision for income tax 800 800 Net loss $ (2,542,770) $ (1,698,498) ======================================================= Basic and diluted weighted average shares outstanding 21,968,260 16,602,590 ======================================================= Basic and diluted net loss per share $ (0.12) $ (0.10) =======================================================
The accompanying notes are an integral part of these financial statements. F-3 RECLAMATION CONSULTING AND APPLICATION, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
Common stock Total ---------------- Additional stockholders' Number of paid in Treasury Stock to Accumulated equity shares Amount capital stock be issued deficit (deficit) Balance at June 30, 2002 12,211,523 $ 122,495 $5,011,575 $(15,000) $1,050,594 $(6,871,251) $ (701,587) Issuance of shares for cash recived in the prior year 743,594 7,436 290,002 - (297,438) - - Issuance of shares for service recived in the prior year 153,125 1,531 42,875 - (44,406) - - Issuanve of shares for debt settlement 1,875,000 18,750 690,000 - (708,750) - - Issuance of shares on loan conversion 1,253,369 12,533 330,470 - - - 343.003 Issuance of shares for cash 1,138,440 11,384 207,416 - - - 218,800 Issuance of shares for service 1,019,608 10,196 394,014 - - - 404,210 Issuance of shares for compensation 425,000 4,250 113,725 - - - 117,975 Conversion provision on debenture and notes - (379) 236,632 - - - 236,253 Cancellation of shares issued to founder (150,000) (1,500) 1,500 - - - - 177,918 shares of common stock to be issued for cash received - - - - 71,167 - 71,167 Net loss for the year ended June 30, 2003 - - - - - (1,698,498) (1,698,498) ----------- --------- ---------- --------- ------- ------------ ------------ Balance at June 30, 2003 18,669,659 $ 186,696 $7,318,209 $(15,000) 71,167 $(8,569,749) $(1,008,677) Issuance of shares for cash recived in the prior year 127,918 1,279 49,888 - (51,167) - - Issuance of shares for service recived in the prior year 50,000 500 19,500 - (20,000) - - Issuanve of shares for debt settlement 1,546,131 15,461 1,176,493 - - - 1,191,954 Issuance of shares on loan conversion 41,432 414 26,917 - - - 27,331 Issuance of shares for cash 4,279,805 42,798 1,753,635 - - - 1,796,433 Issuance of shares for service 777,675 7,777 519,156 - - - 526,933 Option granted for services - - 31,500 - - - 31,500 10,000 shares of common stock to be issued for service rendered - - - - 5,000 - 5,000 Net loss for the year ended June 30, 2004 - - - - - (2,542,770) (2,542,770) ----------- --------- ---------- --------- ------- ------------ ------------ Balance at June 30, 2004 25,492,620 254,926 10,895,296 (15,000) 5,000 (11,112,519) 27,704 =========== ========= ========== ========= ======= ============ ============
The accompanying notes are an integral part of these financial statements. F-4 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(2,542,770) $(1,698,498) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 5,338 37,504 Issuance of shares for services and compensation 526,933 522,185 Shares to be issued for service 5,000 - Loss (gain) on settlement of debts 578,695 (393,537) Allowance for doubtful debts 270,000 - Impairment of inventory 583 127,034 Loss on disposal of asset 22,692 - Option granted for compensation and services 31,500 - Debenture conversion provision - 236,253 Shares to be issued for services - - (Increase)/decrease in current assets: Accounts receivable (224,967) 34,185 Notes receivable (714,178) - Inventory 98,116 11,186 Prepaid expenses 11,476 (3,462) Employee advances (6,523) (10,430) Other assets 3,285 (3,285) Increase/(decrease) in current Liabilities: Accounts payable and accrued Expenses 93,672 142,020 Customer deposit 7,542 - ----------- ----------- Total adjustments 709,163 699,653 ----------- ----------- Net cash used in operating activities (1,833,607) (998,845) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of equipment (1,948) (140,637) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible loans 15,000 90,604 Repayment of convertible loans (35,000) - Proceeds from shareholder loans - 479,234 Proceeds from other loans 83,112 278,302 Repayment of loans (23,246) - Cash received for shares to be issued - 71,167 Common stock issuance for cash 1,796,433 218,800 ----------- ----------- Net cash provided by financing activities 1,836,299 1,138,107 ----------- ----------- NET DECREASE IN CASH & CASH EQUIVALENTS 743 (1,375) CASH & CASH EQUIVALENTS, BEGINNING BALANCE 300 1,675 ----------- ----------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ 1,043 300 =========== ===========
The accompanying notes are an integral part of these financial statements. F-5 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATIONS AND DESCRIPTION OF BUSINESS Reclamation Consulting and Applications, Inc. (formerly, Recycling Centers of America, Inc.) (the "Company") is a Colorado corporation, originally formed in 1976 under the name of Vac-Tech Systems, Inc. The Company changed its name to Recycling Centers of America on March 26, 1999. On January 16, 2002, an article of amendment was filed to change the name of corporation to Reclamation Consulting and Applications, Inc. Presently, the Company's primary business is the production and sale of Alderox TM line of products including ASA-12TM, DCR TM, KR-7 TM, TSR TM, and ASA Cleaners. ASA-12 TM is an asphalt release agent, DCR TM is a drag chain lubricant. KR7TM is a concrete release agent and TSRTM was specifically designed for the oil sands industry. During the period ended December 31, 2003, the Company appointed North American Systems (NAS) as the sole United States distributor of Company's AlderoxTM line of products. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the Company's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: Cash and cash equivalents The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. Accounts Receivable: The Company's customer base consists of a geographically dispersed customer's base. The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis. Property & Equipment Property and equipment is carried at cost. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of three to seven years. Expenditures for maintenance and repairs are charged to expense as incurred. Income taxes The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 (SFAS 109). Under SFAS 109, deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. F-6 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) NOTES TO FINANCIAL STATEMENTS Revenue Recognition The Company recognizes its revenue in accordance with the Securities and Exchange Commissions ("SEC") Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB 104"). Revenue is recognized when merchandise is shipped to a customer. Using Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments Statement of financial accounting standard No. 107, Disclosures about fair value of financial instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying, as financial instruments are a reasonable estimate of fair value. Earnings per share Net loss per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), "Earnings per share". Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Weighted average number of shares used to compute basic and diluted loss per share is the same in these financial statements since the effect of dilutive securities is anti-dilutive. Stock-based compensation In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123 prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123 requires compensation expense to be recorded (i) using the new fair value method or (ii) using the existing accounting rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and related interpretations with pro forma disclosure of what net income and earnings per share would have been had the Company adopted the new fair value method. The company uses the intrinsic value method prescribed by APB25 and has opted for the disclosure provisions of SFAS No.123. Issuance of shares for service The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable. Segment Reporting Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management F-7 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) NOTES TO FINANCIAL STATEMENTS structure, or any other manner in which management disaggregates a company. Currently, SFAS 131 has no effect on the Company's financial statements as substantially all of the Company's operations are conducted in one industry segment. Recent Pronouncements In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123, "Accounting for Stock Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used, on reported results. The Statement is effective for the Companies' interim reporting period ending January 31, 2003. In compliance with FAS No. 148, the Company has elected to continue to follow the intrinsic value method in accounting for its stock-based employee compensation plan as defined by APB No. 25 and has made the applicable disclosures below. Had the Company determined employee stock based compensation cost based on a fair value model at the grant date for its stock options under SFAS 123, the Company's net earnings per share would have been adjusted to the pro forma amounts for the year ended June 30, 2004 and 2003, as follows ($ in thousands, except per share amounts). : Year ended June 30, 2004 2003 -------- -------- Net loss - as reported $ (2,543) $ (1,698) Stock-Based employee compensation expense included in reported net income, net of tax 31 Total stock-based employee compensation expense determined under fair-value-based method for all rewards, net of tax (57) (194) -------- ------- Pro forma net loss $ (2,569) $ (1,892) ======== ======= Earnings (loss) per share: Basic, as reported $ (0.12) $ (0.10) Diluted, as reported $ (0.12) $ (0.11) Basic, pro forma $ (0.12) $ (0.10) Diluted, pro forma $ (0.12) $ (0.11) On May 15, 2003, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 150 (FAS 150), Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. FAS 150 changes the accounting for certain financial instruments that, under previous guidance, could be classified as equity or "mezzanine" equity, by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the statement of financial position. Further, FAS 150 requires disclosure regarding the terms of those instruments and settlement alternatives. FAS 150 affects an entity's classification of the following freestanding instruments: a) F-8 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) NOTES TO FINANCIAL STATEMENTS Mandatorily redeemable instruments b) Financial instruments to repurchase an entity's own equity instruments c) Financial instruments embodying obligations that the issuer must or could choose to settle by issuing a variable number of its shares or other equity instruments based solely on (i) a fixed monetary amount known at inception or (ii) something other than changes in its own equity instruments d) FAS 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. The guidance in FAS 150 is generally effective for all financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. For private companies, mandatorily redeemable financial instruments are subject to the provisions of FAS 150 for the fiscal period beginning after December 15, 2003. The adoption of SFAS 150 does not have a material effect on the earnings or financial position of the Company. In December 2003, the Financial Accounting Standards Board (FASB) issued a revised Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46R). FIN 46R addresses consolidation by business enterprises of variable interest entities and significantly changes the consolidation application of consolidation policies to variable interest entities and, thus improves comparability between enterprises engaged in similar activities when those activities are conducted through variable interest entities. The Company does not hold any variable interest entities. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. 3. ACCOUNTS RECEIVABLE All accounts receivable are trade related. These receivables are current and no reserve for uncollectible accounts is deemed necessary. 4. NOTES RECEIVABLE The notes receivable comprises of $ 817,476 due from North American Systems Inc. (NAS), the sole United States distributor of the Company's line of AlderoxTM products, working in Salt Lake City (SLC) under a revolving loan agreement. The receivable is for the sale of all the assets of the Company in SLC as well as other amounts transferred to the distributor at various times during the period according to the agreement with NAS and is secured by assets of NAS. Part of the agreement with NAS requires that the Company will provide loans to NAS to be used towards meeting the working capital requirements until such time when NAS is able to start paying the amount owed to the Company through sale of the Company's line of AlderoxTM products. The receivable bears interest at the rate of 10% per annum. The agreement terminates October 14, 2005. As of June 30, 2004, the Company has recorded an allowance for doubtful debts of $ 270,000 against the notes receivable. NSA also owes $ 262,844 in account receivable to the Company. 5. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at June 30, 2004: Computers and office equipment $ 16,140 Test equipment 4,916 ------ 21,056 Less accumulated depreciation (9,114) ------- Balance $ 11,942 ======= Depreciation expense was $5,338 and $37,504 for the year ended June 30, 2004 and 2003. Disposal of fixed assets F-9 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) NOTES TO FINANCIAL STATEMENTS During the year, the Company appointed North American Systems (NAS) as the sole United States distributor of the Company's products ASA-12, KR-7, TSR, DCR and cleaners. On August 1, 2003 the Company sold all the assets in Salt Lake City to NAS. The assets transferred had a carrying value of $111,834. The Company recorded $71,355 as a receivable from NAS and offset the remaining balance of $40,479 against outstanding debts to NAS. During the year, the Company disposed off the vehicles and recorded loss of $ 22,692 in the accompanying financial statement. 6. NOTES PAYABLE - RELATED PARTY Notes payable consisted of the following at June 30, 2004: Note payable to shareholder bearing interest rate of 10 %, unsecured, payable on December 31, 2005 $27,000 Notes payable to shareholder, bearing interest rate of 20%, unsecured payable on December 31, 2005 28,000 Notes payable to shareholder, bearing interest rate of 10%, unsecured payable on December 31, 2005 28,000 Notes payable bearing interest rate of 10%, unsecured payable on December 31, 2005 38,763 --------- Total Notes payable $ 121,763 ========= Interest expense for the year ended June 30, 2004 and June 30, 2003 amounted to $7,707 and $ 37,239 respectively. 7. CONVERTIBLE LOANS The Company has convertible loans outstanding at June 30, 2004 totaling $50,104. The loans are convertible to stock at the price of $ 0.40 or $ 0.45. The investor has an option to convert their loan, or any portion, of to the restricted capital stock of the Company at price per the agreement and receiving one share, up front at inception of the loan, for each dollar invested. Interest will accumulate at rate of 10% per annum until conversion date and paid semi annually over the term of the agreement leaving the initial loan until expiration of the agreement convertible to Company's restricted capital stock per the agreement or principal returned with the last interest payment. Loan can be converted at any time within the 3 year loan period. 8. CONVERTIBLE DEBENTURES The Company, through a 506 D Securities Offerings, solicited investment funds. The Convertible Debentures bear interest at ten percent (10%) per annum payable annually and are convertible into restricted common shares of the Company at $0.40 per share. The Company has the right to change the conversion price of the debentures. The Debentures are unsecured and are due and payable by December 31, 2005. The Company recorded beneficial conversion feature expense for $ 236,253 during the year ended June 30, 2003. 9. COMMITMENTS The Company conducts its operations utilizing leased facilities and equipment under non-cancelable operating lease agreements expiring at various dates through the year 2007. Future minimum lease commitments, excluding property taxes and insurance are approximately as follows: F-10 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) NOTES TO FINANCIAL STATEMENTS Year ending June 30, 2005 $77,118 2006 61,386 2007 57,814 =========== Total $ 196,318 Rent expenses for all leased facilities and equipment were $ 38,661 and $75,700 for the year ended June 30, 2004 and 2003, respectively. 10. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK The majority of the Sales in the year ended June 30, 2004 and 2003 was made to a few customers. At June 30, 2004, the total sales to two major customers was $321,239 and the receivable balance from these major customers was $262,844. In fiscal year 2003, the two major customers comprised approximately $187,078 of the Company's total sale and the receivable balance from these major customers was $11,939. Management believes that customer acceptance, billing, and collection policies are adequate to minimize potential risk on trade receivables. 11. INCOME TAXES No provision was made for Federal income tax since the Company has significant net operating loss carryforwards. Through June 30, 2004, the Company incurred net operating losses for tax purposes of approximately $11,100,000. The net operating loss carryforwards may be used to reduce taxable income through the year 2024. The availability of the Company's net operating loss carryforwards are subject to limitation if there is a 50% or more positive change in the ownership of the Company's stock. The provision for income taxes consists of the state minimum tax imposed on corporations. Temporary differences which give rise to deferred tax assets and liabilities at June 30, 2004 comprised of depreciation and amortization and net operating loss carry forward. The gross deferred tax asset balance as of June 30, 2004 was approximately $4,440,000. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carrytforwards cannot reasonably be assured. The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rate to the income taxes reflected in the Consolidated Statements of Operations: June 30, June 30, 2004 2003 -------- ------- Tax expense (credit) at statutory rate-federal (34)% (34)% State tax expense net of federal tax ( 6) ( 6) Permanent differences 1 1 Changes in valuation allowance (39) (39) Tax expense at actual rate - - 12. STOCKHOLDERS' EQUITY Common Stock: During the year ended June 30, 2004 and 2003, the Company issued stocks at various times, as described per the following. The stocks were valued at the average fair market value of the freely trading shares of the Company as quoted on OTCBB on the date of issuance: F-11 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) NOTES TO FINANCIAL STATEMENTS During the fiscal year 2004, the Company issued 4,279,805 shares of common stock for cash amounting $1,796,433 and 1,546,131 shares of common stock for settlement of debt amounting $1,191,954 and 41,432 shares of common stock for conversion of loan amounting $27,331. The Company issued 777,675 shares of common stock for services in fiscal year 2004 for services amounting $526,933. The Company issued 127,918 shares in the year ended June 30, 2004 for cash received in the prior year and issued 50,000 shares in the year ended June 30, 2004 for conversion of loan for prior year. The Company has 10,000 shares of common stock to be issued for service rendered valued at $5,000. During the fiscal year 2003, the Company issued 1,138,440 shares of common stock for cash amounting $218,800 and 1,253,369 shares of common stock for conversion of loans amounting $343,003. The Company issued 1,019,608 shares of common stock for services in fiscal year 2003 for services amounting $404,210 and 425,000 shares of common stock for compensation amounting $117,975. The Company issued 743,594 shares in the year ended June 30, 2003 for cash received in the prior year and issued 153,125 shares in the year ended June 30, 2003 for service received in the prior year. The Company issued 1,875,000 shares for debt settlement recorded in the prior year. The Company cancelled 150,000 shares for founder's shares. The Company received cash of $71,167 for 177,918 shares to be issued. Stock Options: The number and weighted average exercise prices of options granted by the Company are as follows: Options Outstanding Number Weighted of Average Options Exercise Price --------- ------------ Outstanding June 30, 2002 7,555,208 $0.40 Granted during the year 1,257,500 $0.40 Exercised (125,000) (0.40) Expired/forfeited (1,290,208) (0.40) Outstanding June 30, 2003 7,397,500 $0.40 Granted during the year 150,000 $0.40 Exercised (921,250) $0.40 Expired/forfeited (432,500) $0.40 Outstanding June 30, 2004 6,193,750 $0.40 Following is a summary of the status of options outstanding at June 30, 2004: F-12 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) NOTES TO FINANCIAL STATEMENTS Outstanding Options Exercisable Options ------------------- ------------------- Weighted Average Weighted Weighted Remaining Average Average Contractual Exercise Exercise Exercise Price Number Life Price Number Price - -------------- -------- -------- -------- -------- --------- $ 0.40 181,250 4 months $ 0.40 181,250 $ 0.40 $ 0.40 537,500 6 months $ 0.40 537,500 $ 0.40 $ 0.40 450,000 1.5 years $ 0.40 450,000 $ 0.40 $ 0.40 4,875,000 2.6 years $ 0.40 4,875,000 $ 0.40 $ 0.56 150,000 5 months $ 0.56 150,000 $ 0.56 The Company granted options to various consultants for services rendered. These options were accounted for using the fair value of the options granted based on the Black- Scholes option-pricing model. The Company recorded $31,500 during the year ended June 30, 2004 and $-0- in 2003 as consulting expense. The Company accounts for stock based compensation to employees under APB 25 using the intrinsic value method. Pro forma information regarding the effect on operations is required by SFAS 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement. Pro forma information using the Black-Scholes method at the date of grant based on the following assumptions for the year ended June 30, 2004 and 2003 was as follows: Expected life (years) 1-5 years Risk-free interest rate 3% and 5.0% Dividend yield 0% and 0% Volatility 100% and 50% 13. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard No. 95. The Company paid income taxes of $0 and interest of $25,003 during the fiscal year 2004. The Company paid income taxes of $0 and interest of $15,400 during the fiscal year 2003. Supplemental disclosure of non-cash investing and financing activities: The cash flow statements do not include following non-cash investing and financing activities: During the fiscal year 2004, the company issued 1,546,131 shares of common stock for debt settlement valued $1,191,954 and issued 41,432 shares of common stock for conversion of loan valued $27,331. During the fiscal year 2003, the Company issued 1,253,369 shares of common stock for conversion of loans amounting $343,003. 14. LITIGATION: A former employee sued the Company for a breach of contract claim arising from an employment agreement entered into between the ex-employee and the Company on April 7, 2003. The original complaint was filed on Feb. 5, 2004 and asserts the following causes of action: breach of contract, breach of covenant of good faith and fair dealing, and fraud. The plaintiff is demanding compensatory and punitive damages as well as attorneys' fees and costs. F-13 RECLAMATION CONSULTING AND APPLICATIONS, INC. (FORMERLY, RECYCLING CENTERS OF AMERICA, INC.) NOTES TO FINANCIAL STATEMENTS The Company filed its Cross-Complaint on April 15, 2004 alleging breach of contract, negligence, intentional misrepresentation, rescission, and declaratory relief. An amended Cross-Complaint was filed July 6, 2004. The amount of potential loss is $19,000 on the case. The company has accrued this amount in the accompanying financial statement. The Company settled a lawsuit with two former employees during the year ended June 30, 2004. The former employees had alleged that the Company and its officer were liable to them for losses suffered by the former employees due to breach of employment contract. Per the settlement agreement, the Company agreed to pay to the former employees in a total amount of $128,000 in exchange of 200,000 shares of the Company's common stock. The payments will be paid in combined monthly installment of $14,333. Per the settlement agreement, these settlements shall pay off before December 31, 2004. The Company has recorded $128,000 as accrued expense in the accompanying financial statements. The Company has paid $71,109 through June 30, 2004. 15. GOING CONCERN The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of business. Through June 30, 2004, the Company had incurred cumulative losses of $11,112,519 including net losses of $2,542,770 and $1,698,498 for the fiscal years 2004 and 2003, respectively. In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. Management devoted considerable effort during the period ended June 30, 2004, towards (i) obtaining additional equity financing (ii) controlling of salaries and general and administrative expenses (iii) management of accounts payable and (iv) evaluation of its distribution and marketing methods. F-14 RECLAMATION CONSULTING AND APPLICATIONS, INC. BALANCE SHEET MARCH 31, 2005 (Unaudited)
ASSETS CURRENT ASSETS: Accounts receivable $ 9,596 Notes recivable 51,834 Inventory 44,096 Prepaid expense 2,519 Advances to officers 58,652 Employee advances 22,635 ----------- Total current assets 189,331 PROPERTY AND EQUIPMENT, net 55,168 OTHER ASSETS: Deposits 14,993 ----------- $ 259,492 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable $ 219,681 Accrued expenses 408,994 Customer deposit 5,490 Note payable - related parties 546,819 Convertible loans 50,104 Convertible debentures 55,850 ----------- Total current liabilities $ 1,286,937 COMMIMENTS & CONTINGENCIES STOCKHOLDERS' DEFICIT Common stock, $.01 par value; Authorized shares 75,000,000, 28,823,751 shares issued and outstanding 288,238 Additional paid in capital 12,166,480 Treasury stock (15,000) Shares to be issued 127,156 Prepaid Consulting (83,375) Accumulated deficit (13,510,945) ----------- Total stockholders' Deficit (1,027,446) ----------- $ 259,492 ===========
The accompanying notes are an integral part of these financial statements. F-15 RECLAMATION CONSULTING AND APPLICATIONS, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED MARCH 31, 2005 AND 2004 (Unaudited)
Three Months Nine Months Ended March 31, Ended March 31, 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Net revenue $ 11,413 $ 116,481 $ 173,581 162,011 Cost of revenue 15,254 55,226 92,240 87,293 ---------- ---------- ---------- ---------- Gross Profit (loss) (3,842) 61,255 81,341 74,718 Operating expenses Bad debt 958,968 - 1,067,678 1,057 General & Administrative expenses 807,927 180,638 1,378,125 1,351,410 ---------- ---------- ---------- ---------- Total operating expenses 1,766,895 180,638 2,445,803 1,352,467 ---------- ---------- ---------- ---------- Loss from operations (1,770,736) (119,383) (2,364,462) (1,277,749) Non-operating income (expense): Interest Income 20,365 29,166 60,491 29,166 Interest expense (21,758) (2,936) (71,681) (33,126) Loss on settlement of debts (21,975) - (21,975) (585,224) Litigation Settlement - (128,000) - (128,000) Loss on disposal of asset - - - (22,692) ---------- ---------- ---------- ---------- Total non-operating income (expense) (23,368) (101,770) (33,165) (739,876) ---------- ---------- ---------- ---------- Loss before income tax (1,794,105) (221,153) (2,397,627) (2,017,625) Provision for income tax - - 800 800 ---------- ---------- ---------- ---------- Net loss $(1,794,105) $ (221,153) $(2,397,627) $(2,017,625) ========== ========== ========== ========== Basic and diluted weighted average shares outstanding* 28,232,118 23,426,637 26,926,496 22,677,919 ========== ========== ========== ========== Basic and diluted net loss per share $ (0.06) $ (0.01) $ (0.09) $ (0.09) ========== ========== ========== ==========
*Weighted average number of shares used to compute basic and diluted loss per share is the same in these financial statements since the effect of dilutive securities is anti-dilutive. The accompany notes are an integral part of these financial statements. F-16 RECLAMATION CONSULTING AND APPLICATIONS, INC. STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED MARCH 31, 2005 and 2004 (Unaudited)
2005 2004 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(2,398,427) $(2,018,425) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 4,276 4,110 Issuance of shares for services and compensation 686,432 518,413 Issuance of shares for interest expense 1,900 - Bad debts 1,067,678 - Loss on conversion of debts 21,975 - Loss on settlement of debts - 585,224 Options issue for compensation - - Loss on disposal of fixed assets - 22,692 (Increase)/decrease in current assets: Accounts receivable (51,014) (112,780) Note receivable (159,064) (561,577) Inventory (44,096) 36,908 Prepaid expenses (2,519) - Other Receivable - (29,000) Employee advances (64,334) 1,790 Other assets (14,993) 897 (Decrease) in current liabilities: Accounts payable and accrued expenses 44,482 70,181 Customer deposit (2,052) 10,638 --------- --------- Total adjustments 1,488,672 547,496 --------- --------- Net cash used in operating activities (909,755) (1,470,929) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of equipment (2,600) (1,217) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds of note payable 235,500 215,268 Payments on note payable (32,445) (195,707) Proceeds from loan 354,501 15,000 Payment of loans (132,500) (10,000) Receipt of cash for shares to be issued 110,156 78,900 Issuance of common stock for cash 376,100 1,368,985 --------- --------- Net cash provided by financing activities 911,312 1,472,446 --------- --------- NET INCRASE IN CASH & CASH EQUIVALENTS (1,043) 300 CASH & CASH EQUIVALENTS, BEGINNING BALANCE 1,043 - --------- --------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ 0 $ 300 ========= =========
The accompanying notes are an integral part of these financial statements. F-17 RECLAMATION CONSULTING AND APPLICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS 1. ORGANIZATIONS AND DESCRIPTION OF BUSINESS Reclamation Consulting and Applications, Inc. (formerly, Recycling Centers of America, Inc.) (the "Company") is a Colorado corporation, originally formed in 1976 under the name of Vac-Tech Systems, Inc. The Company changed its name to Recycling Centers of America on March 26, 1999. On January 16, 2002, an article of amendment was filed to change the name of corporation to Reclamation Consulting and Applications, Inc. Presently, the Company's primary business is the production and sale of the Alderox(R) line of products including ASA-12(R), KR-7(R), TSR(R), and ASA Cleaners. ASA-12(R) is an asphalt release agent, KR7(R) is a concrete release agent and TSR(R) was specifically designed as a non-stick coating for the oil sands industry. The Company also has an exclusive distributorship agreement with Topia Energy, Inc. Under the agreement, the Company markets the sale of BioDiesel Driven biodiesel fuel. This agreement appoints the Company as the worldwide exclusive distributor of Topia Energy, Inc.,s biodiesel within the marine industry. The Company also markets Topia Energy, Inc.,s biodiesel outside of the marine industry under a registered commission protected account basis. There are no geographical or time limitations on this exclusive agreement. 2. BASIS OF PRESENTATION The accompanying unaudited condensed interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for the presentation of interim financial information, but do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The audited financial statements for the year ended June 30, 2004 were filed on October 1, 2004 with the Securities and Exchange Commission and is hereby referenced. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the nine month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ended June 30, 2005. 3. USE OF ESTIMATES In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. 4. NEW ACCOUNTING PRONOUNCEMENTS In November 2004, the FASB has issued FASB Statement No. 151, "Inventory Costs, an Amendment of ARB No. 43, Chapter 4" ("FAS No. 151"). The amendments made by FAS No. 151 are intended to improve financial reporting by clarifying that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and by requiring the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004. The provisions of FAS No. 151 will be applied prospectively. The Company does not expect the adoption of FAS No. 151 to have a material impact on its consolidated financial position, results of operations or cash flows. F-18 RECLAMATION CONSULTING AND APPLICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant- date fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's second quarter of fiscal 2006. The Company is in process of evaluating the impact of this pronouncement on its financial statements. In December 2004, the FASB issued SFAS Statement No. 153, "Exchanges of Nonmonetary Assets." The Statement is an amendment of APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The Company believes that the adoption of this standard will have no material impact on its financial statements. In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments." The EITF reached a consensus about the criteria that should be used to determine when an investment is considered impaired, whether that impairment is other-than-temporary, and the measurement of an impairment loss and how that criteria should be applied to investments accounted for under SFAS No. 115, "ACCOUNTING IN CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES." EITF 03-01 also included accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. Additionally, EITF 03-01 includes new disclosure requirements for investments that are deemed to be temporarily impaired. In September 2004, the Financial Accounting Standards Board (FASB) delayed the accounting provisions of EITF 03-01; however the disclosure requirements remain effective for annual reports ending after June 15, 2004. The Company will evaluate the impact of EITF 03-01 once final guidance is issued. 5. NOTES RECEIVABLE The Company has a note receivable of $ 51,834 due from North American Systems, Inc. (NASI) a former distributor of the Company,s Alderox(R) line of products. This receivable has been secured through inventory of NASI. The Company wrote- off receivables from NASI amounting to $958,968 during the period ended March 31, 2005. The Company bought back the fixed assets sold to NASI in September 2002 at $44,902. These assets have been recorded at the net book value as on March 31, 2005. 6. ADVANCES TO OFFICERS Some officers of the Company borrowed money amounting to $58,652. These are non interest bearing and due on demand. 7. ACCRUED EXPENSES The following is the composition of accrued expenses as of March 31, 2005. Payroll tax liability $ 238,105 Accrued interest 52,766 Accrued vacation 32,516 Accrued taxes 2,400 Others 83,207 ----------- Total $ 408,994 =========== 8. NOTES PAYABLE - RELATED PARTIES Notes payable consist of the following at March 31, 2005: Note payable bearing interest rate of 10%, unsecured, payable on November 30, 2005 $20,000 Note payable bearing interest rate of 15%, unsecured, payable on September 17, 2005 $125,000 Note payable bearing interest rate of 15%, Secured by assets of the Company payable on April 22, 2005 $20,000 Note payable bearing interest rate of 15%, unsecured, payable on October 29, 2005 $50,000 F-19 RECLAMATION CONSULTING AND APPLICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS Note payable bearing interest rate of 10%, unsecured, payable on September 8, 2005 $5,112 Note payable bearing interest rate of 10%, unsecured, payable on December 31, 2005 $104,705 Note payable to related party - stockholder bearing interest rate of 0%, unsecured, payable on January 1, 2005 $24,000 Note payable to related party - stockholder bearing interest rate of 0%, unsecured, payable on January 21, 2005 $7,500 Note payable to related party - stockholder bearing interest rate of 10%, unsecured, payable on March 10, 2005 $10,000 Note payable to related party - stockholder bearing interest rate of 10%, unsecured, payable on March 14, 2005 $10,000 Note payable to related party - stockholder bearing interest rate of 0%, unsecured, payable on April 1, 2005 $30,500 Note payable to related party - stockholder bearing interest rate of 10%, unsecured, payable on March 10, 2005 $50,000 Note payable to related party - stockholder bearing interest rate of 0%, unsecured, payable on June 1, 2005 $20,000 Note payable to related party - stockholder bearing interest rate of 15%, unsecured, payable on September 30, 2005 $20,000 Note payable to related party - stockholder bearing interest rate of 10%, secured by the assets of the Company, payable on March 10, 2006 $50,001 ----------- Total notes payable to related parties $546,819 =========== Interest expense for related parties for notes and loans payable for the period ended March 31, 2005 and 2004 amounted to $4,621 and $2,936 respectively. 9. CONVERTIBLE LOANS-SHAREHOLDERS The Company has convertible loans outstanding at March 31, 2005 totaling $50,104. The loans are convertible to stock at the price of $ 0.40 or $ 0.45. The investor has an option to convert their loan, or any portion, of to the restricted capital stock of the Company at price per the agreement and receiving one share, up front at inception of the loan, for each dollar invested. Interest will accumulate at rate of 10% per annum until conversion date and paid semi annually over the term of the agreement leaving the initial loan until expiration of the agreement convertible to Company,s restricted capital stock per the agreement or principal returned with the last interest payment. Loan can be converted at any time within the 3 year loan period. F-20 RECLAMATION CONSULTING AND APPLICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS 10. CONVERTIBLE DEBENTURES The Company, through a 506 D Securities Offerings, solicited investment funds. The Convertible Debentures bear interest at ten percent (10%) per annum payable annually and are convertible into restricted common shares of the Company at $0.40 per share. The Company has the right to change the conversion price of the debentures. The Debentures are unsecured and are due and payable by December 31, 2005. The convertible debenture outstanding amounted to $55,850 at March 31, 2005. 11. COMMITMENTS The Company entered into an employment agreement with an individual to act as the President on January 6, 2005. This agreement has the same terms as the past agreement and expires January 6, 2010. Under the agreement, during the first twelve months of employment, the Company agrees to compensate Employee (from the commencement of this agreement) at the rate of not less than $135,200 per year base compensation for the first year of employment. Thereafter, Employee,s annual compensation shall be increased by 20% on each anniversary date of this agreement, provided that the Company reaches a minimum net profit of $250,000. In no event shall Employee,s minimum base compensation be reduced below $135,200 per year. Such compensation shall be payable monthly or on such more frequent basis as the Company may establish. The agreement shall have an initial five- year term, which shall be automatically renewed each year thereafter unless the Company, upon thirty (30) days prior notice notifies Employee of its intent not to renew the Agreement. Notwithstanding the foregoing, the Company or the Employee may at any time terminate this Agreement and the employment relationship on thirty (30) days prior notice to the other, with the consequences hereinafter set forth. The option to purchase 1,500,000 shares of common restricted stock in the Company has been granted in Employee,s name. All options shall expire 5-years from the vesting date. 1,500,000 of these options have been carried over from Employee,s previous Employment Agreement with the Company. Additional stock options shall be granted to Employee each year following the above schedule on the anniversary date of this Agreement, the amount and price of which to be determined solely by the Company. The Company entered into an employment agreement with an individual to act as the Chief Financial Officer on January 6, 2005. This agreement has the same terms as the past agreement and expires January 6, 2010. Under the agreement, during the first twelve months of employment, the Company agrees to compensate Employee (from the commencement of this agreement) at the rate of not less than $135,200 per year base compensation for the first year of employment. Thereafter, Employee,s annual compensation shall be increased by 20% on each anniversary date of this agreement, provided that the Company reaches a minimum net profit of $250,000. In no event shall Employee,s minimum base compensation be reduced below $135,200 per year. Such compensation shall be payable monthly or on such more frequent basis as the Company may establish. The agreement shall have an initial five-year term, which shall be automatically renewed each year thereafter unless the Company, upon thirty (30) days prior notice notifies Employee of its intent not to renew the Agreement. Notwithstanding the foregoing, the Company or the Employee may at any time terminate this Agreement and the employment relationship on thirty (30) days prior notice to the other, with the consequences hereinafter set forth. The option to purchase 1,500,000 shares of common restricted stock in the Company has been granted in Employee,s name. All options shall expire 5-years from the vesting date. 1,500,000 of these options have been carried over from Employee,s previous Employment Agreement with the Company. Additional stock options shall be granted to Employee each year following the above schedule on the anniversary date of this Agreement, the amount and price of which to be determined solely by the Company. F-21 RECLAMATION CONSULTING AND APPLICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS 12. NET LOSS PER SHARE Net loss per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), "Earnings per share". Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Weighted average number of shares used to compute basic and diluted loss per share is the same in this financial statement since the effect of dilutive securities is anti-dilutive. 13. STOCKHOLDERS' DEFICIT Common Stock: During the period ended March 31, 2005, the Company issued 1,497,163 shares of common stock for cash amounting $376,100. During the period ended March 31, 2005, the Company issued 1,158,968 shares of common stock for services amounting $271,753. The Company recorded $83,375 prepaid consulting for this issuance. During the period ended March 31, 2005, the Company cancelled 62,500 shares amounting $625. During the period ended March 31, 2005, the Company issued 5,000 shares of common stock towards payment of interest expense on the notes amounting to $ 1,900. During the period ended March 31, 2005, the Company issued 732,500 shares of common stock in settlement of debts amounting to $146,500. A loss on conversion of $21,975 was incurred in this conversion of debts to equity. Shares to be issued: During the period ended March 31, 2005, the Company received $110,156 for 492,267 shares to be issued. During the period ended March 31, 2005, the Company commits to issue 70,000 shares of common stock for services and compensation amounting to $17,000. Stock Options: During the period ended March 31, 2005, the Company granted 2,120,000 stock options to non-employees with an exercise price of $0.25 per share. These options are vested immediately and the Company recorded a $414,679 expense in relation for the option grant. During the period ended March 31, 2005, the Company granted 2,740,000 stock options to employees with an exercise price of $0.25 per share. These options are vested immediately. In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123, "Accounting for Stock Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used, on reported results. F-22 RECLAMATION CONSULTING AND APPLICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS The following table illustrates the effect on net loss per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation. Net loss: As reported $(2,398,427) Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards 526,761 -------------- Pro forma $(2,925,188) ============== Basic and diluted net loss per share: As reported $ (0.09) ============== Pro forma $ (0.10) ============== The above pro forma effects of applying SFAS 123 are not necessarily representative of the impact on reported net loss for future years. 14. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard No. 95. The Company paid income tax $ 0 for each nine month period ended March 31, 2005 and 2004. Interest expenses of $76,702 and $33,127 was paid during the nine month period ended March 31, 2005 and 2004, respectively. Supplemental disclosure of non-cash investing and financing activities: The cash flow statements do not include following non-cash investing and financing activities: During the period ended March 31, 2005, the Company issued 1,158,968 shares of common stock for services amounting $271,153. During the period ended March 31, 2005, the Company cancelled 62,500 shares. During the period ended March 31, 2005, the Company issued 5,000 shares of common stock towards payment of interest expense on the notes amounting to $ 1,900. 15. RELATED PARTY TRANSACTIONS Certain of the Company's major shareholders have loaned money to the Company at various times. The notes payable to the related parties have been presented in Note 8. Interest expense for related parties for the period ended March 31, 2005 and 2004 amounted to $31,682 and $12,521 respectively. During the period ended March 31, 2005, the Company settled debt to a related party for $146,500 and agreed to issue 732,500 shares towards the settlement. 16. GOING CONCERN The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of business. Through March 31, 2005, the Company had incurred cumulative losses of $13,510,945 including net losses of $2,398,427 for the nine month period ended March 31, 2005. The continuing losses have adversely affected the liquidity of the Company. F-23 RECLAMATION CONSULTING AND APPLICATIONS, INC. NOTES TO THE FINANCIAL STATEMENTS In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company,s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. Management devoted considerable effort during the period ended March 31, 2005, towards (i) obtaining additional equity financing and (ii) evaluation and reorganization of its distribution and marketing methods. F-24 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Our Articles of Incorporation, as amended, provide to the fullest extent permitted by Colorado law, our directors or officers shall not be personally liable to us or our shareholders for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of our Articles of Incorporation, as amended, is to eliminate our right and our shareholders (through shareholders' derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in its Articles of Incorporation, as amended, are necessary to attract and retain qualified persons as directors and officers. Insofar as indemnification for liabilities arising under the Securities Act of 1933 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 the successful defense of any action, suit or proceeding) is asserted by such 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. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth an itemization of all estimated expenses, all of which we will pay, in connection with the issuance and distribution of the securities being registered: NATURE OF EXPENSE AMOUNT SEC Registration fee $ 1,254.30 Accounting fees and expenses 10,000.00* Legal fees and expenses 45,000.00* Miscellaneous 3,745.70 ----------- TOTAL $60,000.00* =========== * Estimated. II-1 ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES. On August 22, 2002, we issued 12,500 shares in exchange for services rendered valued at $5,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 22, 2002, we issued 50,000 shares related to a private placement valued at $20,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 20, 2002, we issued 125,000 shares related to employee bonuses valued at $50,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 20, 2002, we issued 12,500 shares in exchange for services rendered valued at $5,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 20, 2002, we issued 184,479 shares related to a private placement valued at $53,791.60. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On October 12, 2002, we issued 3,000,000 shares in exchange for debt reduction valued at $306,687. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On March 31, 2003, we issued 81,500 shares related to a loan pay down valued at $38,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On March 31, 2003, we issued 167,000 shares related to a private placement valued at $66,800. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On March 31, 2003, we issued 46,869 shares in exchange for debt reduction valued at $6,928.70. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On March 31, 2003, we issued 141,400 shares in exchange for consulting services valued at $49,490. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On June 25, 2003, we issued 403,208 shares in exchange for valuable services rendered valued at $162,533. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On June 25, 2003, we issued 357,000 shares related to a private placement valued at $142,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 4, 2003, we issued 37,500 shares in exchange for a loan reduction valued at $15,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 4, 2003, we issued 50,000 shares related to a loan reduction valued at $20,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 4, 2003, we issued 308,750 shares in exchange for a capital stock purchase valued at $123,500. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 23, 2003, we issued 33,750 shares related to a standard loan conversion valued at $13,500. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 23, 2003, we issued 55,555 shares related to a loan conversion valued at $25,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 23, 2003, we issued 6,666 shares related to an accrued interest conversion valued at $3,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. II-2 On September 29, 2003, we issued 662,918 shares related to private placement valued at $265,167. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 29, 2003, we issued 172,500 shares related to a loan conversion valued at $69,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 29, 2003, we issued 90,675 shares in exchange for services rendered valued at $36,270. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 30, 2003, we issued 974,883 shares in exchange for a note payable convertible valued at $389,953.29. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 30, 2003, we issued 77,693 shares in exchange for accrued interest converted valued at $31,077.33. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 30, 2003, we issued 170,000 shares in exchange for a payoff of a convertible loan valued at $68,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 30, 2003, we issued 26,943 shares in exchange for a payoff of a convertible debenture valued at $10,777. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On September 30, 2003, we issued 201,375 shares related to private placement valued at $80,550. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On November 21, 2003, we issued 20,000 shares related to the payoff of a convertible loan valued at $8,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On November 21, 2003, we issued 318,750 shares related to a private placement valued at $127,500. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On November 21, 2003, we issued 550,000 shares in exchange for services rendered valued at $418,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On December 9, 2003, we issued 50,000 shares in exchange for services rendered valued at $31,500. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On December 24, 2003, we issued 50,000 shares related to a private placement valued at $25,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On December 23, 2003, we issued 452,500 shares related to a private placement valued at $206,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On December 20, 2003, we issued 30,000 shares related to debt reduction valued at $12,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On January 21, 2004, we issued 242,100 shares related to a private placement valued at $116,050. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On February 9, 2004, we issued 522,300 shares related to a private placement valued at $227,400. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. II-3 On March 25, 2004, we issued 577,750 shares related to a private placement valued at $247,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On April 16, 2004, we issued 87,000 shares in exchange for services rendered valued at $43,500. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On April 16, 2004, we issued 198,000 shares related to a private placement valued at $94,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On April 16, 2004, we issued 7,073 shares related to a note payable conversion valued at $2,283. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On June 29, 2004, we issued 182,500 shares related to private placement valued at $73,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On June 29, 2004, we issued 665,779 shares related to a note payable conversion valued at $252,996. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 20, 2004, we issued 399,593 shares in exchange for services rendered valued at $119,877.90. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 24, 2004, we issued 726,663 shares related to a private placement valued at $218,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On August 27, 2004, we issued 40,000 shares related to a private placement valued at $12,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On October 5, 2004, we issued 5,000 shares related to an accrued interest converted valued at $1,500. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On October 6, 2004, we issued 49,375 shares in exchange for services rendered valued at $14,812.50. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On January 3, 2005, we issued 710,000 shares in exchange for services rendered valued at $142,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On January 4, 2005, we issued 150,000 shares related to a note payable conversion valued at $30,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On January 4, 2005, we issued 150,000 shares related to a private placement valued at $30,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On January 4, 2005, we issued 340,000 shares related to a loan payable conversion valued at 68,000. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On February 28, 2005, we issued 580,500 shares related to a private placement valued at $116,100. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. On February 28, 2005, we issued 242,500 shares related to a loan payable conversion valued at $48,500. Such issuances were considered exempt from registration by reason of Section 4(2) of the Securities Act of 1933. To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with four accredited investors on June 23, 2005 for the sale of (i) $2,000,000 in secured convertible notes and (ii) warrants to buy 8,000,000 shares of our common stock. II-4 The investors are obligated to provide us with an aggregate of $2,000,000 as follows: o $700,000 was disbursed on June 23, 2005; o $600,000 will be disbursed within five days of the filing of this registration statement; and o $700,000 will be disbursed within five days of the effectiveness of this prospectus. Accordingly, we have received a total of $700,000 pursuant to the Securities Purchase Agreement. The secured convertible notes bear interest at 10%, mature three years from the date of issuance, and are convertible into our common stock, at the selling stockholders' option, at the lower of (i) $0.21 or (ii) 50% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. The full principal amount of the secured convertible notes are due upon default under the terms of secured convertible notes. In addition, we have granted the investors a security interest in substantially all of our assets and intellectual property and registration rights. The warrants are exercisable until five years from the date of issuance at a purchase price of $0.28 per share. In addition the warrants exercise price gets adjusted in the event we issue common stock at a price below market, with the exception of any securities issued as of the date of this warrant. * All of the above offerings and sales were deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of Reclamation Consulting and Applications or executive officers of Reclamation Consulting and Applications, and transfer was restricted by Reclamation Consulting and Applications in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, all of the above-referenced persons were provided with access to our Securities and Exchange Commission filings. Except as expressly set forth above, the individuals and entities to whom we issued securities as indicated in this section of the registration statement are unaffiliated with us. II-5 ITEM 27. EXHIBITS. The following exhibits are included as part of this Form SB-2. References to "the Company" in this Exhibit List mean Reclamation Consulting and Applications, Inc., a Colorado corporation. Exhibit No. Description 3.1 Articles of Incorporation, filed as an exhibit to the registration statement on Form 10-SB, filed with the Securities and Exchange Commission (the "Commission") on March 8, 2000 and incorporated herein by reference. 3.2 Articles of Amendment to the Articles of Incorporation, filed as an exhibit to the registration statement on Form 10-SB, filed with the Commission on March 8, 2000 and incorporated herein by reference. 3.3 Articles of Amendment to the Articles of Incorporation, filed as an exhibit to the registration statement on Form 10-SB, filed with the Commission on March 8, 2000 and incorporated herein by reference. 3.4 By-laws, filed as an exhibit to the registration statement on Form 10-SB, filed with the Commission on March 8, 2000 and incorporated herein by reference. 4.1 Securities Purchase Agreement, dated June 23, 2005, by and among Reclamation Consulting and Applications, Inc. and AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.2 Callable Secured Convertible Note issued to AJW Offshore, Ltd., dated June 23, 2005, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.3 Callable Secured Convertible Note issued to AJW Qualified Partners, LLC, dated June 23, 2005, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.4 Callable Secured Convertible Note issued to AJW Partners, LLC, dated June 23, 2005, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.5 Callable Secured Convertible Note issued to New Millennium Capital Partners II, LLC, dated June 23, 2005, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.6 Stock Purchase Warrant issued to AJW Offshore, Ltd., dated June 23, 2005, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.7 Stock Purchase Warrant issued to AJW Qualified Partners, LLC, dated June 23, 2005, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.8 Stock Purchase Warrant issued to AJW Partners, LLC, dated June 23, 2005, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.9 Stock Purchase Warrant issued to New Millennium Capital Partners II, LLC, dated June 23, 2005, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. II-6 4.10 Registration Rights Agreement, dated as of June 23, 2005, by and among Reclamation Consulting and Applications, Inc., AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.11 Security Agreement, dated as of June 23, 2005, by and among Reclamation Consulting and Applications, Inc., AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.12 Intellectual Property Security Agreement, dated June 23, 2005, by and among Reclamation Consulting and Applications, Inc., AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 4.13 Guaranty and Pledge Agreement, dated June 23, 2005, by and among Reclamation Consulting and Applications, Inc., Gordon Davies, AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC, filed as an exhibit to the Current Report on Form 8-K filed with the Commission on June 28, 2005 and incorporated herein by reference. 5.1 Sichenzia Ross Friedman Ference LLP Opinion and Consent (filed herewith). 10.1 Employment Agreement for Gordon Davies, dated as of January 6, 2005. 10.2 Employment Agreement for Michael Davies, dated as of January 6, 2005. 10.3 Distribution Agreement, dated as of February 3, 2005, by and between the Company and ITA Asphalt Limited. 10.4 Distribution Agreement, dated as of July 7, 2005, by and between the Company and Jimmy Watts. 10.5 Distribution Agreement, dated as of July 12, 2005, by and between the Company and Mark Lang. 10.6 Distribution Agreement, dated as of June 30, 2005, by and between the Company and Don Pickett. 10.7 Contract Sales Representative Agreement, dated as of October 27, 2004, by and between the Company and Dennis Jackman. 10.8 Amendment to Contract Sales Representative Agreement, dated as of October 27, 2004, by and between the Company and Dennis Jackman. 10.9 Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. 10.10 Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. 10.11 Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. II-7 10.12 Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. 10.13 Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. 10.14 Amendment to Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. 10.15 Amendment to Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. 10.16 Amendment to Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. 10.17 Amendment to Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. 10.18 Amendment to Contract Sales Representative Agreement, dated as of November 15, 2004, by and between the Company and Rosiane Jacomini. 10.19 Distribution Agreement, dated as of August 10, 2004, by and between the Company and Aurtech Marketing, Pty., Ltd. 10.20 Distribution Agreement, dated as of December 5, 2003, by and between the Company and Canadian Release Agents, Ltd. 23.1 Consent of Kabani & Company, Inc. (filed herewith). 23.2 Consent of legal counsel (see Exhibit 5.1). ITEM 28. UNDERTAKINGS. The undersigned registrant hereby undertakes to: (1) File, during any period in which offers or sales are being made, a post-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 (the "Securities Act"); (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. II-8 (4) For purposes of determining any liability under the Securities Act, treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part of this registration statement as of the time it was declared effective. (5) For determining any liability under the Securities Act, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities. Insofar as indemnification for liabilities arising under the Securities Act 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 the successful defense of any action, suit or proceeding) is asserted by such 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. II-9 SIGNATURES In accordance with the requirements of the Securities Act of 1933, as amended, the registrant, Reclamation Consulting and Applications, Inc., certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and has duly caused this registration statement on Form SB-2 to be signed on its behalf by the undersigned, in the City of Lake Forest, State of California, on July 27, 2005. RECLAMATION CONSULTING AND APPLICATIONS, INC. By: /s/ GORDON DAVIES --------------------------------------- Gordon Davies, Chief Executive Officer, Principal Executive Officer and Director By: /s/ MICHAEL DAVIES --------------------------------------- Michael Davies, Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated. SIGNATURE TITLE DATE /s/ GORDON DAVIES Chief Executive Officer (Principal July 27, 2005 - ------------------------- Executive Officer), President and Gordon Davies Director /s/ MICHAEL DAVIES Chief Financial Officer (Principal July 27, 2005 - ------------------------- Financial Officer and Principal Michael Davies Accounting Officer) and Director II-10 EX-5 2 ex51.txt EXHIBIT 5.1 SICHENZIA ROSS FRIEDMAN FERENCE LLP 1065 Avenue of the Americas, 21st Flr. New York, NY 10018 Telephone: (212) 930-9700 Facsimile: (212) 930-9725 July 27, 2005 VIA ELECTRONIC TRANSMISSION Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 RE: Reclamation Consulting and Applications, Inc. Form SB-2 Registration Statement (File No. 333-) Ladies and Gentlemen: We refer to the above-captioned registration statement on Form SB-2 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), filed by Reclamation Consulting and Applications, Inc., a Colorado corporation (the "Company"), with the Securities and Exchange Commission. We have examined the originals, photocopies, certified copies or other evidence of such records of the Company, certificates of officers of the Company and public officials, and other documents as we have deemed relevant and necessary as a basis for the opinion hereinafter expressed. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as certified copies or photocopies and the authenticity of the originals of such latter documents. Based on our examination mentioned above, we are of the opinion that the securities being sold pursuant to the Registration Statement are duly authorized and will be, when issued in the manner described in the Registration Statement, legally and validly issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm under "Legal Matters" in the related Prospectus. In giving the foregoing consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Act, or the rules and regulations of the Securities and Exchange Commission. /s/ Sichenzia Ross Friedman Ference LLP EX-10 3 ex101.txt Exhibit 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is entered into as of the day of January 6, 2005, by and between Gordon Davies ("Employee") and RECLAMATION CONSULTING AND APPLICATIONS, INC., a Colorado Corporation with its principal place of business at 23832 Rockfield Boulevard, Suite 275, Lake Forest, California 92630 ("Company"). 1. RECITALS: 1.1 The company is in the business of manufacturing and marketing asphalt, cement and related products release agents in liquid form that are non-toxic, non-explosive and environmentally compatible, the formulation and ingredients of which are confidential. 1.2 Employee has experience in the businesses conducted and to be conducted by the Employer, or in related businesses, and desires to be employed by the Company, and the Company desires to employee the Employee, on the terms and conditions specified below 2. COVENANTS: In consideration of the recitals and mutual covenants contained herein, the parties agree that: 2.1 Employment. The Company will employ Employee to serve as President with the duties listed and defined by the Company or the Board, in connection with the Company's operations and Employee does hereby accept such employment, all subject to the terms and provisions of this Agreement. Employee represents that he is legally free to enter into this agreement and that it does not conflict with any of his duties or obligations to any other person and that he is not in any way restricted by any duties or obligations to any other person from contributing his knowledge and talents to the Company in performing his duties hereunder. 2.2 Term. This Agreement shall have an initial five-year term, which shall be automatically renewed each year thereafter unless the Company, upon thirty (30) days prior notice notifies Employee of its intent not to renew the Agreement. Notwithstanding the foregoing, the Company or the Employee may at any time terminate this Agreement and the employment relationship on thirty (30) days prior notice to the other, with the consequences hereinafter set forth. 2.3 Compensation. During the first twelve months of employment, the Company agrees to compensate Employee (from the commencement of this agreement) at the rate of not less than $135,200 per year base compensation for the first year of employment. Thereafter, Employee's annual compensation shall be increased by 20% on each anniversary date of this agreement, provided that the Company reaches a minimum net profit of $250,000. In no event shall Employee's minimum base compensation be reduced below $135,200 per year. Such compensation shall be payable monthly or on such more frequent basis as the Company may establish. 2.4 Bonuses. An annual bonus will be paid to Employee, the amount of which is based upon the Company's net profits and shall be structured as follows: 1 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $135,200 $13,500 $500,000 20% $135,200 $27,000 $750,000 30% $135,200 $40,500 $1,000,000 40% $135,200 $54,000 $1,250,000 50% $135,200 $67,500 $1,500,000 60% $135,200 $81,000 $1,750,000 70% $135,200 $94,500 $2,000,000 80% $135,200 $108,000 $2,250,000 90% $135,200 $121,000 $2,500,000 100% $135,200 $135,000 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $162,240 $16,224 $500,000 20% $162,240 $32,448 $750,000 30% $162,240 $48,672 $1,000,000 40% $162,240 $64,898 $1,250,000 50% $162,240 $81,120 $1,500,000 60% $162,240 $97,344 $1,750,000 70% $162,240 $113,568 $2,000,000 80% $162,240 $129,792 $2,250,000 90% $162,240 $146,016 $2,500,000 100% $162,240 $162,240 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $194,688 $ 19,468.80 $500,000 20% $194,688 $ 38,937.60 $750,000 30% $194,688 $ 58,406.40 $1,000,000 40% $194,688 $ 77,857.20 $1,250,000 50% $194,688 $ 97,344 $1,500,000 60% $194,688 $116,812.80 $1,750,000 70% $194,688 $136,281.60 $2,000,000 80% $194,688 $155,750.40 $2,250,000 90% $194,688 $175,219.20 $2,500,000 100% $194,688 $194,688 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $233,625.60 $ 23,362.56 $500,000 20% $233,625.60 $ 46,727.12 $750,000 30% $233,625.60 $ 70,087.68 $1,000,000 40% $233,625.60 $ 93,450.24 2 $1,250,000 50% $233,625.60 $116,812.80 $1,500,000 60% $233,625.60 $140,175.36 $1,750,000 70% $233,625.60 $163,537.92 $2,000,000 80% $233,625.60 $186,900.48 $2,250,000 90% $233,625.60 $210,263.04 $2,500,000 100% $233,625.60 $233,625.60 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $280,350.72 $28,035.07 $500,000 20% $280,350.72 $56,070.14 $750,000 30% $280,350.72 $84,105.21 $1,000,000 40% $280,350.72 $112,140.28 $1,250,000 50% $280,350.72 $140,175.36 $1,500,000 60% $280,350.72 $168,210.43 $1,750,000 70% $280,350.72 $196,245.49 $2,000,000 80% $280,350.72 $224,280.57 $2,250,000 90% $280,350.72 $252,315.64 $2,500,000 100% $280,350.72 $280,350.72 2.5 Stock Options. The option to purchase 2,500,000 shares of common restricted stock in the Company has been granted in Employee's name. All options shall expire 5-years from the vesting date. 1,500,000 of these options have been carried over from Employee's previous Employment Agreement with the Company. Options will be vested annually, subject to continued employment, and released to Employee as per the schedule below. The corresponding number of share options shall be vested to Employee at the purchase values and on the dates indicated. No. Options Date Available Exercise Price 500,000 January 15, 2002 $0.40 per share 500,000 January 15, 2003 $0.40 per share 500,000 January 15, 2004 $0.40 per share 1,000,000 January 15, 2005 $0.25 per share Additional stock options may be granted to Employee each year following the above schedule on the anniversary date of this Agreement, the amount and price of which to be determined solely by the Company. 2.6 Duties. Employee agrees to devote his energies to the business of the Company and agrees to perform such reasonable responsibilities and duties as may be assigned to him from time to time by the Company or by the Company's board of directors, which shall be consistent with his position as Executive Vice President. In no event shall the Employee be precluded from activities in professional societies, or from lecturing or writing in areas of his professional expertise for reasonable periods, and Employee shall be entitled to retain fees, honoraria, publication royalties and similar compensation paid as a result of such activities. 2.7 Additional Benefits. The Company agrees to reimburse Employee promptly for or to pay on behalf of Employee, any reasonable expenses heretofore or hereafter incurred by Employee (to the extent not paid by others) in the 3 furtherance of the goals of the Company upon submission of a satisfactory accounting by Employee, and to provide Employee with the following additional benefits: 2.7.1 A minimum of three weeks annual paid vacation. Vacation shall accrue on a monthly basis or part thereof; however, once unused vacation has accrued to a maximum of three weeks, accrual of additional vacation shall cease until the balance of accrued vacation has been reduced below six weeks. The Company will not cause the vacation accrual to cease by withholding its approval of any of the Employee's vacation requests. 2.7.2 Any other standard benefits that may be established by the Company or its affiliates for its employees. 2.8 Non-Disclosure of Confidential Information. It is understood that employee will acquire and be informed of confidential technical and/or business information used by and belonging to the Company ("Confidential Information"), including Confidential Information as defined in the Company's EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT. Employee agrees that some or all of such Confidential Information is in the nature of trade secrets and is the sole property of the Company. Employee will keep confidential, and will not disclose to any third person or entity, any Confidential Information without Employer's consent and pursuant to the proceedings further defined in the Company's EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT. 2.9 Confidentiality after Termination of Employment. Employee agrees that upon termination of employment, he or she shall surrender promptly to the Company any and all documents and property of the Company, including, but not limited to: reports, drawings, manuals, correspondence, customer lists and other Confidential Information which he or she may possess, and all other materials and all copies thereof relating in any way to the Company's business, or in any way obtained by the Employee during the course of his employment, and that he shall not retain any copies, notes or abstracts of the foregoing. Employee further agrees that such documents, lists and information shall be and remain the sole property of the Company. All of the terms of paragraph 2.8 shall remain in full force and effect both during the continuation of employment of Employee by the Company and after the termination of employment for any reason. 2.10 Confidentiality. Employee agrees to execute standard Company documents establishing the Employee's duties of confidentiality and the rights of the Company to all inventions, trade secrets, etc., developed by the Employee in the course of his employment, namely the EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT. 2.11 Non-Competition. Employee agrees that during the term of his employment by Company, Employee will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company and its subsidiaries and affiliate operations, nor solicit or in any other manner work for or assist any business which is competitive to the Company and its subsidiaries and affiliate operations. 2.12 Non-Participation in Competitive Activities. During the term of this agreement, Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an Employee of the Company and its subsidiaries and affiliate operations, and Employee will not combine or participate with other employees of the Company and its subsidiaries and affiliate operations for the purpose of organization of any such competitive business activity. 4 2.13 Assignment to Company of Proprietary Rights. Employee agrees to execute any and all documents and take any and all other actions necessary or desirable for the assignment to the Company and its subsidiaries and affiliate operations of all of his interests in any Confidential Information, trade secrets, copyrightable materials and patentable or patented ideas developed by him, alone or in conjunction with others, in the course of his employment by the Company. 2.14 Injunctive Relief. The parties hereto agree and acknowledge that many of the rights conveyed by this Agreement are of a unique and special nature and that the Company and its subsidiaries and affiliate operations will not have an adequate remedy at law in the event of failure of Employee to abide by its terms and conditions, nor will money damages adequately compensate for such injury. It is, therefore, agreed between the parties that in the event of breach by Employee of Employee's covenants contained in this Agreement, the Company and its subsidiaries and affiliate operations shall have the rights, among other rights, to damages sustained thereby and to a preliminary or permanent injunction to restrain Employee from the prohibited acts. Employee agrees that this Paragraph shall survive for one year after the termination of his employment, and Employee shall be bound by its terms for a period of one year subsequent to the termination of his employment, providing that the Company and its subsidiaries and affiliate operations continue to conduct the same business or businesses as they were conducting during the period of this Agreement. Nothing herein contained shall in any way limit or exclude any and all other rights granted by law or equity to the Company and its subsidiaries and affiliate operations. 2.15 Termination of Employment. If Employee's employment terminates or is terminated, the rights and obligations of the parties shall depend upon the reason for termination. Termination may occur for any one of the following reasons: termination by the Company for cause, termination by the Company without cause, termination by Employee without cause, termination by Employee with cause, or termination of Employee by reason of his death or long-term disability. 2.15.1 Termination by Company for Cause. In the event of termination by the Company for cause, which shall consist only of specific actions knowingly and intentionally taken by Employee to the specific material detriment of the Company and not reasonably intended by him to benefit the company, the Employee will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment. Employee agrees, if he is so terminated for cause, that, for a period of one year following the termination of employment of the Employee, Employee will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company and its subsidiaries and affiliates utilizing any Confidential Information acquired while organizing, founding, or acting as an officer, director or employee of the Company, its subsidiaries or affiliates, nor solicit customers, investors, service providers, or strategic partners of the Company, with the Company's, or its subsidiary's or affiliates' business whether by interfering with or raiding their employees, or disrupting or interfering with their relationships with customers, investors, service providers, or strategic partners. Employee will have thirty days after termination by the Company for cause to challenge the termination. Employee may challenge the termination by the Company for cause by sending written notice to that effect to the Company via registered or certified mail, postmarked no later than 30-days from the date that employee received notice from the Company that Employee was being terminated by the Company for cause. The Company and Employee will each select an arbitrator who will each review the facts surrounding the termination and the challenge. The arbitrators will decide whether the Company was justified in terminating the Employee for 5 cause. If the arbitrators cannot agree whether the Company was justified in terminating Employee for cause, the arbitrators will select a third arbitrator who will make the determination of whether the Company was justified in terminating the Employee for cause. The arbitration proceeding shall be conducted in accordance with the provisions of California's Arbitration act, Code of Civil Procedure, Sections 1280, et seq. The Company and Employee agree to abide by the decision of the arbitration. If the arbitrators agree or if the third arbitrator determines, as applicable, that the Company was not justified in terminating the Employee for cause, within 72 hours of receiving the arbitration decision that the termination by the Company for cause was not justified, the Company will pay Employee back pay for all salaries and benefits from the date of termination through the date of the arbitration decision. The termination will then be treated as a termination by the Company without cause, subject to the provisions of subparagraphs 2.15.2 Termination by Company without Cause. In the event of termination by the Company without cause, i.e., an involuntary termination, or notification by the Company of an intent not to renew the Agreement pursuant to paragraph 2.2 of this Agreement, Employee shall be entitled to elect to receive severance pay equal to 50% of the annual total compensation in effect in the last month of employment, but in no cause less than $67,600 and will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment. 2.15.3 Termination by Employee without Cause. In the event of termination by Employee without cause, i.e., a voluntary termination, the Employee will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment. Employee agrees, if he so terminates without cause, that, for a period of one year following the termination of employment of the Employee, Employee will not engage in any way whatsoever, directly of indirectly, in any business that is competitive with the Company and its subsidiaries and affiliates utilizing any Confidential Information acquired while organizing, founding, or acting as an officer, director or employee of the Company, its subsidiaries, or affiliates, nor solicit customers, investors, service providers, or strategic partners of the Company, or any of its subsidiaries or operating affiliates; or disrupt, damage, impair or interfere with the Company's, or its subsidiary's or affiliates' business whether by interfering with or raiding their employees, or disrupting or interfering with their relationships with customers, investors, service providers or strategic partners. Thereafter, he will be free to so compete or participate with a competitor. 2.15.4 Termination by Employee with Cause. In the event of receipt of notice of termination by Employee with cause, which shall consist only of a material breach of the agreement by the Company including, without limitation, nonpayment of salary or other compensation due, non-reimbursement of business expenses, or failure to provide either health insurance allowance or coverage or other benefits, the Company will have thirty days after receipt of notice of termination by Employee to challenge the termination by Employee with cause. The Company and Employee will each select an arbitrator who will each review the facts surrounding the termination and the challenge. The arbitrators will decide wither the Employee is justified in terminating with cause. If the arbitrators cannot agree whether the Employee is justified in terminating with cause, the arbitrators will select a third arbitrator who will make the determination of whether the Employee is justified in terminating with cause. The arbitration proceeding shall be conducted in accordance with the provisions of California's Arbitration act, Code of Civil Procedure, Sections 1280, et seq. The Company and Employee agree to abide by the decision of the arbitration. If the arbitrators agree, or if the third arbitrator determines, as applicable, that the Employee is justified in terminating with cause, or if the Company fails to challenge the termination by the Employee with cause within the thirty day period, the Employee shall be entitled to elect to receive severance pay equal to 100% of the annual total compensation in effect in the last month of employment, but in no case less than 6 $135,200 and will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment plus 30 days. If the arbitrators agree, or if the third arbitrator determines, as applicable, that the Employee is not justified in terminating with cause, the termination will be treated as a termination by Employee without cause, subject to the provisions of subparagraphs 2.15.3. 2.15.5 Termination by Death or Disability. In the event of termination by reason of death of the Employee or the long-term disability of the Employee, Employee shall be entitled to termination pay equal to three month's pay plus three month's benefits, and will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment. All payments due under this paragraph will be made on the date of termination of employment. For purposes of this section, the Company may terminate the Employee due to long-term disability if the Employee is unable to perform any of his duties for a period of ninety consecutive days or more, for reasons of sickness or injury. Additionally, in the event of the long-term disability of Employee, if Employee is terminated by the Company and then subsequently recovers from the disability, Employee will be free to compete in any way whatsoever, directly or indirectly, in any business that is competitive with the Company, and may solicit or in any other manner work for or assist any business which is competitive to the Company. 2.15.6 Severance Pay. If Employee elects to receive the severance pay provided for in subparagraph 2.15.2 or 2.15.4, whichever is applicable, and that severance pay together with all other payments required by this Agreement are paid to Employee in accordance with subparagraph 2.15.7, Employee agrees that for a period of one year following the termination of employment of the Employee, Employee will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company and its subsidiaries and affiliates utilizing any Confidential Information acquired while organizing, founding, or acting as an officer, director or employee of the Company, its subsidiaries or affiliates, nor solicit customers, investors, service providers, or strategic partners of the Company, or any of its subsidiaries or operating affiliates; or disrupt, damage, impair or interfere with the Company's, or its subsidiary's or affiliates' business whether by interfering with or raiding their employees, or disrupting or interfering with their relationships with customers, investors, service providers or strategic partners. If Employee elects not to receive such severance pay, Employee will be free to compete in any way whatsoever, directly or indirectly, in any business that is competitive with the Company, and may solicit or in any other manner work for or assist any business which is competitive to the Company. 2.15.7 Termination for any reason. In the event of termination for any reason, all pay due under this Agreement except for severance pay is payable by the Company on the last day of employment. Severance pay, when applicable, will be paid as follows: one-half on the last day of employment and the remaining payments in three equal monthly installments payable on the first of months four through six. 2.16 Future Agreement. This Agreement and the documents referred to herein contain the entire agreement of the parties relevant to the subject matter hereof, and it may be amended only by a written document signed by both Employee and Company. 2.17 Governing Law. The laws of California, without regard to conflicts of laws principles thereof, shall govern this agreement. 7 2.18 Binding Effect. This Agreement shall inure to the benefit of and be binding upon the heirs, successors and assigns of the parties hereto. EMPLOYEE: [Print Name] RECLAMATION CONSULTING AND APPLICATIONS, INC. By: ---------------------------------------- Its. --------------------------------------- EX-10 4 ex102.txt Exhibit 10.2 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is entered into as of the day of January 6, 2005, by and between Michael Davies ("Employee") and RECLAMATION CONSULTING AND APPLICATIONS, INC., a Colorado Corporation with its principal place of business at 23832 Rockfield Boulevard, Suite 275, Lake Forest, California 92630 ("Company"). 1. RECITALS: 1.1 The company is in the business of manufacturing and marketing asphalt, cement and related products release agents in liquid form that are non-toxic, non-explosive and environmentally compatible, the formulation and ingredients of which are confidential. 1.2 Employee has experience in the businesses conducted and to be conducted by the Employer, or in related businesses, and desires to be employed by the Company, and the Company desires to employee the Employee, on the terms and conditions specified below 2. COVENANTS: In consideration of the recitals and mutual covenants contained herein, the parties agree that: 2.1 Employment. The Company will employ Employee to serve as Executive Vice President & Chief Financial Officer with the duties listed and defined by the Company or the Board, in connection with the Company's operations and Employee does hereby accept such employment, all subject to the terms and provisions of this Agreement. Employee represents that he is legally free to enter into this agreement and that it does not conflict with any of his duties or obligations to any other person and that he is not in any way restricted by any duties or obligations to any other person from contributing his knowledge and talents to the Company in performing his duties hereunder. 2.2 Term. This Agreement shall have an initial five-year term, which shall be automatically renewed each year thereafter unless the Company, upon thirty (30) days prior notice notifies Employee of its intent not to renew the Agreement. Notwithstanding the foregoing, the Company or the Employee may at any time terminate this Agreement and the employment relationship on thirty (30) days prior notice to the other, with the consequences hereinafter set forth. 2.3 Compensation. During the first twelve months of employment, the Company agrees to compensate Employee (from the commencement of this agreement) at the rate of not less than $135,200 per year base compensation for the first year of employment. Thereafter, Employee's annual compensation shall be increased by 20% on each anniversary date of this agreement, provided that the Company reaches a minimum net profit of $250,000. In no event shall Employee's minimum base compensation be reduced below $135,200 per year. Such compensation shall be payable monthly or on such more frequent basis as the Company may establish. 2.4 Bonuses. An annual bonus will be paid to Employee, the amount of which is based upon the Company's net profits and shall be structured as follows: 1 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $135,200 $ 13,500 $500,000 20% $135,200 $ 27,000 $750,000 30% $135,200 $ 40,500 $1,000,000 40% $135,200 $ 54,000 $1,250,000 50% $135,200 $ 67,500 $1,500,000 60% $135,200 $ 81,000 $1,750,000 70% $135,200 $ 94,500 $2,000,000 80% $135,200 $108,000 $2,250,000 90% $135,200 $121,000 $2,500,000 100% $135,200 $135,000 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $162,240 $ 16,224 $500,000 20% $162,240 $ 32,448 $750,000 30% $162,240 $ 48,672 $1,000,000 40% $162,240 $ 64,898 $1,250,000 50% $162,240 $ 81,120 $1,500,000 60% $162,240 $ 97,344 $1,750,000 70% $162,240 $113,568 $2,000,000 80% $162,240 $129,792 $2,250,000 90% $162,240 $146,016 $2,500,000 100% $162,240 $162,240 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $194,688 $19,468.80 $500,000 20% $194,688 $38,937.60 $750,000 30% $194,688 $58,406.40 $1,000,000 40% $194,688 $77,857.20 $1,250,000 50% $194,688 $ 97,344 $1,500,000 60% $194,688 $116,812.80 $1,750,000 70% $194,688 $136,281.60 $2,000,000 80% $194,688 $155,750.40 $2,250,000 90% $194,688 $175,219.20 $2,500,000 100% $194,688 $194,688 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $233,625.60 $ 23,362.56 $500,000 20% $233,625.60 $ 46,727.12 $750,000 30% $233,625.60 $ 70,087.68 2 $1,000,000 40% $233,625.60 $ 93,450.24 $1,250,000 50% $233,625.60 $116,812.80 $1,500,000 60% $233,625.60 $140,175.36 $1,750,000 70% $233,625.60 $163,537.92 $2,000,000 80% $233,625.60 $186,900.48 $2,250,000 90% $233,625.60 $210,263.04 $2,500,000 100% $233,625.60 $233,625.60 RCAI % of Salary Salary Bonus Net Profit Paid as Bonus Amount Amount $250,000 10% $280,350.72 $ 28,035.07 $500,000 20% $280,350.72 $ 56,070.14 $750,000 30% $280,350.72 $ 84,105.21 $1,000,000 40% $280,350.72 $112,140.28 $1,250,000 50% $280,350.72 $140,175.36 $1,500,000 60% $280,350.72 $168,210.43 $1,750,000 70% $280,350.72 $196,245.49 $2,000,000 80% $280,350.72 $224,280.57 $2,250,000 90% $280,350.72 $252,315.64 $2,500,000 100% $280,350.72 $280,350.72 2.5 Stock Options. The option to purchase 2,500,000 shares of common restricted stock in the Company has been granted in Employee's name. All options shall expire 5-years from the vesting date. 1,500,000 of these options have been carried over from Employee's previous Employment Agreement with the Company. Options will be vested annually, subject to continued employment, and released to Employee as per the schedule below. The corresponding number of share options shall be vested to Employee at the purchase values and on the dates indicated. No. Options Date Available Exercise Price 500,000 January 15, 2002 $0.40 per share 500,000 January 15, 2003 $0.40 per share 500,000 January 15, 2004 $0.40 per share 1,000,000 January 15, 2005 $0.25 per share Additional stock options may be granted to Employee each year following the above schedule on the anniversary date of this Agreement, the amount and price of which to be determined solely by the Company. 2.6 Duties. Employee agrees to devote his energies to the business of the Company and agrees to perform such reasonable responsibilities and duties as may be assigned to him from time to time by the Company or by the Company's board of directors, which shall be consistent with his position as Executive Vice President. In no event shall the Employee be precluded from activities in professional societies, or from lecturing or writing in areas of his professional expertise for reasonable periods, and Employee shall be entitled to retain fees, honoraria, publication royalties and similar compensation paid as a result of such activities. 2.7 Additional Benefits. The Company agrees to reimburse Employee promptly for or to pay on behalf of Employee, any reasonable expenses heretofore or hereafter incurred by Employee (to the extent not paid by others) in the 3 furtherance of the goals of the Company upon submission of a satisfactory accounting by Employee, and to provide Employee with the following additional benefits: 2.7.1 A minimum of three weeks annual paid vacation. Vacation shall accrue on a monthly basis or part thereof; however, once unused vacation has accrued to a maximum of three weeks, accrual of additional vacation shall cease until the balance of accrued vacation has been reduced below six weeks. The Company will not cause the vacation accrual to cease by withholding its approval of any of the Employee's vacation requests. 2.7.2 Any other standard benefits that may be established by the Company or its affiliates for its employees. 2.8 Non-Disclosure of Confidential Information. It is understood that employee will acquire and be informed of confidential technical and/or business information used by and belonging to the Company ("Confidential Information"), including Confidential Information as defined in the Company's EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT. Employee agrees that some or all of such Confidential Information is in the nature of trade secrets and is the sole property of the Company. Employee will keep confidential, and will not disclose to any third person or entity, any Confidential Information without Employer's consent and pursuant to the proceedings further defined in the Company's EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT. 2.9 Confidentiality after Termination of Employment. Employee agrees that upon termination of employment, he or she shall surrender promptly to the Company any and all documents and property of the Company, including, but not limited to: reports, drawings, manuals, correspondence, customer lists and other Confidential Information which he or she may possess, and all other materials and all copies thereof relating in any way to the Company's business, or in any way obtained by the Employee during the course of his employment, and that he shall not retain any copies, notes or abstracts of the foregoing. Employee further agrees that such documents, lists and information shall be and remain the sole property of the Company. All of the terms of paragraph 2.8 shall remain in full force and effect both during the continuation of employment of Employee by the Company and after the termination of employment for any reason. 2.10 Confidentiality. Employee agrees to execute standard Company documents establishing the Employee's duties of confidentiality and the rights of the Company to all inventions, trade secrets, etc., developed by the Employee in the course of his employment, namely the EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT. 2.11 Non-Competition. Employee agrees that during the term of his employment by Company, Employee will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company and its subsidiaries and affiliate operations, nor solicit or in any other manner work for or assist any business which is competitive to the Company and its subsidiaries and affiliate operations. 2.12 Non-Participation in Competitive Activities. During the term of this agreement, Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an Employee of the Company and its subsidiaries and affiliate operations, and Employee will not combine or participate with other employees of the Company and its subsidiaries 4 and affiliate operations for the purpose of organization of any such competitive business activity. 2.13 Assignment to Company of Proprietary Rights. Employee agrees to execute any and all documents and take any and all other actions necessary or desirable for the assignment to the Company and its subsidiaries and affiliate operations of all of his interests in any Confidential Information, trade secrets, copyrightable materials and patentable or patented ideas developed by him, alone or in conjunction with others, in the course of his employment by the Company. 2.14 Injunctive Relief. The parties hereto agree and acknowledge that many of the rights conveyed by this Agreement are of a unique and special nature and that the Company and its subsidiaries and affiliate operations will not have an adequate remedy at law in the event of failure of Employee to abide by its terms and conditions, nor will money damages adequately compensate for such injury. It is, therefore, agreed between the parties that in the event of breach by Employee of Employee's covenants contained in this Agreement, the Company and its subsidiaries and affiliate operations shall have the rights, among other rights, to damages sustained thereby and to a preliminary or permanent injunction to restrain Employee from the prohibited acts. Employee agrees that this Paragraph shall survive for one year after the termination of his employment, and Employee shall be bound by its terms for a period of one year subsequent to the termination of his employment, providing that the Company and its subsidiaries and affiliate operations continue to conduct the same business or businesses as they were conducting during the period of this Agreement. Nothing herein contained shall in any way limit or exclude any and all other rights granted by law or equity to the Company and its subsidiaries and affiliate operations. 2.15 Termination of Employment. If Employee's employment terminates or is terminated, the rights and obligations of the parties shall depend upon the reason for termination. Termination may occur for any one of the following reasons: termination by the Company for cause, termination by the Company without cause, termination by Employee without cause, termination by Employee with cause, or termination of Employee by reason of his death or long-term disability. 2.15.1 Termination by Company for Cause. In the event of termination by the Company for cause, which shall consist only of specific actions knowingly and intentionally taken by Employee to the specific material detriment of the Company and not reasonably intended by him to benefit the company, the Employee will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment. Employee agrees, if he is so terminated for cause, that, for a period of one year following the termination of employment of the Employee, Employee will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company and its subsidiaries and affiliates utilizing any Confidential Information acquired while organizing, founding, or acting as an officer, director or employee of the Company, its subsidiaries or affiliates, nor solicit customers, investors, service providers, or strategic partners of the Company, with the Company's, or its subsidiary's or affiliates' business whether by interfering with or raiding their employees, or disrupting or interfering with their relationships with customers, investors, service providers, or strategic partners. Employee will have thirty days after termination by the Company for cause to challenge the termination. Employee may challenge the termination by the Company for cause by sending written notice to that effect to the Company via registered or certified mail, postmarked no later than 30-days from the date that employee received notice from the Company that Employee was being terminated by the Company for cause. The Company and Employee will each select an arbitrator who will each review the facts surrounding the termination and the challenge. The arbitrators will decide whether the Company was justified in terminating the Employee for cause. If the arbitrators cannot agree whether the Company was justified in terminating Employee for cause, the arbitrators will select a third arbitrator 5 who will make the determination of whether the Company was justified in terminating the Employee for cause. The arbitration proceeding shall be conducted in accordance with the provisions of California's Arbitration act, Code of Civil Procedure, Sections 1280, et seq. The Company and Employee agree to abide by the decision of the arbitration. If the arbitrators agree or if the third arbitrator determines, as applicable, that the Company was not justified in terminating the Employee for cause, within 72 hours of receiving the arbitration decision that the termination by the Company for cause was not justified, the Company will pay Employee back pay for all salaries and benefits from the date of termination through the date of the arbitration decision. The termination will then be treated as a termination by the Company without cause, subject to the provisions of subparagraphs 2.15.2 Termination by Company without Cause. In the event of termination by the Company without cause, i.e., an involuntary termination, or notification by the Company of an intent not to renew the Agreement pursuant to paragraph 2.2 of this Agreement, Employee shall be entitled to elect to receive severance pay equal to 50% of the annual total compensation in effect in the last month of employment, but in no cause less than $67,600 and will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment. 2.15.3 Termination by Employee without Cause. In the event of termination by Employee without cause, i.e., a voluntary termination, the Employee will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment. Employee agrees, if he so terminates without cause, that, for a period of one year following the termination of employment of the Employee, Employee will not engage in any way whatsoever, directly of indirectly, in any business that is competitive with the Company and its subsidiaries and affiliates utilizing any Confidential Information acquired while organizing, founding, or acting as an officer, director or employee of the Company, its subsidiaries, or affiliates, nor solicit customers, investors, service providers, or strategic partners of the Company, or any of its subsidiaries or operating affiliates; or disrupt, damage, impair or interfere with the Company's, or its subsidiary's or affiliates' business whether by interfering with or raiding their employees, or disrupting or interfering with their relationships with customers, investors, service providers or strategic partners. Thereafter, he will be free to so compete or participate with a competitor. 2.15.4 Termination by Employee with Cause. In the event of receipt of notice of termination by Employee with cause, which shall consist only of a material breach of the agreement by the Company including, without limitation, nonpayment of salary or other compensation due, non-reimbursement of business expenses, or failure to provide either health insurance allowance or coverage or other benefits, the Company will have thirty days after receipt of notice of termination by Employee to challenge the termination by Employee with cause. The Company and Employee will each select an arbitrator who will each review the facts surrounding the termination and the challenge. The arbitrators will decide wither the Employee is justified in terminating with cause. If the arbitrators cannot agree whether the Employee is justified in terminating with cause, the arbitrators will select a third arbitrator who will make the determination of whether the Employee is justified in terminating with cause. The arbitration proceeding shall be conducted in accordance with the provisions of California's Arbitration act, Code of Civil Procedure, Sections 1280, et seq. The Company and Employee agree to abide by the decision of the arbitration. If the arbitrators agree, or if the third arbitrator determines, as applicable, that the Employee is justified in terminating with cause, or if the Company fails to challenge the termination by the Employee with cause within the thirty day period, the Employee shall be entitled to elect to receive severance pay 6 equal to 100% of the annual total compensation in effect in the last month of employment, but in no case less than $135,200 and will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment plus 30 days. If the arbitrators agree, or if the third arbitrator determines, as applicable, that the Employee is not justified in terminating with cause, the termination will be treated as a termination by Employee without cause, subject to the provisions of subparagraphs 2.15.3. 2.15.5 Termination by Death or Disability. In the event of termination by reason of death of the Employee or the long-term disability of the Employee, Employee shall be entitled to termination pay equal to three month's pay plus three month's benefits, and will receive all unpaid salary, bonuses, and other benefits accrued through the last day of employment. All payments due under this paragraph will be made on the date of termination of employment. For purposes of this section, the Company may terminate the Employee due to long-term disability if the Employee is unable to perform any of his duties for a period of ninety consecutive days or more, for reasons of sickness or injury. Additionally, in the event of the long-term disability of Employee, if Employee is terminated by the Company and then subsequently recovers from the disability, Employee will be free to compete in any way whatsoever, directly or indirectly, in any business that is competitive with the Company, and may solicit or in any other manner work for or assist any business which is competitive to the Company. 2.15.6 Severance Pay. If Employee elects to receive the severance pay provided for in subparagraph 2.15.2 or 2.15.4, whichever is applicable, and that severance pay together with all other payments required by this Agreement are paid to Employee in accordance with subparagraph 2.15.7, Employee agrees that for a period of one year following the termination of employment of the Employee, Employee will not engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company and its subsidiaries and affiliates utilizing any Confidential Information acquired while organizing, founding, or acting as an officer, director or employee of the Company, its subsidiaries or affiliates, nor solicit customers, investors, service providers, or strategic partners of the Company, or any of its subsidiaries or operating affiliates; or disrupt, damage, impair or interfere with the Company's, or its subsidiary's or affiliates' business whether by interfering with or raiding their employees, or disrupting or interfering with their relationships with customers, investors, service providers or strategic partners. If Employee elects not to receive such severance pay, Employee will be free to compete in any way whatsoever, directly or indirectly, in any business that is competitive with the Company, and may solicit or in any other manner work for or assist any business which is competitive to the Company. 2.15.7 Termination for any reason. In the event of termination for any reason, all pay due under this Agreement except for severance pay is payable by the Company on the last day of employment. Severance pay, when applicable, will be paid as follows: one-half on the last day of employment and the remaining payments in three equal monthly installments payable on the first of months four through six. 2.16 Future Agreement. This Agreement and the documents referred to herein contain the entire agreement of the parties relevant to the subject matter hereof, and it may be amended only by a written document signed by both Employee and Company. 2.17 Governing Law. The laws of California, without regard to conflicts of laws principles thereof, shall govern this agreement. 7 2.18 Binding Effect. This Agreement shall inure to the benefit of and be binding upon the heirs, successors and assigns of the parties hereto. EMPLOYEE: [Print Name] RECLAMATION CONSULTING AND APPLICATIONS, INC. By: ---------------------------------------- Its. --------------------------------------- EX-10 5 ex103.txt Exhibit 10.3 DISTRIBUTORSHIP AGREEMENT THIS AGREEMENT (Agreement) is entered into this 3rd day of February 2005, by and between Reclamation Consulting and Applications Inc., a Colorado, USA corporation ("RCAI") and ITA Asphalt Limited, a Northern Ireland corporation ("Distributor") RECITALS WHEREAS, RCAI manufactures and distributes the Products (as defined below). WHEREAS, RCAI desires to appoint Distributor to promote, market, sell, distribute and service the Products and Distributor desires to promote, market, sell, distribute and provide customer service for the Products in the Territory, defined herein below. THEREFORE, in consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and Distributor hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, cleaners and lubricants, in liquid form which are used in the construction and similar industries and which are sold under the Trademarks and which are non-toxic, non-explosive and environmentally compatible. 1.2 `Territory' means the entire geographic area of the Republic of Ireland and the United Kingdom. 1.3 `Effective Date' means the date first written above which will be concurrent with the date upon which an authorized representative of the last party to sign this Agreement does so. 1.4 `Agreement Year' means any fiscal year of Distributor, commencing September 1st and continuing through August 31st, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants Distributor the right of distribution hereunder and as set forth in Schedule A attached hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to Distributor hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, distribution, application or handling of the Products 1. 1 Please supply full copies of all documents 1 1.7 `Distributor' means the Distributor, and any sub-distributor or subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of Distributor herein are assigned or delegated upon the prior written consent of RCAI as required under this Agreement. SECTION 2: GRANT OF EXCLUSIVE DISTRIBUTORSHIP 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints Distributor and Distributor hereby accepts the exclusive appointment to promote, sell distribute and provide customer service for the Products under the Trademarks in the Territory under the terms and conditions of this Agreement. 2.2 RCAI agrees that it will not grant to any other party (directly or indirectly or howsoever legally constituted) any rights to distribute the Products in the Territory and will not itself sell the Products in the Territory. 2.3 The exclusive right granted herein will apply provided Distributor uses all reasonable efforts to achieve the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described in Section 4 below. 2.4 During the term hereof, Distributor will refrain from directly promoting, distributing or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory. 2.5 RCAI will use reasonable efforts to refer promptly to Distributor any customer inquiry or order originating from the Territory and to advise Distributor of such inquiries. However, Distributor will not be liable to RCAI for compensation of any kind in the event of the sale, distribution or servicing of Products by RCAI in the Territory. 2.6 The rights of Distributor to promote, distribute or provide customer service for the Products include the right of sub-distribution or subcontract, upon the prior written consent of RCAI such consent not to be unreasonably withheld or delayed. All other rights not expressly granted in this Agreement to Distributor are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date and for the term hereof, RCAI hereby grants Distributor the nontransferable right to use the Trademarks set forth in Schedule A hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may upon reasonable prior notice in writing to Distributor amend Schedule A from time to time. 3.2 Distributor will comply with all prior reasonable written RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, Distributor will represent to customers and other third parties that Distributor is an authorized independent distributor of RCAI and the Products for the Territory. SECTION 4: MINIMUM SALES OBJECTIVE 2 4.1 The parties acknowledge that the minimum volume of sales for the Territory (`Minimum Sales Objective') for each Agreement Year will be as described in Schedule B attached. 4.2 Distributor territory licensing fee of $50,000 USD will be paid by Distributor to RCAI by a surcharge of__$0.27 USD (twenty-seven US cents) per litre basis for all Products accepted by Distributor (it being understood and acknowledged by the parties that one gallon equals 3.785 litres). Upon payment of the total sum of $50,000 in this manner, Distributor shall have a fully paid up license. 4.3 Distributor will use all reasonable efforts to achieve the Minimum Sales Objective in any given Agreement Year. In particular, Distributor will: a) actively promote, distribute and service the Products in the Territory; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of this Agreement on training and advertising; and e) respond promptly and fully to any of RCAI's reasonable written requests for information on customers or market conditions in the Territory. f) reasonably assist RCAI at RCAI's expense, when requested, in the development and testing of new products developed by RCAI 4.4 Existing Sales Any and all existing sales within the Territory will be transferred to the Distributor upon the completion of this Agreement and the payment of the Territory licensing fee referred to in clause 4.2 above. SECTION 5: SALES TRAINING 5.1 RCAI will provide all requested assistance to the Distributor within 10 days of written request in connection with sales, technical and product support for the Products with a minimum of five (5) days sales, technical and product training (at no charge to the Distributor) to Distributor's sales personnel within twelve (12) months of the execution of this Agreement and at location(s) within the Territory. 5.2 All costs relating to sales, support, and technical training, performed by RCAI personnel, or appointed representatives (other than the 5 days provided at no cost) will be billed to the Distributor at the rate of 50% of all reasonable and proper costs incurred by RCAI in providing the support. 5.3 All direct sales support including lead generation and sales generation performed by RCAI personnel or designated representatives and as previously agreed in writing with the Distributor will be billed for time and travel expenses at the rate of 50% of all reasonable and proper incurred costs. SECTION 6: TERMS OF DELIVERY 6.1 Unless otherwise agreed, RCAI will deliver all Products for which it accepts purchase orders 3 CIF at which time and place title to the Products and risk of loss of the Products will pass to Distributor. 6.2 All order will be delivered via bulk overseas containers or ISO-tainers to achieve lowest transportation costs available. 6.3 Distributor is responsible for all costs and risks of transportation, insurance, any import duties or other charges, sales, use or other taxes, and licenses or approvals required for the transport, import, promotion, distribution and sale of the Products in the Territory, and any loss or damage sustained. SECTION 7: TERMS OF PAYMENT 7.1 Payments made to Distributor from RCAI will reflect the prices set forth on RCAI's Price List for the Products, attached hereto as Schedule C. 7.2 RCAI may amend the Product/Price List of Schedule C from time to time, any changes to said prices to be effective upon ninety (90) days prior written notice by RCAI to Distributor. Any price changes will be based on increases in the cost of commodities, manufacturing and/or business operations. 7.3 If it is necessary to convert any amount paid or payable to US dollars from any other currency, the conversion will be made at the rate of exchange prevailing for the purchase of the US dollars at noon on the date when the payment was paid or became due. 7.4 The Distributor will tender payments to RCAI in USD either in cheque, money order, bank transfer or other unconditional methods of payment agreed by RCAI and shall pay the entire amount due for the Products upon acceptance of those Products by Distributor. All payments shall be guaranteed by a USD .00 irrevocable stand-by letter of credit (L/C). The terms and conditions of the L/C shall be as agreed between the parties and shall be in place for the term of this Agreement. SECTION 8: QUALITY CONTROL, SAFETY STANDARDS 8.1 In order to ensure that a high standard of reliability, application and handling of the Products is maintained and that proper use of the Trademarks in connection with the Products is made, RCAI will exercise in a reasonable manner its rights of supervision and quality control over Distributor's provision of customer service for the Products during the term of this Agreement. 8.2 Distributor will: a) employ and maintain sufficient personnel to perform the obligations of Distributor herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; c) furnish all market development information reasonably requested by RCAI in writing concerning the customers of Products sold by Distributor; and d) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to Distributor's attention, of any customer complaints 4 regarding the Products. e) advertise & publicize the Products in the Territory in accordance with any reasonable RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any training or market development assistance by RCAI. SECTION 9: LIMITED WARRANTIES AND INDEMNIFICATION FOR PRODUCTS 9.1 RCAI hereby warrants to the Distributor: 9.1.1 that all of the Products are completely non-hazardous, 100% bio-degradable and are made with a blend of all-natural materials and are not toxic or environmentally hazardous and that the manufacture of the Products is fully compliant with all requirements of any governmental agency in the United States or in the Territory, including specifically, but not limited to, any environmental laws. 9.1.2 that neither the sale nor use of the Products shall cause the Distributor to infringe any intellectual property rights owned or controlled by a third party. 9.1.3 that RCAI shall, at time of delivery of the Products, have legal title and rights of ownership of the Products and otherwise has all necessary rights, title and interest to grant the rights set forth herein to Distributor, free of any claims, liens or conflicting rights in favor of any third parties. 9.2 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the purchase date by the end user. 9.3 Except as provided at Section 9.6 below, RCAI's entire liability and Distributor's customers' exclusive remedy is limited to either the replacement without charge, or refund of the sale price of any Products which prove not to function as intended within the warranty period. 9.4 RCAI will not be liable for the replacement of Products where it can be objectively demonstrated that those Products have been subjected to misuse, accident, alteration, neglect or damage. 9.5 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 9.6 RCAI shall defend, indemnify and hold Distributor harmless from any claims, actions, costs, expenses (including reasonable Attorney's fees), losses, damages or liability incurred because of the actual or alleged violation of any regulation or law as mentioned in Section 9.1 and for any actual or alleged infringement as mentioned in Section 9.2. This indemnification shall not apply unless: 9.6.1 The Distributor shall first notify RCAI in writing of any such allegation; 5 9.6.2 The Distributor shall make no admissions without RCAI's consent; and 9.6.3 The Distributor shall allow RCAI to conduct and/or settle all negotiations and litigation and shall give RCAI all reasonable assistance in relation thereto (all the costs incurred or recovered in such negotiations and litigation being for RCAI's account). SECTION 10: DISTRIBUTOR'S LIABILITY 10.1 Distributor will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 11: PROPRIETARY RIGHTS 11.1 Distributor on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants Distributor the rights to distribute and use pursuant to the provisions of this Agreement; and b) will knowingly refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 11.2 Promptly after Distributor learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, Distributor will notify RCAI of said unauthorized use or disclosure. 11.3 Should RCAI decide to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in the Distributor's Territory, Distributor will, upon RCAI's request, render any reasonable assistance RCAI may require, at RCAI's expense. SECTION 12: TERM AND TERMINATION 12.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of three (3) year (Initial Term). This Agreement may be renewed for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice of RCAI to Distributor. At the time of renewal Distributor will: a) have complied with its reasonable efforts obligation to achieve the Minimum Sales Objective for the Agreement Year concerned; and b) have complied with all other obligations of this Agreement to RCAI's reasonable satisfaction. 12.2 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to Distributor, notice effective upon the date given, in the event of any one or more of the following: a) the failure of Distributor to use its reasonable efforts to achieve the Minimum Sales Objective required hereunder; 6 b) Distributor's breach of any material obligation concerning RCAI's proprietary rights; c) Distributor's material breach of any obligation or representation, other than those of paragraphs a) and b) above; d) Distributor's assignment of this Agreement or any of rights granted hereunder by Distributor by agreement or operation of law, without the prior written consent of RCAI; f) any legal or business transaction or event which causes a change in majority ownership of Distributor and effectively results in an assignment of this Agreement to owners substantially different from the owners of Distributor at the time of execution of this Agreement without the prior written consent of RCAI; and g) any insolvency or inability of Distributor to pay debts as and when due, or the initiation or pendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of Distributor. 12.3 In the event that RCAI claims Distributor is in breach of any provision of this Agreement, it shall give three (3) months prior written notice of such deficiency and Distributor shall have a period of three (3) months from date of receipt of aforesaid notice to cure said deficiency. SECTION 13: EFFECTS OF TERMINATION 13.1 Subject to the terms of this Agreement, upon valid termination, Distributor will immediately discontinue the promotion, distribution and servicing of the Products and will cease to represent itself as an authorized Distributor of RCAI. 13.2 Distributor will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, Distributor will certify destruction of Documentation. 13.3 Distributor will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 13.4 Unless termination occurs for cause, Distributor may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter shall be purchased by RCAI from Distributor at either Distributor's blending cost which is the total of the raw materials cost of the Product and the labor costs to blend) or the cost of the Products. 13.5 Nothing herein will relieve or extinguish any of Distributor's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by Distributor, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other distributors or customers. 13.6 Distributor will offer to RCAI and RCAI may elect to assume the rights and obligations of any 7 agreements between Distributor and its customers for the service of the Products, effective as of the date of termination or expiration. 13.7 In no event will termination or expiration with or without cause of this Agreement entitle Distributor to any compensation by RCAI on any grounds whatsoever. SECTION 14: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 14.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California, United States of America. 14.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in Orange County, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 14.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, Distributor acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against Distributor for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 14.4 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 15: GENERAL PROVISIONS 15.1 Relationship of the Parties. Nothing in this Agreement will be construed as creating a partnership orjoint venture between the parties or making Distributor a shareholder, agent, employee or other representative of RCAI, but in all of its operations hereunder Distributor will be an independent contractor, conduct its business at its own cost and expense and make no representation, express or implied, that it is an employee, partner, shareholder, joint venture or other representative of RCAI. Distributor will have no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. 15.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 8 15.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Distributor unless prior written consent is obtained from RCAI (such consent not to be unreasonably withheld or delayed) and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Distributor is bound and Distributor remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 15.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 15.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 15.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 15.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 15.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth below, until changed by written notice. Notice shall be effective when given, provided it is given in accordance with this Section 15.8. If to RCAI: Gordon Davies RCAI 23832 Rockfield Blvd., Ste. 275 Lake Forest, CA 92630 Liam Brown If to Distributor: ITA Asphalt Limited Unit 2 Twin Spires Centre 155 Northumberland Street Belfast BT13 2JF Northern Ireland 15.9 Third Party Rights. Except insofar as this Agreement expressly provides that a third party may in his own right enforce a term of this Agreement, a person who is not a party to this Agreement has no right to 9 rely upon or enforce any term of this Agreement. Neither party may declare itself a trustee of the rights under this Agreement for the benefit of any third party IN WITNESS WHEREOF, RCAI and Distributor have each caused this Agreement to be executed on its behalf by it's duly authorized officer as of the date first written above. RCAI By: /s/ GORDON DAVIES By: /s/ LIAM BROWN ----------------- -------------- Gordon Davies Liam Brown President Director EX-10 6 ex104.txt Exhibit 10.4 SALES REPRESENTATIVE AGREEMENT THIS AGREEMENT (Agreement) is entered into this 7th day of July 2005, by and between Reclamation Consulting and Applications Inc., a company organized under the laws of Colorado with its principal place of business at 23832 Rockfield Blvd., Suite 273, Lake Forest, California 92630, USA and Mr. Jimmy Watts, an individual having his principal place of business at 375 Red Eagle Circle, Ridgeland, MS 39157 (`Representative'). RECITALS RCAI manufactures and distributes certain asphalt and cement product release agents, lubricants and cleaners, which are used in the construction, paving and similar industries and which are sold under the RCAI trademarks `Alderox(R)', ASA-12(R), KR7(R), DCR(R), Paver Blend and TSR(R). RCAI desires to appoint Representative to promote, market, sell and service RCAI's products and Representative desires to promote, market, sell and provide customer service for RCAI products in the territory, defined herein below. In consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and Representative hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, lubricants and cleaners, specifically Alderox(R) ASA-12(R) Asphalt Release Agent, Alderox(R) KR7(R) Concrete Release Agent & Form Oil and Alderox(R) DCR(R) Drag Chain and Drag Slat Release Agent and Lubricant, Alderox(R) Paver Blend paving equipment release agent and cleaner and Alderox(R) TSR(R) oil sands and mining release agent in liquid form that RCAI formulates and manufactures. RCAI authorizes Representative to promote, market, sell and provide customer service of and for these Products under the RCAI Trademarks. RCAI may, at its sole discretion and in writing, add additional Products to this Agreement as they become available. 1.2 `Territory' means the entire geographic area of Mississippi. 1.3 `Effective Date' means the date first written above which will be concurrent with the date when an authorized representative of the last party hereto executes this Agreement. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants Representative the right of distribution hereunder and as set forth in Schedule A hereto. 1 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to Representative hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, application or handling of the Products. 1.7 `Representative' means Mr. Jimmy Watts, and any sub-subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of Representative herein are assigned or delegated upon the prior written consent of RCAI. SECTION 2: GRANT OF REPRESENTATIVE RIGHTS & RESPONSIBILITIES 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints Representative and Representative hereby accepts the appointment to promote, sell, market and provide customer service for the Products in the Territory under the terms and conditions of this Agreement. 2.2 The rights granted herein will apply provided Representative achieves the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described below. 2.3 During the term hereof, Representative will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 During the term RCAI shall appoint no other sales agents to sell the Products within the Territory, provided minimum sales objectives are achieved as set out below. RCAI will use reasonable efforts to refer to Representative any customer inquiry or order originating from Representative's Territory. 2.5 The rights of Representative to promote, sell or provide customer service for the Products include the right of subcontract, but only upon the prior written consent of RCAI. All other rights not expressly granted in this Agreement to Representative are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby grants Representative the nonexclusive, nontransferable right to use the Trademarks set forth in Schedule A attached hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may amend Schedule A from time to time. 3.2 Representative will comply with all RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, Representative will represent to customers and other third parties that Representative is an authorized independent representative of RCAI and the Products for the Territory. Representative will refrain from using any trademarks or other identifying symbols that may be considered by customers or other third parties to be misleading as to the identity of Representative, the relationship of RCAI and Representative, or the origin or nature of the Products. 2 SECTION 4: MINIMUM SALES 4.1 The minimum volume of sales of the Products that Representative commits to use its best efforts to achieve in the Territory on an annual basis in the first Agreement Year is 30,000 gallons (avg. 2,500 gallons per month). RCAI will review the annual volumes of sales of the Products prior to the beginning of any successive term during which this Agreement may continue and RCAI may change and adjust such minimums as it, in its sole judgment, sees fit. 4.2 Representative will use its best efforts to achieve the Minimum Sales in any given Agreement Year. In particular, Representative will: a) actively promote, sell and service the Products in the Territories; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of Sections 8 and 9 hereof on training and advertising; e) respond promptly and fully to any of RCAI's requests for information on customers or market conditions in Representative's Territory. 4.3 In the event that Representative fails to achieve the Minimum Sales in any Agreement Year, RCAI may, in its sole discretion, revise the Minimum Sales for the Territory, and/or revoke the exclusive appointment granted herein in the Territory with immediate effect and appoint other Representative(s) in the Territory, and/or terminate this Agreement in full immediately upon 90 days written notice to Representative. SECTION 5: TERMS OF DELIVERY 5.1 Unless otherwise agreed, all Products for which RCAI accepts purchase order are FOB RCAI's facility. Transportation and delivery fees are to be paid by customer. SECTION 6: TERMS OF PAYMENT 6.1 Purchase Orders from Customers will be sent directly to RCAI with copy to Representative. 6.2 RCAI's Suggested Retail Price for all Alderox(R) products, excluding cleaning products, is $9.00 per gallon. Should Representative sell any Alderox(R) product at a price in excess of the Suggested Retail Price, the `overage' will be split 60% (Representative)/40% (RCAI). 6.3 Invoices will be sent directly from RCAI to Customer with copy to Representative. 6.4 Representative will be paid a sales commission of $1.50 per gallon of product purchased by customers within the Territory. 6.5 Representative will be paid a sales commission of $10% of the purchase price for equipment purchased by customers within the Territory 6.6 Sales commission payments will be made to Representative by RCAI immediately upon receipt of payment from the customer. 6.7 Upon execution of the Sales Representative Agreement, RCAI will provide Representative with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(R) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. SECTION 7: QUALITY CONTROL & SAFETY STANDARDS 7.1 Representative will: a) employ and maintain sufficient personnel to perform the obligations of Representative as defined herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; b) furnish all market development information reasonably requested by RCAI concerning the customers of Products sold by Representative; and c) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to Representative's attention, of any customer complaints regarding the Products. d) Advertise and publicize the Products in the Territory in accordance with any RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any sales training or market development assistance by RCAI. All advertising and/or promotional material related to the Alderox(R) products must be approved in writing by RCAI prior to use. SECTION 8: LIMITED WARRANTIES FOR PRODUCTS 8.1 RCAI hereby warrants with respect to all Products delivered to customers will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the delivery date. 8.2 RCAI's entire liability and Representative's customers' exclusive remedy is limited to the replacement without charge, of any Products which prove not to function as intended within the warranty period. 8.3 RCAI will not be liable for the replacement of Products which, in RCAI's sole opinion, have been subjected to misuse, accident, alteration, neglect or damage. 8.4 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 8.5 IN NO EVENT WILL RCAI BE LIABLE FOR DAMAGES OF ANY KIND, DIRECT OR INDIRECT, INCLUDING, WITHOUT LIMITATION, GENERAL AND SPECIAL DAMAGES SUFFERED BY REPRESENTATIVE OR ANY CUSTOMER OR SUBCONTRACTOR ARISING FROM BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE OR OTHER TORT, EQUITY, OR ANY OTHER LEGAL GROUND OF ACTION. 3 SECTION 9: REPRESENTATIVE'S LIABILITY 9.1 Representative will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 10: PROPRIETARY RIGHTS 10.1 Representative on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants Representative the rights to sell and use pursuant to the provisions of this Agreement; and b) will refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 10.2 Promptly after learning of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, Representative will notify RCAI of said unauthorized use or disclosure. 10.3 Should RCAI decide in its sole discretion to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in Representative's Territory, Representative will, upon RCAI's request, render any assistance RCAI may require, at RCAI's expense. SECTION 11: TERM AND TERMINATION 11.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of one (1) year (Initial Term). This Agreement may be renewed at RCAI's sole option for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice by RCAI to Representative. At the time of renewal Representative will: a) have complied with its best efforts obligation to achieve the Minimum Sales Objective for the Agreement term concerned; and b) have complied with all other obligations of this Agreement to RCAI's satisfaction. 11.2 This Agreement may be terminated without cause by either party hereto if the party wishing to terminate gives prior written notice to the other party at least 90 days prior to the end of the Initial Term or any Successive Term. 11.3 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to Representative, notice effective upon the date given, in the event of any one or more of the following: a) the failure of Representative to achieve the Minimum Sales, provided, however, that RCAI may elect in lieu of termination, to revise the Minimum Sales, appoint other Representative(s) in 4 the Territory or take any other measures to ensure that the market in Representative's Territory is optimally developed; b) Representative's default in payment when due of any amount payable to RCAI, provided however, in lieu of or in addition to termination, RCAI may take any measures to mitigate or reduce the extent of Representative's default. c) Representative's breach of any obligation concerning RCAI's proprietary rights; d) Representative's breach of any obligation or representation, other than those of paragraphs a), b) and c) above, e) Representative's attempted assignment of this Agreement or any of rights granted hereunder by Representative by agreement or operation of law, without the prior written consent of RCAI; f) Representative's unauthorized development of new products related to the Alderox(R) products and/or unauthorized development of the Alderox(R) products. g) any legal or business transaction or event which causes a change in majority ownership of Representative and effectively results in an assignment of this Agreement to owners substantially different from the owners of Representative at the time of execution of this Agreement without the prior written consent of RCAI; and h) any insolvency or inability of Representative to pay debts as and when due, or the initiation or tendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of Representative. SECTION 12: EFFECTS OF TERMINATION 12.1 Subject to Section 15.6, upon termination, Representative will immediately discontinue the promotion, selling and servicing of the Products and will cease to represent itself as an authorized Representative of RCAI. 12.2 Representative will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, Representative will certify destruction of Documentation. 12.3 Representative will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 12.4 Unless termination occurs for cause, Representative may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter must be disposed of by Representative and certified to RCAI. 12.5 Nothing herein will relieve or extinguish any of Representative's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by Representative, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other Representatives or customers. 5 12.6 Representative will offer to RCAI and RCAI may at its sole option, elect to assume the rights and obligations of any agreements between Representative and its customers for the service of the Products, effective as of the date of termination or expiration. 12.7 If either RCAI terminates this Agreement without cause, there will be no non-compete period following the termination of the Agreement. 12.8 If RCAI terminates this Agreement with cause, Representative may not compete with any of RCAI's products or services for a period of two (2) years. 12.9 If Representative terminates this Agreement without cause, Representative may not compete with any of RCAI's products or services of a period of five (5) years. 12.10 If Representative terminates this Agreement with cause, there will be no non-compete period following the termination of the Agreement. 12.11 In no event will termination or expiration with or without cause of this Agreement entitle Representative to any compensation by RCAI on any grounds whatsoever. SECTION 13: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 13.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California. 13.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') under its International Commercial Mediation Rules before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in accordance with its International Arbitration Rules. To the extent these rules require supplementation and do not contradict the aforesaid Rules, the arbitral tribunal will apply the California rules on Arbitration and Conciliation of International Commercial Disputes. Unless otherwise agreed, the place of arbitration will be Los Angeles, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 13.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, Representative acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against Representative for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA International Arbitration Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 13.4 The award of the arbitrator will be final and binding on the parties, provided said award does not contradict in whole or in part the state of the governing law hereof. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement. 13.5 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein 6 shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 14: GENERAL PROVISIONS 14.1 Relationship of the Parties. Representative is an independent sales representative of RCAI, but in all of its operations hereunder Representative will operate as an independent contractor and will conduct its business at its own cost. Representative has no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. RCAI is not be responsible for payment of any taxes, income or otherwise, on behalf of Representative nor is RCAI responsible to provide any benefits whatsoever. 14.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 14.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Representative unless prior written consent is obtained from RCAI and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Representative is bound and Representative remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 14.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 14.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 14.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 14.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 14.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal 7 delivery service, and properly addressed to the appropriate party at the address set forth above, until changed by written notice. Notice shall be effective when given. IN WITNESS WHEREOF, RCAI and Representative have each caused this Agreement to be executed on its behalf by its duly authorized officer as of the date first written above. RCAI REPRESENTATIVE By: /s/ GORDON DAVIES By: /s/ JIMMY WATTS ----------------- --------------- Gordon Davies Jimmy Watts President 8 EX-10 7 ex105.txt Exhibit 10.5 DISTRIBUTORSHIP AGREEMENT THIS AGREEMENT (Agreement) is entered into this 12th day of July, 2005, by and between Reclamation Consulting and Applications Inc., a Colorado, USA corporation ("RCAI") and Mark Lang ("Distributor") RECITALS WHEREAS, RCAI manufactures and distributes the Products (as defined below). WHEREAS, RCAI desires to appoint Distributor to promote, market, sell, distribute and service the Products and Distributor desires to promote, market, sell, distribute and provide customer service for the Products in the Territory, defined herein below. THEREFORE, in consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and Distributor hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, cleaners and lubricants, in liquid form which are used in the construction and similar industries and which are sold under the Trademarks and which are non-toxic, non-explosive and environmentally compatible. New Products and markets developed and introduced by RCAI over the term of this Agreement may be sold by Distributor on a non-exclusive basis, unless otherwise agreed to in writing. 1.2 `Territory' means the geographic area of Colorado. 1.3 `Effective Date' means the date first written above which will be concurrent with the date upon which an authorized representative of the last party to sign this Agreement does so. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants Distributor the right of distribution hereunder and as set forth in Schedule A attached hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to Distributor hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, distribution, application or handling of the Products. 1.7 `Distributor' means the Distributor, and any sub-distributor or subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of Distributor herein are assigned or delegated upon the prior written consent of RCAI as required under this Agreement. 1 SECTION 2: GRANT OF EXCLUSIVE DISTRIBUTORSHIP 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints Distributor and Distributor hereby accepts the exclusive appointment to promote, sell distribute and provide customer service for the Products under the Trademarks in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive right granted herein will apply provided Distributor uses all reasonable efforts to achieve the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described in Section 4 below. 2.3 During the term hereof, Distributor will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 RCAI will use reasonable efforts to refer promptly to Distributor any customer inquiry or order originating from the Territory and to advise Distributor of such inquiries. However, Distributor will not be liable to RCAI for compensation of any kind in the event of the sale, distribution or servicing of Products by RCAI in the Territory. 2.5 The rights of Distributor to promote, distribute or provide customer service for the Products include the right of sub-distribution or subcontract, upon the prior written consent of RCAI such consent not to be unreasonably withheld or delayed. All other rights not expressly granted in this Agreement to Distributor are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date and for the term hereof, RCAI hereby grants Distributor the nontransferable right to use the Trademarks set forth in Schedule A hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may upon reasonable prior notice in writing to Distributor amend Schedule A from time to time. 3.2 Distributor will comply with all prior reasonable written RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, Distributor will represent to customers and other third parties that Distributor is an authorized independent distributor of RCAI and the Products for the Territory. SECTION 4: MINIMUM SALES OBJECTIVE 4.1 The parties acknowledge that the minimum volume of sales for the Territory (`Minimum Sales Objective') for each Agreement Year will be as described in Schedule B attached. 4.2 Distributor will use all reasonable efforts to achieve the Minimum Sales Objective in any given Agreement Year. In particular, Distributor will: a) actively promote, distribute and service the Products in the Territory; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of this Agreement on training and advertising; and e) respond promptly and fully to any of RCAI's reasonable written requests for information on customers or market conditions in the Territory. 2 f) reasonably assist RCAI at RCAI's expense, when requested, in the development and testing of new products developed by RCAI SECTION 5: SALES TRAINING & SUPPORT 5.1 Upon execution of this Agreement, RCAI will provide Distributor with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(R) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. 5.2 RCAI will provide distributor with sales and marketing support including providing Distributor with promotional materials, participation in trade-shows, technical support, etc. SECTION 6: TERMS OF DELIVERY 6.1 Unless otherwise agreed, RCAI will deliver all Products for which it accepts purchase orders FOB RCAI's facility at Salt Lake City, UT, at which time and place title to the Products and risk of loss of the Products will pass to Distributor. 6.2 Distributor is responsible for all costs and risks of transportation, insurance, sales, use or other taxes, and licenses or approvals required for the transport, promotion, distribution and sale of the Products in the Territory, and any loss or damage sustained. SECTION 7: TERMS OF PAYMENT 7.1 Payments made to RCAI from Distributor will reflect the prices set forth on RCAI's Price List for the Products, attached hereto as Schedule C. 7.2 RCAI may amend the Product/Price List of Schedule C from time to time, any changes to said prices to be effective upon ninety (90) days prior written notice by RCAI to Distributor. Any price changes will be based on increases in the cost of commodities, manufacturing and/or business operations. 7.3 Distributor will tender payments to RCAI in USD either in check, money order, bank transfer or other unconditional methods of payment agreed by RCAI and shall pay the entire amount due for the Products upon acceptance of those Products by Distributor. 3 SECTION 8: QUALITY CONTROL, SAFETY STANDARDS 8.1 In order to ensure that a high standard of reliability, application and handling of the Products is maintained and that proper use of the Trademarks in connection with the Products is made, RCAI will exercise in a reasonable manner its rights of supervision and quality control over Distributor's provision of customer service for the Products during the term of this Agreement. 8.2 Distributor will: a) employ and maintain sufficient personnel to perform the obligations of Distributor herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; c) furnish all market development information reasonably requested by RCAI in writing concerning the customers of Products sold by Distributor; and d) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to Distributor's attention, of any customer complaints regarding the Products. e) advertise & publicize the Products in the Territory in accordance with any reasonable RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any training or market development assistance by RCAI. SECTION 9: LIMITED WARRANTIES AND INDEMNIFICATION FOR PRODUCTS 9.1 RCAI hereby warrants to the Distributor:- 9.1.1 that all of the Products are completely non-hazardous, 100% bio-degradable and are made with a blend of all-natural materials and are not toxic or environmentally hazardous and that the manufacture of the Products is fully compliant with all requirements of any governmental agency in the United States or in the Territory, including specifically, but not limited to, any environmental laws. 9.1.2 that neither the sale nor use of the Products shall cause the Distributor to infringe any intellectual property rights owned or controlled by a third party. 9.1.3 that RCAI shall, at time of delivery of the Products, have legal title and rights of ownership of the Products and otherwise has all necessary rights, title and interest to grant the rights set forth herein to Distributor, free of any claims, liens or conflicting rights in favor of any third parties. 9.2 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the purchase date by the end user. 4 9.3 Except as provided at Section 9.6 below, RCAI's entire liability and Distributor's customers' exclusive remedy is limited to either the replacement without charge, or refund of the sale price of any Products which prove not to function as intended within the warranty period. 9.4 RCAI will not be liable for the replacement of Products where it can be objectively demonstrated that those Products have been subjected to misuse, accident, alteration, neglect or damage. 9.5 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 9.6 RCAI shall defend, indemnify and hold Distributor harmless from any claims, actions, costs, expenses (including reasonable Attorney's fees), losses, damages or liability incurred because of the actual or alleged violation of any regulation or law as mentioned in Section 9.1 and for any actual or alleged infringement as mentioned in Section 9.2. This indemnification shall not apply unless: 9.6.1 The Distributor shall first notify RCAI in writing of any such allegation; 9.6.2 The Distributor shall make no admissions without RCAI's consent; and 9.6.3 The Distributor shall allow RCAI to conduct and/or settle all negotiations and litigation and shall give RCAI all reasonable assistance in relation thereto (all the costs incurred or recovered in such negotiations and litigation being for RCAI's account). SECTION 10: DISTRIBUTOR'S LIABILITY 10.1 Distributor will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 11: PROPRIETARY RIGHTS 11.1 Distributor on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants Distributor the rights to distribute and use pursuant to the provisions of this Agreement; and b) will knowingly refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 11.2 Promptly after Distributor learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, Distributor will notify RCAI of said unauthorized use or disclosure. 11.3 Should RCAI decide to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in the Distributor's Territory, Distributor will, upon RCAI's request, render any reasonable assistance RCAI may require, at RCAI's expense. 5 SECTION 12: TERM AND TERMINATION 12.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of one (1) year (Initial Term). This Agreement may be renewed for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice of RCAI to Distributor. At the time of renewal Distributor will: a) have complied with its reasonable efforts obligation to achieve the Minimum Sales Objective for the Agreement Year concerned; and b) have complied with all other obligations of this Agreement to RCAI's reasonable satisfaction. 12.2 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to Distributor, notice effective upon the date given, in the event of any one or more of the following: a) the failure of Distributor to use its reasonable efforts to achieve the Minimum Sales Objective required hereunder; b) Distributor's breach of any material obligation concerning RCAI's proprietary rights; c) Distributor's material breach of any obligation or representation, other than those of paragraphs a) and b) above; d) Distributor's assignment of this Agreement or any of rights granted hereunder by Distributor by agreement or operation of law, without the prior written consent of RCAI; f) any legal or business transaction or event which causes a change in majority ownership of Distributor and effectively results in an assignment of this Agreement to owners substantially different from the owners of Distributor at the time of execution of this Agreement without the prior written consent of RCAI; and g) any insolvency or inability of Distributor to pay debts as and when due, or the initiation or pendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of Distributor. 12.3 In the event that RCAI claims Distributor is in breach of any provision of this Agreement, it shall give three (3) months prior written notice of such deficiency and Distributor shall have a period of three (3) months from date of receipt of aforesaid notice to cure said deficiency. SECTION 13: EFFECTS OF TERMINATION 13.1 Subject to the terms of this Agreement, upon valid termination, Distributor will immediately discontinue the promotion, distribution and servicing of the Products and will cease to represent itself as an authorized Distributor of RCAI. 6 13.2 Distributor will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, Distributor will certify destruction of Documentation. 13.3 Distributor will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 13.4 Unless termination occurs for cause, Distributor may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter shall be purchased by RCAI from Distributor at either Distributor's blending cost which is the total of the raw materials cost of the Product and the labor costs to blend) or the cost of the Products. 13.5 Nothing herein will relieve or extinguish any of Distributor's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by Distributor, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other distributors or customers. 13.6 Distributor will offer to RCAI and RCAI may elect to assume the rights and obligations of any agreements between Distributor and its customers for the service of the Products, effective as of the date of termination or expiration. 13.7 In no event will termination or expiration with or without cause of this Agreement entitle Distributor to any compensation by RCAI on any grounds whatsoever. SECTION 14: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 14.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California, United States of America. 14.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in Orange County, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 14.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, Distributor acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against Distributor for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 14.4 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. 7 SECTION 15: GENERAL PROVISIONS 15.1 Relationship of the Parties. Nothing in this Agreement will be construed as creating a partnership or joint venture between the parties or making Distributor a shareholder, agent, employee or other representative of RCAI, but in all of its operations hereunder Distributor will be an independent contractor, conduct its business at its own cost and expense and make no representation, express or implied, that it is an employee, partner, shareholder, joint venture or other representative of RCAI. Distributor will have no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. 15.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 15.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Distributor unless prior written consent is obtained from RCAI (such consent not to be unreasonably withheld or delayed) and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Distributor is bound and Distributor remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 15.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 15.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 15.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 15.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 15.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth below, until changed by written notice. Notice shall be effective when given, provided it is given in accordance with this Section 15.8. 8 If to RCAI: Gordon Davies RCAI 23832 Rockfield Blvd., Ste. 275 Lake Forest, CA 92630 If to Distributor: ________________________________ ________________________________ ________________________________ 15.9 Third Party Rights. Except insofar as this Agreement expressly provides that a third party may in his own right enforce a term of this Agreement, a person who is not a party to this Agreement has no right to rely upon or enforce any term of this Agreement. Neither party may declare itself a trustee of the rights under this Agreement for the benefit of any third party IN WITNESS WHEREOF, RCAI and Distributor have each caused this Agreement to be executed on its behalf by it's duly authorized officer as of the date first written above. RCAI DISTRIBUTOR By: /s/ GORDON DAVIES By: /s/ MARK LANG ----------------- ------------- Gordon Davies Mark Lang President EX-10 8 july262005ex106.txt Exhibit 10.6 DISTRIBUTORSHIP AGREEMENT THIS AGREEMENT (Agreement) is entered into this 30th day of June 2005, by and between Reclamation Consulting and Applications Inc., a Colorado, USA corporation ("RCAI") and Mr. Don Pickett ("Distributor") RECITALS WHEREAS, RCAI manufactures and distributes the Products (as defined below). WHEREAS, RCAI desires to appoint Distributor to promote, market, sell, distribute and service the Products and Distributor desires to promote, market, sell, distribute and provide customer service for the Products in the Territory, defined herein below. THEREFORE, in consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and Distributor hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, cleaners and lubricants, in liquid form which are used in the construction and similar industries and which are sold under the Trademarks and which are non-toxic, non-explosive and environmentally compatible. New Products and markets developed and introduced by RCAI over the term of this Agreement may be sold by Distributor on a non-exclusive basis, unless otherwise agreed to in writing. 1.2 `Territory' means the geographical area of Ohio. 1.3 `Effective Date' means the date first written above which will be concurrent with the date upon which an authorized representative of the last party to sign this Agreement does so. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants Distributor the right of distribution hereunder and as set forth in Schedule A attached hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to Distributor hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, distribution, application or handling of the Products. 1.7 `Distributor' means the Distributor, and any sub-distributor or subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of Distributor herein are assigned or delegated upon the prior written consent of RCAI as required under this Agreement. SECTION 2: GRANT OF EXCLUSIVE DISTRIBUTORSHIP 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints Distributor and Distributor hereby accepts the exclusive appointment to promote, sell distribute and provide customer service for the Products under the Trademarks in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive right granted herein will apply provided Distributor uses all reasonable efforts to achieve the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described in Section 4 below. 2.3 During the term hereof, Distributor will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 RCAI will use reasonable efforts to refer promptly to Distributor any customer inquiry or order originating from the Territory and to advise Distributor of such inquiries. However, Distributor will not be liable to RCAI for compensation of any kind in the event of the sale, distribution or servicing of Products by RCAI in the Territory. 2.5 The rights of Distributor to promote, distribute or provide customer service for the Products include the right of sub-distribution or subcontract, upon the prior written consent of RCAI such consent not to be unreasonably withheld or delayed. All other rights not expressly granted in this Agreement to Distributor are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date and for the term hereof, RCAI hereby grants Distributor the nontransferable right to use the Trademarks set forth in Schedule A hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may upon reasonable prior notice in writing to Distributor amend Schedule A from time to time. 3.2 Distributor will comply with all prior reasonable written RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, Distributor will represent to customers and other third parties that Distributor is an authorized independent distributor of RCAI and the Products for the Territory. SECTION 4: MINIMUM SALES OBJECTIVE 4.1 The parties acknowledge that the minimum volume of sales for the Territory (`Minimum Sales Objective') for each Agreement Year will be as described in Schedule B attached. 4.2 Distributor will use all reasonable efforts to achieve the Minimum Sales Objective in any given Agreement Year. In particular, Distributor will: a) actively promote, distribute and service the Products in the Territory; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of this Agreement on training and advertising; and e) respond promptly and fully to any of RCAI's reasonable written requests for information on customers or market conditions in the Territory. f) reasonably assist RCAI at RCAI's expense, when requested, in the development and testing of new products developed by RCAI SECTION 5: SALES TRAINING & SUPPORT 5.1 Upon execution of this Agreement, RCAI will provide Distributor with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(TM) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. 5.2 RCAI will provide distributor with sales and marketing support including providing Distributor with promotional materials, participation in trade-shows, technical support, etc. SECTION 6: TERMS OF DELIVERY 6.1 Unless otherwise agreed, RCAI will deliver all Products for which it accepts purchase orders FOB RCAI's facility at Salt Lake City, UT, at which time and place title to the Products and risk of loss of the Products will pass to Distributor. 6.2 Distributor is responsible for all costs and risks of transportation, insurance, sales, use or other taxes, and licenses or approvals required for the transport, promotion, distribution and sale of the Products in the Territory, and any loss or damage sustained. SECTION 7: TERMS OF PAYMENT 7.1 Payments made to RCAI from Distributor will reflect the prices set forth on RCAI's Price List for the Products, attached hereto as Schedule C. 7.2 RCAI may amend the Product/Price List of Schedule C from time to time, any changes to said prices to be effective upon ninety (90) days prior written notice by RCAI to Distributor. Any price changes will be based on increases in the cost of commodities, manufacturing and/or business operations. 7.3 Distributor will tender payments to RCAI in USD either in check, money order, bank transfer or other unconditional methods of payment agreed by RCAI and shall pay the entire amount due for the Products upon acceptance of those Products by Distributor. SECTION 8: QUALITY CONTROL, SAFETY STANDARDS 8.1 In order to ensure that a high standard of reliability, application and handling of the Products is maintained and that proper use of the Trademarks in connection with the Products is made, RCAI will exercise in a reasonable manner its rights of supervision and quality control over Distributor's provision of customer service for the Products during the term of this Agreement. 8.2 Distributor will: a) employ and maintain sufficient personnel to perform the obligations of Distributor herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; c) furnish all market development information reasonably requested by RCAI in writing concerning the customers of Products sold by Distributor; and d) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to Distributor's attention, of any customer complaints regarding the Products. e) advertise & publicize the Products in the Territory in accordance with any reasonable RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any training or market development assistance by RCAI. SECTION 9: LIMITED WARRANTIES AND INDEMNIFICATION FOR PRODUCTS 9.1 RCAI hereby warrants to the Distributor:- 9.1.1 that all of the Products are completely non-hazardous, 100% bio-degradable and are made with a blend of all-natural materials and are not toxic or environmentally hazardous and that the manufacture of the Products is fully compliant with all requirements of any governmental agency in the United States or in the Territory, including specifically, but not limited to, any environmental laws. 9.1.2 that neither the sale nor use of the Products shall cause the Distributor to infringe any intellectual property rights owned or controlled by a third party. 9.1.3 that RCAI shall, at time of delivery of the Products, have legal title and rights of ownership of the Products and otherwise has all necessary rights, title and interest to grant the rights set forth herein to Distributor, free of any claims, liens or conflicting rights in favor of any third parties. 9.2 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the purchase date by the end user. 9.3 Except as provided at Section 9.6 below, RCAI's entire liability and Distributor's customers' exclusive remedy is limited to either the replacement without charge, or refund of the sale price of any Products which prove not to function as intended within the warranty period. 9.4 RCAI will not be liable for the replacement of Products where it can be objectively demonstrated that those Products have been subjected to misuse, accident, alteration, neglect or damage. 9.5 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 9.6 RCAI shall defend, indemnify and hold Distributor harmless from any claims, actions, costs, expenses (including reasonable Attorney's fees), losses, damages or liability incurred because of the actual or alleged violation of any regulation or law as mentioned in Section 9.1 and for any actual or alleged infringement as mentioned in Section 9.2. This indemnification shall not apply unless: 9.6.1 The Distributor shall first notify RCAI in writing of any such allegation; 9.6.2 The Distributor shall make no admissions without RCAI's consent; and 9.6.3 The Distributor shall allow RCAI to conduct and/or settle all negotiations and litigation and shall give RCAI all reasonable assistance in relation thereto (all the costs incurred or recovered in such negotiations and litigation being for RCAI's account). SECTION 10: DISTRIBUTOR'S LIABILITY 10.1 Distributor will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 11: PROPRIETARY RIGHTS 11.1 Distributor on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants Distributor the rights to distribute and use pursuant to the provisions of this Agreement; and b) will knowingly refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 11.2 Promptly after Distributor learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, Distributor will notify RCAI of said unauthorized use or disclosure. 11.3 Should RCAI decide to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in the Distributor's Territory, Distributor will, upon RCAI's request, render any reasonable assistance RCAI may require, at RCAI's expense. SECTION 12: TERM AND TERMINATION 12.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of one (1) year (Initial Term). This Agreement may be renewed for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice of RCAI to Distributor. At the time of renewal Distributor will: a) have complied with its reasonable efforts obligation to achieve the Minimum Sales Objective for the Agreement Year concerned; and b) have complied with all other obligations of this Agreement to RCAI's reasonable satisfaction. 12.2 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to Distributor, notice effective upon the date given, in the event of any one or more of the following: a) the failure of Distributor to use its reasonable efforts to achieve the Minimum Sales Objective required hereunder; b) Distributor's breach of any material obligation concerning RCAI's proprietary rights; c) Distributor's material breach of any obligation or representation, other than those of paragraphs a) and b) above; d) Distributor's assignment of this Agreement or any of rights granted hereunder by Distributor by agreement or operation of law, without the prior written consent of RCAI; f) any legal or business transaction or event which causes a change in majority ownership of Distributor and effectively results in an assignment of this Agreement to owners substantially different from the owners of Distributor at the time of execution of this Agreement without the prior written consent of RCAI; and g) any insolvency or inability of Distributor to pay debts as and when due, or the initiation or pendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of Distributor. 12.3 In the event that RCAI claims Distributor is in breach of any provision of this Agreement, it shall give three (3) months prior written notice of such deficiency and Distributor shall have a period of three (3) months from date of receipt of aforesaid notice to cure said deficiency. SECTION 13: EFFECTS OF TERMINATION 13.1 Subject to the terms of this Agreement, upon valid termination, Distributor will immediately discontinue the promotion, distribution and servicing of the Products and will cease to represent itself as an authorized Distributor of RCAI. 13.2 Distributor will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, Distributor will certify destruction of Documentation. 13.3 Distributor will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 13.4 Unless termination occurs for cause, Distributor may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter shall be purchased by RCAI from Distributor at either Distributor's blending cost which is the total of the raw materials cost of the Product and the labor costs to blend) or the cost of the Products. 13.5 Nothing herein will relieve or extinguish any of Distributor's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by Distributor, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other distributors or customers. 13.6 Distributor will offer to RCAI and RCAI may elect to assume the rights and obligations of any agreements between Distributor and its customers for the service of the Products, effective as of the date of termination or expiration. 13.7 In no event will termination or expiration with or without cause of this Agreement entitle Distributor to any compensation by RCAI on any grounds whatsoever. SECTION 14: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 14.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California, United States of America. 14.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in Orange County, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 14.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, Distributor acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against Distributor for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 14.4 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 15: GENERAL PROVISIONS 15.1 Relationship of the Parties. Nothing in this Agreement will be construed as creating a partnership or joint venture between the parties or making Distributor a shareholder, agent, employee or other representative of RCAI, but in all of its operations hereunder Distributor will be an independent contractor, conduct its business at its own cost and expense and make no representation, express or implied, that it is an employee, partner, shareholder, joint venture or other representative of RCAI. Distributor will have no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. 15.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 15.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Distributor unless prior written consent is obtained from RCAI (such consent not to be unreasonably withheld or delayed) and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Distributor is bound and Distributor remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 15.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 15.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 15.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 15.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 15.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth below, until changed by written notice. Notice shall be effective when given, provided it is given in accordance with this Section 15.8. If to RCAI: Gordon Davies RCAI 23832 Rockfield Blvd., Ste. 275 Lake Forest, CA 92630 If to Distributor: Don Pickett PO Box 552 Dayton, OH 15.9 Third Party Rights. Except insofar as this Agreement expressly provides that a third party may in his own right enforce a term of this Agreement, a person who is not a party to this Agreement has no right to rely upon or enforce any term of this Agreement. Neither party may declare itself a trustee of the rights under this Agreement for the benefit of any third party IN WITNESS WHEREOF, RCAI and Distributor have each caused this Agreement to be executed on its behalf by it's duly authorized officer as of the date first written above. RCAI DISTRIBUTOR By: /s/ GORDON DAVIES By: /s/ DON PICKETT ----------------- --------------- Gordon Davies Don Pickett President EX-10 9 july262005ex107.txt Exhibit 10.7 CONTRACT SALES REPRESENTATIVE AGREEMENT THIS AGREEMENT (Agreement) is entered into this 27th day of October 2004, by and between Reclamation Consulting and Applications Inc., a company organized under the laws of Colorado with its principal place of business at 23832 Rockfield Blvd., Suite 273, Lake Forest, California 92630, USA and Dennis Jackman, an individual having his principal place of business a _______________________________________________________________ (`Contract Sales Representative') RECITALS RCAI manufactures and distributes certain asphalt and cement product release agents, lubricants and cleaners, which are used in the construction, paving and similar industries and which are sold under the RCAI trademarks `Alderox(TM)', ASA-12(TM), KR7(TM), DCR(TM), Paver Blend and TSR(TM). RCAI desires to appoint Contract Sales Representative to promote, market, sell and service RCAI's products and Contract Sales Representative desires to promote, market, sell and provide customer service for RCAI products in the territory, defined herein below. In consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and Contract Sales Representative hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, lubricants and cleaners, specifically Alderox(TM) ASA-12(TM) Asphalt Release Agent, Alderox(TM) KR7(TM) Concrete Release Agent & Form Oil and Alderox(TM) DCR(TM) Drag Chain and Drag Slat Release Agent and Lubricant, Alderox(TM) Paver Blend paving equipment release agent and cleaner and Alderox(TM) TSR(TM) oil sands and mining release agent in liquid form that RCAI formulates and manufactures. RCAI authorizes Contract Sales Representative to promote, market, sell and provide customer service of and for these Products under the RCAI Trademarks. RCAI may, at its sole discretion and in writing, add additional Products to this Agreement as they become available. 1.2 `Territory' means the State of Pennsylvania. 1.3 `Effective Date' means the date first written above which will be concurrent with the date when an authorized representative of the last party hereto executes this Agreement. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants Distributor the right of distribution hereunder and as set forth in Schedule A hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to Distributor hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, application or handling of the Products. 1.7 `Contract Sales Representative' means Dennis Jackman, and any sub-subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of Contract Sales Representative herein are assigned or delegated upon the prior written consent of RCAI. SECTION 2: GRANT OF CONTRACT SALES REPRESENTATIVE RIGHTS AND RESPONSIBILITIES 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints Contract Sales Representative and Contract Sales Representative hereby accepts the appointment to promote, sell, market and provide customer service for the Products in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive rights granted herein will apply provided Contract Sales Representative achieves the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described below. 2.3 During the term hereof, Contract Sales Representative will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 During the term RCAI shall appoint no other sales agents to sell the Products within the Territory, provided minimum sales objectives are achieved as set out below. RCAI will use reasonable efforts to refer to Contract Sales Representative any customer inquiry or order originating from Contract Sales Representative's Territory. 2.5 The rights of Contract Sales Representative to promote, sell or provide customer service for the Products include the right of subcontract, but only upon the prior written consent of RCAI. All other rights not expressly granted in this Agreement to Contract Sales Representative are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby grants Contract Sales Representative the nonexclusive, nontransferable right to use the Trademarks set forth in Schedule B hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may amend Schedule B from time to time. 3.2 Contract Sales Representative will comply with all RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, Contract Sales Representative will represent to customers and other third parties that Contract Sales Representative is an authorized independent representative of RCAI and the Products for the Territories. Contract Sales Representative will refrain from using any trademarks or other identifying symbols that may be considered by customers or other third parties to be misleading as to the identity of Contract Sales Representative, the relationship of RCAI and Contract Sales Representative, or the origin or nature of the Products. SECTION 4: MINIMUM SALES 4.1 The minimum volume of sales of the Products that Contract Sales Representative commits to use its best efforts to achieve in the Territory on an annual basis in the first Agreement Year is 60,000 gallons (avg. 5,000 gallons per month). RCAI will review the annual volumes of sales of the Products prior to the beginning of any successive term during which this Agreement may continue and RCAI may change and adjust such minimums as it, in its sole judgment, sees fit. 4.2 Contract Sales Representative will use its best efforts to achieve the Minimum Sales in any given Agreement Year. In particular, Contract Sales Representative will: a) actively promote, sell and service the Products in the Territories; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of Sections 8 and 9 hereof on training and advertising; e) respond promptly and fully to any of RCAI's requests for information on customers or market conditions in Contract Sales Representative's Territory. 4.3 In the event that Contract Sales Representative fails to achieve the Minimum Sales in any Agreement Year, RCAI may, in its sole discretion, revise the Minimum Sales for the Territory, and/or revoke the exclusive appointment granted herein in the Territory with immediate effect and appoint other Contract Sales Representative(s) in the Territory, and/or terminate this Agreement in full immediately upon 20 days written notice to Contract Sales Representative. SECTION 5: TERMS OF DELIVERY 5.1 Unless otherwise agreed, all Products for which RCAI accepts purchase order are FOB RCAI's facility. Transportation and delivery fees are to be paid by customer. SECTION 6: TERMS OF PAYMENT 6.1 Purchase Orders from Customers will be sent directly to RCAI with copy to Contract Sales Representative. 6.2 Invoices will be sent directly from RCAI to Customer with copy to Contract Sales Representative. 6.3 Contract Sales Representative will be paid a sales commission of $1.50 per gallon of product purchased by customers within its Territory. 6.4 Sales commission payments will be made to Contract Sales Representative by RCAI immediately upon receipt of payment from the customer. 6.5 Contract Sales Representative shall pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 1 year. 6.6 Upon receipt of payment of the License Fee, RCAI will provide Contract Sales Representative with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(TM) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. SECTION 7: QUALITY CONTROL & SAFETY STANDARDS 7.1 Contract Sales Representative will: a) employ and maintain sufficient personnel to perform the obligations of Contract Sales Representative herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; b) furnish all market development information reasonably requested by RCAI concerning the customers of Products sold by Contract Sales Representative; and c) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to Contract Sales Representative's attention, of any customer complaints regarding the Products. d) Advertise and publicize the Products in the Territory in accordance with any RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any sales training or market development assistance by RCAI. All advertising and/or promotional material related to the Alderox(TM) products must be approved in writing by RCAI prior to use. SECTION 8: LIMITED WARRANTIES FOR PRODUCTS 8.1 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the pick-up date. 8.2 RCAI's entire liability and Contract Sales Representative's customers' exclusive remedy is limited to the replacement without charge, of any Products which prove not to function as intended within the warranty period. 8.3 RCAI will not be liable for the replacement of Products which, in RCAI's sole opinion, have been subjected to misuse, accident, alteration, neglect or damage. 8.4 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 8.5 IN NO EVENT WILL RCAI BE LIABLE FOR DAMAGES OF ANY KIND, DIRECT OR INDIRECT, INCLUDING, WITHOUT LIMITATION, GENERAL AND SPECIAL DAMAGES SUFFERED BY CONTRACT SALES REPRESENTATIVE OR ANY CUSTOMER OR SUBCONTRACTOR ARISING FROM BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE OR OTHER TORT, EQUITY, OR ANY OTHER LEGAL GROUND OF ACTION. SECTION 9: CONTRACT SALES REPRESENTATIVE'S LIABILITY 9.1 Contract Sales Representative will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 10: PROPRIETARY RIGHTS 10.1 Contract Sales Representative on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants Contract Sales Representative the rights to sell and use pursuant to the provisions of this Agreement; and b) will refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 10.2 Promptly after Contract Sales Representative learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, Contract Sales Representative will notify RCAI of said unauthorized use or disclosure. 10.3 Should RCAI decide in its sole discretion to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in the Contract Sales Representative's Territory, Contract Sales Representative will, upon RCAI's request, render any assistance RCAI may require, at RCAI's expense. SECTION 11: TERM AND TERMINATION 11.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of one (1) year (Initial Term). This Agreement may be renewed at RCAI's sole option for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice by RCAI to Contract Sales Representative. At the time of renewal Contract Sales Representative will: a) have complied with its best efforts obligation to achieve the Minimum Sales Objective for the Agreement Year concerned; and b) have complied with all other obligations of this Agreement to RCAI's satisfaction. 11.2 This Agreement may be terminated without cause by either party hereto if the party wishing to terminate gives prior written notice to the other party at least 90 days prior to the end of the Initial Term or any Successive Term. 11.3 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to Contract Sales Representative, notice effective upon the date given, in the event of any one or more of the following: a) the failure of Contract Sales Representative to achieve the Minimum Sales, provided, however, that RCAI may elect in lieu of termination, to revise the Minimum Sales, appoint other Contract Sales Representative(s) in the Territory or take any other measures to ensure that the market in Contract Sales Representative's Territory is optimally developed; b) Contract Sales Representative's default in payment when due of any amount payable to RCAI, provided however, in lieu of or in addition to termination, RCAI may take any measures to mitigate or reduce the extent of Contract Sales Representative's default. c) Contract Sales Representative's breach of any obligation concerning RCAI's proprietary rights; d) Contract Sales Representative's breach of any obligation or representation, other than those of paragraphs a), b) and c) above, e) Contract Sales Representative's attempted assignment of this Agreement or any of rights granted hereunder by Contract Sales Representative by agreement or operation of law, without the prior written consent of RCAI; f) Contract Sales Representative's unauthorized development of new products related to the Alderox(TM) products and/or unauthorized development of the Alderox(TM) products. g) any legal or business transaction or event which causes a change in majority ownership of Contract Sales Representative and effectively results in an assignment of this Agreement to owners substantially different from the owners of Contract Sales Representative at the time of execution of this Agreement without the prior written consent of RCAI; and h) any insolvency or inability of Contract Sales Representative to pay debts as and when due, or the initiation or tendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of Contract Sales Representative. SECTION 12: EFFECTS OF TERMINATION 12.1 Subject to Section 15.6, upon termination, Contract Sales Representative will immediately discontinue the promotion, selling and servicing of the Products and will cease to represent itself as an authorized Contract Sales Representative of RCAI. 12.2 Contract Sales Representative will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, Contract Sales Representative will certify destruction of Documentation. 12.3 Contract Sales Representative will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 12.4 Unless termination occurs for cause, Contract Sales Representative may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter must be disposed of by Contract Sales Representative and certified to RCAI. 12.5 Nothing herein will relieve or extinguish any of Contract Sales Representative's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by Contract Sales Representative, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other Contract Sales Representatives or customers. 12.6 Contract Sales Representative will offer to RCAI and RCAI may at its sole option, elect to assume the rights and obligations of any agreements between Contract Sales Representative and its customers for the service of the Products, effective as of the date of termination or expiration. 12.7 In no event will termination or expiration with or without cause of this Agreement entitle Contract Sales Representative to any compensation by RCAI on any grounds whatsoever. SECTION 13: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 13.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California. 13.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') under its International Commercial Mediation Rules before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in accordance with its International Arbitration Rules. To the extent these rules require supplementation and do not contradict the aforesaid Rules, the arbitral tribunal will apply the California rules on Arbitration and Conciliation of International Commercial Disputes. Unless otherwise agreed, the place of arbitration will be Los Angeles, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 13.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, Contract Sales Representative acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against Contract Sales Representative for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA International Arbitration Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 13.4 The award of the arbitrator will be final and binding on the parties, provided said award does not contradict in whole or in part the state of the governing law hereof. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement. 13.5 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 14: GENERAL PROVISIONS 14.1 Relationship of the Parties. Contract Sales Representative is an independent sales representative of RCAI, but in all of its operations hereunder Contract Sales Representative will operate as an independent contractor and will conduct its business at its own cost. Contract Sales Representative has no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. RCAI is not be responsible for payment of any taxes, income or otherwise, on behalf of Contract Sales Representative nor is RCAI responsible to provide any benefits whatsoever. 14.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 14.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Contract Sales Representative unless prior written consent is obtained from RCAI and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Contract Sales Representative is bound and Contract Sales Representative remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 14.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 14.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 14.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 14.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 14.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth above, until changed by written notice. Notice shall be effective when given. IN WITNESS WHEREOF, RCAI and Contract Sales Representative have each caused this Agreement to be executed on its behalf by its duly authorized officer as of the date first written above. RCAI CONTRACT SALES REPRESENTATIVE By: /s/ GORDON DAVIES By: /s/ DENNIS JACKMAN ----------------- ------------------ Gordon Davies Dennis Jackman President EX-10 10 july262005ex108.txt Exhibit 10.8 ADDENDUM TO CONTRACT SALES REPRESENTATIVE AGREEMENT THIS ADDENDUM is to the Contract Sales Representative Agreement entered into on the ____ day of November 2004 between Reclamation Consulting and Applications Inc. and Dennis Jackman. Under the terms of the Contract Sales Representative Agreement, Contract Sales Representative agrees to pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 1 year. Upon receipt of payment of the License Fee, RCAI agreed provide Contract Sales Representative with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(TM) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. With respect to the License Fee, RCAI offers to Contract Sales Representative and Contract Sales Representative accepts that the $25,000 license fee shall be paid out of Alderox(TM) product sales instead of a lump sum payment. Under this agreement, RCAI will increase Contract Sales Representative's commission from $1.50 to $2.00 per gallon. The $0.50 per gallon difference will be retained by RCAI upon payment from the customer and applied toward the outstanding balance on the License Fee. Contract Sales Representative may make additional payments against the License Fee at any time and without penalty. Once the License Fee has been paid in full, commissions will revert back to $1.50. Signed and agreed to by: RCAI Contract Sales Representative /s/ GORDON DAVIES /s/ DENNIS JACKMAN - ----------------- ------------------ Gordon Davies, President/Director Dennis Jackman EX-10 11 july262005sb2ex109.txt Exhibit 10.9 CONTRACT SALES REPRESENTATIVE AGREEMENT THIS AGREEMENT (Agreement) is entered into this 15th day of November 2004, by and between Reclamation Consulting and Applications Inc., a company organized under the laws of Colorado with its principal place of business at 23832 Rockfield Blvd., Suite 273, Lake Forest, California 92630, USA and Rosiane Jacomini, an individual having her principal place of business at 26 North Terrace Avenue, Mount Vernon, NY 10550 (`Contract Sales Representative' or `CSR'). RECITALS RCAI manufactures and distributes certain asphalt and cement product release agents, lubricants and cleaners, which are used in the construction, paving and similar industries and which are sold under the RCAI trademarks `Alderox(TM)', ASA-12(TM), KR7(TM), DCR(TM), Paver Blend and TSR(TM). RCAI desires to appoint CSR to promote, market, sell and service RCAI's products and CSR desires to promote, market, sell and provide customer service for RCAI products in the territory, defined herein below. In consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and CSR hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, lubricants and cleaners, specifically Alderox(TM) ASA-12(TM) Asphalt Release Agent, Alderox(TM) KR7(TM) Concrete Release Agent & Form Oil and Alderox(TM) DCR(TM) Drag Chain and Drag Slat Release Agent and Lubricant, Alderox(TM) Paver Blend paving equipment release agent and cleaner and Alderox(TM) TSR(TM) oil sands and mining release agent in liquid form that RCAI formulates and manufactures. RCAI authorizes CSR to promote, market, sell and provide customer service of and for these Products under the RCAI Trademarks. RCAI may, at its sole discretion and in writing, add additional Products to this Agreement as they become available. 1.2 `Territory' means the State of Connecticut. 1.3 `Effective Date' means the date first written above which will be concurrent with the date when an authorized representative of the last party hereto executes this Agreement. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants CSR the right of distribution hereunder and as set forth in Schedule A hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to CSR hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, application or handling of the Products. 1.7 `Contract Sales Representative' or `CSR' means Rosiane Jacomini, and any sub-subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of CSR herein are assigned or delegated upon the prior written consent of RCAI. SECTION 2: GRANT OF CONTRACT SALES REPRESENTATIVE RIGHTS AND RESPONSIBILITIES 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints CSR and CSR hereby accepts the appointment to promote, sell, market and provide customer service for the Products in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive rights granted herein will apply provided CSR achieves the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described below. 2.3 During the term hereof, CSR will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 During the term RCAI shall appoint no other sales agents to sell the Products within the Territory, provided minimum sales objectives are achieved as set out below. RCAI will use reasonable efforts to refer to CSR any customer inquiry or order originating from CSR's. 2.5 The rights of CSR to promote, sell or provide customer service for the Products include the right of subcontract, but only upon the prior written consent of RCAI. All other rights not expressly granted in this Agreement to CSR are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby grants CSR the nonexclusive, nontransferable right to use the Trademarks set forth in Schedule A attached hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may amend Schedule A from time to time. 3.2 CSR will comply with all RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, CSR will represent to customers and other third parties that CSR is an authorized independent representative of RCAI and the Products for the Territories. CSR will refrain from using any trademarks or other identifying symbols that may be considered by customers or other third parties to be misleading as to the identity of CSR, the relationship of RCAI and CSR, or the origin or nature of the Products. SECTION 4: MINIMUM SALES 4.1 The minimum volume of sales of the Products that CSR commits to use its best efforts to achieve in the Territory on an annual basis in the first Agreement Year is 60,000 gallons (avg. 5,000 gallons per month). RCAI will review the annual volumes of sales of the Products prior to the beginning of any successive term during which this Agreement may continue and RCAI may change and adjust such minimums as it, in its sole judgment, sees fit. 4.2 Contract Sales Representative will use its best efforts to achieve the Minimum Sales in any given Agreement Year. In particular, Contract Sales Representative will: a) actively promote, sell and service the Products in the Territories; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of Sections 8 and 9 hereof on training and advertising; e) respond promptly and fully to any of RCAI's requests for information on customers or market conditions in Contract Sales Representative's Territory. 4.3 In the event that CSR fails to achieve the Minimum Sales in any Agreement Year, RCAI may, in its sole discretion, revise the Minimum Sales for the Territory, and/or revoke the exclusive appointment granted herein in the Territory with immediate effect and appoint other Contract Sales Representative(s) in the Territory, and/or terminate this Agreement in full immediately upon 90 days written notice to CSR. SECTION 5: TERMS OF DELIVERY 5.1 Unless otherwise agreed, all Products for which RCAI accepts purchase order are FOB RCAI's facility. Transportation and delivery fees are to be paid by customer. SECTION 6: TERMS OF PAYMENT 6.1 Purchase Orders from Customers will be sent directly to RCAI with copy to CSR. 6.2 RCAI's Suggested Retail Price for all Alderox(TM) products, excluding cleaning products, is $9.00 per gallon. Should CSR sell any Alderox(TM) product at a price in excess of the Suggested Retail Price, the `overage' will be split 60 (CSR)/40 (RCAI). 6.3 Invoices will be sent directly from RCAI to Customer with copy to CSR. 6.4 CSR will be paid a sales commission of $1.50 per gallon of product purchased by customers within the Territory. 6.5 Sales commission payments will be made to CSR by RCAI immediately upon receipt of payment from the customer. 6.6 CSR shall pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. 6.7 Upon receipt of payment of the License Fee, RCAI will provide CSR with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(TM) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. 6.8 Although CSR will not actively seek out contacts/customers in areas outside of the Territory, it is understood that certain customers may have facilities/operations in numerous territories and may wish to purchase product for a number of facilities/operations in different territories from a single Contract Sales Representative or in an area not covered by another Contract Sales Representative. In this event, the following will apply: (a) Should CSR receive orders for products in an area outside of the Territory and within a Territory covered by another Contract Sales Representative, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order is responsible for servicing the account. (b) Should CSR receive orders for product in an area outside the Territory and in an area not covered by another Contract Sales Representative, CSR will receive full commissions and will be fully responsible for servicing the account. When appointment is made for a representative within the territory, CSR will receive 50% commissions and be responsible for servicing of the account. (c) In the event that another Contract Sales Representative receives orders for product within CSR's Territory, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order will be responsible for servicing the account unless otherwise agreed between the two parties. SECTION 7: QUALITY CONTROL & SAFETY STANDARDS 7.1 Contract Sales Representative will: a) employ and maintain sufficient personnel to perform the obligations of CSR as defined herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; b) furnish all market development information reasonably requested by RCAI concerning the customers of Products sold by CSR; and c) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to CSR's attention, of any customer complaints regarding the Products. d) Advertise and publicize the Products in the Territory in accordance with any RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any sales training or market development assistance by RCAI. All advertising and/or promotional material related to the Alderox(TM) products must be approved in writing by RCAI prior to use. SECTION 8: LIMITED WARRANTIES FOR PRODUCTS 8.1 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the pick-up date. 8.2 RCAI's entire liability and CSR's customers' exclusive remedy is limited to the replacement without charge, of any Products which prove not to function as intended within the warranty period. 8.3 RCAI will not be liable for the replacement of Products which, in RCAI's sole opinion, have been subjected to misuse, accident, alteration, neglect or damage. 8.4 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 8.5 IN NO EVENT WILL RCAI BE LIABLE FOR DAMAGES OF ANY KIND, DIRECT OR INDIRECT, INCLUDING, WITHOUT LIMITATION, GENERAL AND SPECIAL DAMAGES SUFFERED BY CONTRACT SALES REPRESENTATIVE OR ANY CUSTOMER OR SUBCONTRACTOR ARISING FROM BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE OR OTHER TORT, EQUITY, OR ANY OTHER LEGAL GROUND OF ACTION. SECTION 9: CONTRACT SALES REPRESENTATIVE'S LIABILITY 9.1 CSR will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 10: PROPRIETARY RIGHTS 10.1 CSR on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants CSR the rights to sell and use pursuant to the provisions of this Agreement; and b) will refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 10.2 Promptly after CSR learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, CSR will notify RCAI of said unauthorized use or disclosure. 10.3 Should RCAI decide in its sole discretion to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in CSR's Territory, CSR will, upon RCAI's request, render any assistance RCAI may require, at RCAI's expense. SECTION 11: TERM AND TERMINATION 11.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of five (5) years (Initial Term). This Agreement may be renewed at RCAI's sole option for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice by RCAI to CSR. At the time of renewal CSR will: a) have complied with its best efforts obligation to achieve the Minimum Sales Objective for the Agreement term concerned; and b) have complied with all other obligations of this Agreement to RCAI's satisfaction. 11.2 This Agreement may be terminated without cause by either party hereto if the party wishing to terminate gives prior written notice to the other party at least 90 days prior to the end of the Initial Term or any Successive Term. 11.3 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to CSR, notice effective upon the date given, in the event of any one or more of the following: a) the failure of CSR to achieve the Minimum Sales, provided, however, that RCAI may elect in lieu of termination, to revise the Minimum Sales, appoint other Contract Sales Representative(s) in the Territory or take any other measures to ensure that the market in CSR's Territory is optimally developed; b) CSR's default in payment when due of any amount payable to RCAI, provided however, in lieu of or in addition to termination, RCAI may take any measures to mitigate or reduce the extent of CSR's default. c) CSR's breach of any obligation concerning RCAI's proprietary rights; d) CSR's breach of any obligation or representation, other than those of paragraphs a), b) and c) above, e) CSR's attempted assignment of this Agreement or any of rights granted hereunder by CSR by agreement or operation of law, without the prior written consent of RCAI; f) CSR's unauthorized development of new products related to the Alderox(TM) products and/or unauthorized development of the Alderox(TM) products. g) any legal or business transaction or event which causes a change in majority ownership of CSR and effectively results in an assignment of this Agreement to owners substantially different from the owners of CSR at the time of execution of this Agreement without the prior written consent of RCAI; and h) any insolvency or inability of CSR to pay debts as and when due, or the initiation or tendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of CSR. SECTION 12: EFFECTS OF TERMINATION 12.1 Subject to Section 15.6, upon termination, CSR will immediately discontinue the promotion, selling and servicing of the Products and will cease to represent itself as an authorized Contract Sales Representative of RCAI. 12.2 CSR will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, CSR will certify destruction of Documentation. 12.3 CSR will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 12.4 Unless termination occurs for cause, CSR may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter must be disposed of by CSR and certified to RCAI. 12.5 Nothing herein will relieve or extinguish any of CSR's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by CSR, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other Contract Sales Representatives or customers. 12.6 CSR will offer to RCAI and RCAI may at its sole option, elect to assume the rights and obligations of any agreements between CSR and its customers for the service of the Products, effective as of the date of termination or expiration. 12.7 If either RCAI terminates this Agreement without cause, there will be no non-compete period following the termination of the Agreement. 12.8 If RCAI terminates this Agreement with cause, CSR may not compete with any of RCAI's products or services for a period of two (2) years. 12.9 If CSR terminates this Agreement without cause, CSR may not compete with any of RCAI's products or services of a period of five (5) years. 12.10 If CSR terminates this Agreement with cause, there will be no non-compete period following the termination of the Agreement. 12.11 In no event will termination or expiration with or without cause of this Agreement entitle CSR to any compensation by RCAI on any grounds whatsoever. SECTION 13: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 13.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California. 13.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') under its International Commercial Mediation Rules before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in accordance with its International Arbitration Rules. To the extent these rules require supplementation and do not contradict the aforesaid Rules, the arbitral tribunal will apply the California rules on Arbitration and Conciliation of International Commercial Disputes. Unless otherwise agreed, the place of arbitration will be Los Angeles, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 13.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, CSR acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against CSR for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA International Arbitration Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 13.4 The award of the arbitrator will be final and binding on the parties, provided said award does not contradict in whole or in part the state of the governing law hereof. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement. 13.5 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 14: GENERAL PROVISIONS 14.1 Relationship of the Parties. Contract Sales Representative is an independent sales representative of RCAI, but in all of its operations hereunder Contract Sales Representative will operate as an independent contractor and will conduct its business at its own cost. Contract Sales Representative has no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. RCAI is not be responsible for payment of any taxes, income or otherwise, on behalf of Contract Sales Representative nor is RCAI responsible to provide any benefits whatsoever. 14.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 14.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Contract Sales Representative unless prior written consent is obtained from RCAI and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Contract Sales Representative is bound and Contract Sales Representative remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 14.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 14.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 14.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 14.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 14.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth above, until changed by written notice. Notice shall be effective when given. IN WITNESS WHEREOF, RCAI and Contract Sales Representative have each caused this Agreement to be executed on its behalf by its duly authorized officer as of the date first written above. RCAI CONTRACT SALES REPRESENTATIVE By: /s/ GORDON DAVIES By: /s/ ROSIANE JACOMINI ----------------- -------------------- Gordon Davies Rosiane Jacomini President EX-10 12 july262005sb2ex1010.txt Exhibit 10.10 CONTRACT SALES REPRESENTATIVE AGREEMENT THIS AGREEMENT (Agreement) is entered into this 15th day of November 2004, by and between Reclamation Consulting and Applications Inc., a company organized under the laws of Colorado with its principal place of business at 23832 Rockfield Blvd., Suite 273, Lake Forest, California 92630, USA and Rosiane Jacomini, an individual having her principal place of business at 26 North Terrace Avenue, Mount Vernon, NY 10550 (`Contract Sales Representative' or `CSR'). RECITALS RCAI manufactures and distributes certain asphalt and cement product release agents, lubricants and cleaners, which are used in the construction, paving and similar industries and which are sold under the RCAI trademarks `Alderox(TM)', ASA-12(TM), KR7(TM), DCR(TM), Paver Blend and TSR(TM). RCAI desires to appoint CSR to promote, market, sell and service RCAI's products and CSR desires to promote, market, sell and provide customer service for RCAI products in the territory, defined herein below. In consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and CSR hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, lubricants and cleaners, specifically Alderox(TM) ASA-12(TM) Asphalt Release Agent, Alderox(TM) KR7(TM) Concrete Release Agent & Form Oil and Alderox(TM) DCR(TM) Drag Chain and Drag Slat Release Agent and Lubricant, Alderox(TM) Paver Blend paving equipment release agent and cleaner and Alderox(TM) TSR(TM) oil sands and mining release agent in liquid form that RCAI formulates and manufactures. RCAI authorizes CSR to promote, market, sell and provide customer service of and for these Products under the RCAI Trademarks. RCAI may, at its sole discretion and in writing, add additional Products to this Agreement as they become available. 1.2 `Territory' means the State of New Hampshire. 1.3 `Effective Date' means the date first written above which will be concurrent with the date when an authorized representative of the last party hereto executes this Agreement. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants CSR the right of distribution hereunder and as set forth in Schedule A hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to CSR hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, application or handling of the Products. 1.7 `Contract Sales Representative' or `CSR' means Rosiane Jacomini, and any sub-subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of CSR herein are assigned or delegated upon the prior written consent of RCAI. SECTION 2: GRANT OF CONTRACT SALES REPRESENTATIVE RIGHTS AND RESPONSIBILITIES 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints CSR and CSR hereby accepts the appointment to promote, sell, market and provide customer service for the Products in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive rights granted herein will apply provided CSR achieves the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described below. 2.3 During the term hereof, CSR will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 During the term RCAI shall appoint no other sales agents to sell the Products within the Territory, provided minimum sales objectives are achieved as set out below. RCAI will use reasonable efforts to refer to CSR any customer inquiry or order originating from CSR's. 2.5 The rights of CSR to promote, sell or provide customer service for the Products include the right of subcontract, but only upon the prior written consent of RCAI. All other rights not expressly granted in this Agreement to CSR are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby grants CSR the nonexclusive, nontransferable right to use the Trademarks set forth in Schedule A attached hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may amend Schedule A from time to time. 3.2 CSR will comply with all RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, CSR will represent to customers and other third parties that CSR is an authorized independent representative of RCAI and the Products for the Territories. CSR will refrain from using any trademarks or other identifying symbols that may be considered by customers or other third parties to be misleading as to the identity of CSR, the relationship of RCAI and CSR, or the origin or nature of the Products. SECTION 4: MINIMUM SALES 4.1 The minimum volume of sales of the Products that CSR commits to use its best efforts to achieve in the Territory on an annual basis in the first Agreement Year is 60,000 gallons (avg. 5,000 gallons per month). RCAI will review the annual volumes of sales of the Products prior to the beginning of any successive term during which this Agreement may continue and RCAI may change and adjust such minimums as it, in its sole judgment, sees fit. 4.2 Contract Sales Representative will use its best efforts to achieve the Minimum Sales in any given Agreement Year. In particular, Contract Sales Representative will: a) actively promote, sell and service the Products in the Territories; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of Sections 8 and 9 hereof on training and advertising; e) respond promptly and fully to any of RCAI's requests for information on customers or market conditions in Contract Sales Representative's Territory. 4.3 In the event that CSR fails to achieve the Minimum Sales in any Agreement Year, RCAI may, in its sole discretion, revise the Minimum Sales for the Territory, and/or revoke the exclusive appointment granted herein in the Territory with immediate effect and appoint other Contract Sales Representative(s) in the Territory, and/or terminate this Agreement in full immediately upon 90 days written notice to CSR. SECTION 5: TERMS OF DELIVERY 5.1 Unless otherwise agreed, all Products for which RCAI accepts purchase order are FOB RCAI's facility. Transportation and delivery fees are to be paid by customer. SECTION 6: TERMS OF PAYMENT 6.1 Purchase Orders from Customers will be sent directly to RCAI with copy to CSR. 6.2 RCAI's Suggested Retail Price for all Alderox(TM) products, excluding cleaning products, is $9.00 per gallon. Should CSR sell any Alderox(TM) product at a price in excess of the Suggested Retail Price, the `overage' will be split 60 (CSR)/40 (RCAI). 6.3 Invoices will be sent directly from RCAI to Customer with copy to CSR. 6.4 CSR will be paid a sales commission of $1.50 per gallon of product purchased by customers within the Territory. 6.5 Sales commission payments will be made to CSR by RCAI immediately upon receipt of payment from the customer. 6.6 CSR shall pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. 6.7 Upon receipt of payment of the License Fee, RCAI will provide CSR with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(TM) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. 6.8 Although CSR will not actively seek out contacts/customers in areas outside of the Territory, it is understood that certain customers may have facilities/operations in numerous territories and may wish to purchase product for a number of facilities/operations in different territories from a single Contract Sales Representative or in an area not covered by another Contract Sales Representative. In this event, the following will apply: (a) Should CSR receive orders for products in an area outside of the Territory and within a Territory covered by another Contract Sales Representative, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order is responsible for servicing the account. (b) Should CSR receive orders for product in an area outside the Territory and in an area not covered by another Contract Sales Representative, CSR will receive full commissions and will be fully responsible for servicing the account. When appointment is made for a representative within the territory, CSR will receive 50% commissions and be responsible for servicing of the account. (c) In the event that another Contract Sales Representative receives orders for product within CSR's Territory, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order will be responsible for servicing the account unless otherwise agreed between the two parties. SECTION 7: QUALITY CONTROL & SAFETY STANDARDS 7.1 Contract Sales Representative will: a) employ and maintain sufficient personnel to perform the obligations of CSR as defined herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; b) furnish all market development information reasonably requested by RCAI concerning the customers of Products sold by CSR; and c) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to CSR's attention, of any customer complaints regarding the Products. d) Advertise and publicize the Products in the Territory in accordance with any RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any sales training or market development assistance by RCAI. All advertising and/or promotional material related to the Alderox(TM) products must be approved in writing by RCAI prior to use. SECTION 8: LIMITED WARRANTIES FOR PRODUCTS 8.1 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the pick-up date. 8.2 RCAI's entire liability and CSR's customers' exclusive remedy is limited to the replacement without charge, of any Products which prove not to function as intended within the warranty period. 8.3 RCAI will not be liable for the replacement of Products which, in RCAI's sole opinion, have been subjected to misuse, accident, alteration, neglect or damage. 8.4 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 8.5 IN NO EVENT WILL RCAI BE LIABLE FOR DAMAGES OF ANY KIND, DIRECT OR INDIRECT, INCLUDING, WITHOUT LIMITATION, GENERAL AND SPECIAL DAMAGES SUFFERED BY CONTRACT SALES REPRESENTATIVE OR ANY CUSTOMER OR SUBCONTRACTOR ARISING FROM BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE OR OTHER TORT, EQUITY, OR ANY OTHER LEGAL GROUND OF ACTION. SECTION 9: CONTRACT SALES REPRESENTATIVE'S LIABILITY 9.1 CSR will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 10: PROPRIETARY RIGHTS 10.1 CSR on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants CSR the rights to sell and use pursuant to the provisions of this Agreement; and b) will refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 10.2 Promptly after CSR learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, CSR will notify RCAI of said unauthorized use or disclosure. 10.3 Should RCAI decide in its sole discretion to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in CSR's Territory, CSR will, upon RCAI's request, render any assistance RCAI may require, at RCAI's expense. SECTION 11: TERM AND TERMINATION 11.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of five (5) years (Initial Term). This Agreement may be renewed at RCAI's sole option for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice by RCAI to CSR. At the time of renewal CSR will: a) have complied with its best efforts obligation to achieve the Minimum Sales Objective for the Agreement term concerned; and b) have complied with all other obligations of this Agreement to RCAI's satisfaction. 11.2 This Agreement may be terminated without cause by either party hereto if the party wishing to terminate gives prior written notice to the other party at least 90 days prior to the end of the Initial Term or any Successive Term. 11.3 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to CSR, notice effective upon the date given, in the event of any one or more of the following: a) the failure of CSR to achieve the Minimum Sales, provided, however, that RCAI may elect in lieu of termination, to revise the Minimum Sales, appoint other Contract Sales Representative(s) in the Territory or take any other measures to ensure that the market in CSR's Territory is optimally developed; b) CSR's default in payment when due of any amount payable to RCAI, provided however, in lieu of or in addition to termination, RCAI may take any measures to mitigate or reduce the extent of CSR's default. c) CSR's breach of any obligation concerning RCAI's proprietary rights; d) CSR's breach of any obligation or representation, other than those of paragraphs a), b) and c) above, e) CSR's attempted assignment of this Agreement or any of rights granted hereunder by CSR by agreement or operation of law, without the prior written consent of RCAI; f) CSR's unauthorized development of new products related to the Alderox(TM) products and/or unauthorized development of the Alderox(TM) products. g) any legal or business transaction or event which causes a change in majority ownership of CSR and effectively results in an assignment of this Agreement to owners substantially different from the owners of CSR at the time of execution of this Agreement without the prior written consent of RCAI; and h) any insolvency or inability of CSR to pay debts as and when due, or the initiation or tendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of CSR. SECTION 12: EFFECTS OF TERMINATION 12.1 Subject to Section 15.6, upon termination, CSR will immediately discontinue the promotion, selling and servicing of the Products and will cease to represent itself as an authorized Contract Sales Representative of RCAI. 12.2 CSR will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, CSR will certify destruction of Documentation. 12.3 CSR will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 12.4 Unless termination occurs for cause, CSR may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter must be disposed of by CSR and certified to RCAI. 12.5 Nothing herein will relieve or extinguish any of CSR's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by CSR, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other Contract Sales Representatives or customers. 12.6 CSR will offer to RCAI and RCAI may at its sole option, elect to assume the rights and obligations of any agreements between CSR and its customers for the service of the Products, effective as of the date of termination or expiration. 12.7 If either RCAI terminates this Agreement without cause, there will be no non-compete period following the termination of the Agreement. 12.8 If RCAI terminates this Agreement with cause, CSR may not compete with any of RCAI's products or services for a period of two (2) years. 12.9 If CSR terminates this Agreement without cause, CSR may not compete with any of RCAI's products or services of a period of five (5) years. 12.10 If CSR terminates this Agreement with cause, there will be no non-compete period following the termination of the Agreement. 12.11 In no event will termination or expiration with or without cause of this Agreement entitle CSR to any compensation by RCAI on any grounds whatsoever. SECTION 13: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 13.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California. 13.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') under its International Commercial Mediation Rules before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in accordance with its International Arbitration Rules. To the extent these rules require supplementation and do not contradict the aforesaid Rules, the arbitral tribunal will apply the California rules on Arbitration and Conciliation of International Commercial Disputes. Unless otherwise agreed, the place of arbitration will be Los Angeles, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 13.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, CSR acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against CSR for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA International Arbitration Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 13.4 The award of the arbitrator will be final and binding on the parties, provided said award does not contradict in whole or in part the state of the governing law hereof. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement. 13.5 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 14: GENERAL PROVISIONS 14.1 Relationship of the Parties. Contract Sales Representative is an independent sales representative of RCAI, but in all of its operations hereunder Contract Sales Representative will operate as an independent contractor and will conduct its business at its own cost. Contract Sales Representative has no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. RCAI is not be responsible for payment of any taxes, income or otherwise, on behalf of Contract Sales Representative nor is RCAI responsible to provide any benefits whatsoever. 14.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 14.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Contract Sales Representative unless prior written consent is obtained from RCAI and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Contract Sales Representative is bound and Contract Sales Representative remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 14.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 14.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 14.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 14.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 14.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth above, until changed by written notice. Notice shall be effective when given. IN WITNESS WHEREOF, RCAI and Contract Sales Representative have each caused this Agreement to be executed on its behalf by its duly authorized officer as of the date first written above. RCAI CONTRACT SALES REPRESENTATIVE By: /s/ GORDON DAVIES By: /s/ ROSIANE JACOMINI ----------------- -------------------- Gordon Davies Rosiane Jacomini President EX-10 13 july262005sb2ex1011.txt Exhibit 10.11 CONTRACT SALES REPRESENTATIVE AGREEMENT THIS AGREEMENT (Agreement) is entered into this 15th day of November 2004, by and between Reclamation Consulting and Applications Inc., a company organized under the laws of Colorado with its principal place of business at 23832 Rockfield Blvd., Suite 273, Lake Forest, California 92630, USA and Rosiane Jacomini, an individual having her principal place of business at 26 North Terrace Avenue, Mount Vernon, NY 10550 (`Contract Sales Representative' or `CSR'). RECITALS RCAI manufactures and distributes certain asphalt and cement product release agents, lubricants and cleaners, which are used in the construction, paving and similar industries and which are sold under the RCAI trademarks `Alderox(TM)', ASA-12(TM), KR7(TM), DCR(TM), Paver Blend and TSR(TM). RCAI desires to appoint CSR to promote, market, sell and service RCAI's products and CSR desires to promote, market, sell and provide customer service for RCAI products in the territory, defined herein below. In consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and CSR hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, lubricants and cleaners, specifically Alderox(TM) ASA-12(TM) Asphalt Release Agent, Alderox(TM) KR7(TM) Concrete Release Agent & Form Oil and Alderox(TM) DCR(TM) Drag Chain and Drag Slat Release Agent and Lubricant, Alderox(TM) Paver Blend paving equipment release agent and cleaner and Alderox(TM) TSR(TM) oil sands and mining release agent in liquid form that RCAI formulates and manufactures. RCAI authorizes CSR to promote, market, sell and provide customer service of and for these Products under the RCAI Trademarks. RCAI may, at its sole discretion and in writing, add additional Products to this Agreement as they become available. 1.2 `Territory' means the State of New Jersey. 1.3 `Effective Date' means the date first written above which will be concurrent with the date when an authorized representative of the last party hereto executes this Agreement. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants CSR the right of distribution hereunder and as set forth in Schedule A hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to CSR hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, application or handling of the Products. 1.7 `Contract Sales Representative' or `CSR' means Rosiane Jacomini, and any sub-subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of CSR herein are assigned or delegated upon the prior written consent of RCAI. SECTION 2: GRANT OF CONTRACT SALES REPRESENTATIVE RIGHTS AND RESPONSIBILITIES 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints CSR and CSR hereby accepts the appointment to promote, sell, market and provide customer service for the Products in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive rights granted herein will apply provided CSR achieves the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described below. 2.3 During the term hereof, CSR will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 During the term RCAI shall appoint no other sales agents to sell the Products within the Territory, provided minimum sales objectives are achieved as set out below. RCAI will use reasonable efforts to refer to CSR any customer inquiry or order originating from CSR's. 2.5 The rights of CSR to promote, sell or provide customer service for the Products include the right of subcontract, but only upon the prior written consent of RCAI. All other rights not expressly granted in this Agreement to CSR are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby grants CSR the nonexclusive, nontransferable right to use the Trademarks set forth in Schedule A attached hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may amend Schedule A from time to time. 3.2 CSR will comply with all RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, CSR will represent to customers and other third parties that CSR is an authorized independent representative of RCAI and the Products for the Territories. CSR will refrain from using any trademarks or other identifying symbols that may be considered by customers or other third parties to be misleading as to the identity of CSR, the relationship of RCAI and CSR, or the origin or nature of the Products. SECTION 4: MINIMUM SALES 4.1 The minimum volume of sales of the Products that CSR commits to use its best efforts to achieve in the Territory on an annual basis in the first Agreement Year is 60,000 gallons (avg. 5,000 gallons per month). RCAI will review the annual volumes of sales of the Products prior to the beginning of any successive term during which this Agreement may continue and RCAI may change and adjust such minimums as it, in its sole judgment, sees fit. 4.2 Contract Sales Representative will use its best efforts to achieve the Minimum Sales in any given Agreement Year. In particular, Contract Sales Representative will: a) actively promote, sell and service the Products in the Territories; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of Sections 8 and 9 hereof on training and advertising; e) respond promptly and fully to any of RCAI's requests for information on customers or market conditions in Contract Sales Representative's Territory. 4.3 In the event that CSR fails to achieve the Minimum Sales in any Agreement Year, RCAI may, in its sole discretion, revise the Minimum Sales for the Territory, and/or revoke the exclusive appointment granted herein in the Territory with immediate effect and appoint other Contract Sales Representative(s) in the Territory, and/or terminate this Agreement in full immediately upon 90 days written notice to CSR. SECTION 5: TERMS OF DELIVERY 5.1 Unless otherwise agreed, all Products for which RCAI accepts purchase order are FOB RCAI's facility. Transportation and delivery fees are to be paid by customer. SECTION 6: TERMS OF PAYMENT 6.1 Purchase Orders from Customers will be sent directly to RCAI with copy to CSR. 6.2 RCAI's Suggested Retail Price for all Alderox(TM) products, excluding cleaning products, is $9.00 per gallon. Should CSR sell any Alderox(TM) product at a price in excess of the Suggested Retail Price, the `overage' will be split 60 (CSR)/40 (RCAI). 6.3 Invoices will be sent directly from RCAI to Customer with copy to CSR. 6.4 CSR will be paid a sales commission of $1.50 per gallon of product purchased by customers within the Territory. 6.5 Sales commission payments will be made to CSR by RCAI immediately upon receipt of payment from the customer. 6.6 CSR shall pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. 6.7 Upon receipt of payment of the License Fee, RCAI will provide CSR with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(TM) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. 6.8 Although CSR will not actively seek out contacts/customers in areas outside of the Territory, it is understood that certain customers may have facilities/operations in numerous territories and may wish to purchase product for a number of facilities/operations in different territories from a single Contract Sales Representative or in an area not covered by another Contract Sales Representative. In this event, the following will apply: (a) Should CSR receive orders for products in an area outside of the Territory and within a Territory covered by another Contract Sales Representative, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order is responsible for servicing the account. (b) Should CSR receive orders for product in an area outside the Territory and in an area not covered by another Contract Sales Representative, CSR will receive full commissions and will be fully responsible for servicing the account. When appointment is made for a representative within the territory, CSR will receive 50% commissions and be responsible for servicing of the account. (c) In the event that another Contract Sales Representative receives orders for product within CSR's Territory, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order will be responsible for servicing the account unless otherwise agreed between the two parties. SECTION 7: QUALITY CONTROL & SAFETY STANDARDS 7.1 Contract Sales Representative will: a) employ and maintain sufficient personnel to perform the obligations of CSR as defined herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; b) furnish all market development information reasonably requested by RCAI concerning the customers of Products sold by CSR; and c) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to CSR's attention, of any customer complaints regarding the Products. d) Advertise and publicize the Products in the Territory in accordance with any RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any sales training or market development assistance by RCAI. All advertising and/or promotional material related to the Alderox(TM) products must be approved in writing by RCAI prior to use. SECTION 8: LIMITED WARRANTIES FOR PRODUCTS 8.1 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the pick-up date. 8.2 RCAI's entire liability and CSR's customers' exclusive remedy is limited to the replacement without charge, of any Products which prove not to function as intended within the warranty period. 8.3 RCAI will not be liable for the replacement of Products which, in RCAI's sole opinion, have been subjected to misuse, accident, alteration, neglect or damage. 8.4 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 8.5 IN NO EVENT WILL RCAI BE LIABLE FOR DAMAGES OF ANY KIND, DIRECT OR INDIRECT, INCLUDING, WITHOUT LIMITATION, GENERAL AND SPECIAL DAMAGES SUFFERED BY CONTRACT SALES REPRESENTATIVE OR ANY CUSTOMER OR SUBCONTRACTOR ARISING FROM BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE OR OTHER TORT, EQUITY, OR ANY OTHER LEGAL GROUND OF ACTION. SECTION 9: CONTRACT SALES REPRESENTATIVE'S LIABILITY 9.1 CSR will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 10: PROPRIETARY RIGHTS 10.1 CSR on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants CSR the rights to sell and use pursuant to the provisions of this Agreement; and b) will refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 10.2 Promptly after CSR learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, CSR will notify RCAI of said unauthorized use or disclosure. 10.3 Should RCAI decide in its sole discretion to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in CSR's Territory, CSR will, upon RCAI's request, render any assistance RCAI may require, at RCAI's expense. SECTION 11: TERM AND TERMINATION 11.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of five (5) years (Initial Term). This Agreement may be renewed at RCAI's sole option for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice by RCAI to CSR. At the time of renewal CSR will: a) have complied with its best efforts obligation to achieve the Minimum Sales Objective for the Agreement term concerned; and b) have complied with all other obligations of this Agreement to RCAI's satisfaction. 11.2 This Agreement may be terminated without cause by either party hereto if the party wishing to terminate gives prior written notice to the other party at least 90 days prior to the end of the Initial Term or any Successive Term. 11.3 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to CSR, notice effective upon the date given, in the event of any one or more of the following: a) the failure of CSR to achieve the Minimum Sales, provided, however, that RCAI may elect in lieu of termination, to revise the Minimum Sales, appoint other Contract Sales Representative(s) in the Territory or take any other measures to ensure that the market in CSR's Territory is optimally developed; b) CSR's default in payment when due of any amount payable to RCAI, provided however, in lieu of or in addition to termination, RCAI may take any measures to mitigate or reduce the extent of CSR's default. c) CSR's breach of any obligation concerning RCAI's proprietary rights; d) CSR's breach of any obligation or representation, other than those of paragraphs a), b) and c) above, e) CSR's attempted assignment of this Agreement or any of rights granted hereunder by CSR by agreement or operation of law, without the prior written consent of RCAI; f) CSR's unauthorized development of new products related to the Alderox(TM) products and/or unauthorized development of the Alderox(TM) products. g) any legal or business transaction or event which causes a change in majority ownership of CSR and effectively results in an assignment of this Agreement to owners substantially different from the owners of CSR at the time of execution of this Agreement without the prior written consent of RCAI; and h) any insolvency or inability of CSR to pay debts as and when due, or the initiation or tendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of CSR. SECTION 12: EFFECTS OF TERMINATION 12.1 Subject to Section 15.6, upon termination, CSR will immediately discontinue the promotion, selling and servicing of the Products and will cease to represent itself as an authorized Contract Sales Representative of RCAI. 12.2 CSR will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, CSR will certify destruction of Documentation. 12.3 CSR will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 12.4 Unless termination occurs for cause, CSR may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter must be disposed of by CSR and certified to RCAI. 12.5 Nothing herein will relieve or extinguish any of CSR's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by CSR, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other Contract Sales Representatives or customers. 12.6 CSR will offer to RCAI and RCAI may at its sole option, elect to assume the rights and obligations of any agreements between CSR and its customers for the service of the Products, effective as of the date of termination or expiration. 12.7 If either RCAI terminates this Agreement without cause, there will be no non-compete period following the termination of the Agreement. 12.8 If RCAI terminates this Agreement with cause, CSR may not compete with any of RCAI's products or services for a period of two (2) years. 12.9 If CSR terminates this Agreement without cause, CSR may not compete with any of RCAI's products or services of a period of five (5) years. 12.10 If CSR terminates this Agreement with cause, there will be no non-compete period following the termination of the Agreement. 12.11 In no event will termination or expiration with or without cause of this Agreement entitle CSR to any compensation by RCAI on any grounds whatsoever. SECTION 13: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 13.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California. 13.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') under its International Commercial Mediation Rules before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in accordance with its International Arbitration Rules. To the extent these rules require supplementation and do not contradict the aforesaid Rules, the arbitral tribunal will apply the California rules on Arbitration and Conciliation of International Commercial Disputes. Unless otherwise agreed, the place of arbitration will be Los Angeles, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 13.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, CSR acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against CSR for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA International Arbitration Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 13.4 The award of the arbitrator will be final and binding on the parties, provided said award does not contradict in whole or in part the state of the governing law hereof. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement. 13.5 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 14: GENERAL PROVISIONS 14.1 Relationship of the Parties. Contract Sales Representative is an independent sales representative of RCAI, but in all of its operations hereunder Contract Sales Representative will operate as an independent contractor and will conduct its business at its own cost. Contract Sales Representative has no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. RCAI is not be responsible for payment of any taxes, income or otherwise, on behalf of Contract Sales Representative nor is RCAI responsible to provide any benefits whatsoever. 14.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 14.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Contract Sales Representative unless prior written consent is obtained from RCAI and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Contract Sales Representative is bound and Contract Sales Representative remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 14.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 14.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 14.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 14.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 14.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth above, until changed by written notice. Notice shall be effective when given. IN WITNESS WHEREOF, RCAI and Contract Sales Representative have each caused this Agreement to be executed on its behalf by its duly authorized officer as of the date first written above. RCAI CONTRACT SALES REPRESENTATIVE By: /s/ GORDON DAVIES By: /s/ ROSIANE JACOMINI ----------------- -------------------- Gordon Davies Rosiane Jacomini President EX-10 14 july262005sb2ex1012.txt Exhibit 10.12 CONTRACT SALES REPRESENTATIVE AGREEMENT THIS AGREEMENT (Agreement) is entered into this 15th day of November 2004, by and between Reclamation Consulting and Applications Inc., a company organized under the laws of Colorado with its principal place of business at 23832 Rockfield Blvd., Suite 273, Lake Forest, California 92630, USA and Rosiane Jacomini, an individual having her principal place of business at 26 North Terrace Avenue, Mount Vernon, NY 10550 (`Contract Sales Representative' or `CSR'). RECITALS RCAI manufactures and distributes certain asphalt and cement product release agents, lubricants and cleaners, which are used in the construction, paving and similar industries and which are sold under the RCAI trademarks `Alderox(TM)', ASA-12(TM), KR7(TM), DCR(TM), Paver Blend and TSR(TM). RCAI desires to appoint CSR to promote, market, sell and service RCAI's products and CSR desires to promote, market, sell and provide customer service for RCAI products in the territory, defined herein below. In consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and CSR hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, lubricants and cleaners, specifically Alderox(TM) ASA-12(TM) Asphalt Release Agent, Alderox(TM) KR7(TM) Concrete Release Agent & Form Oil and Alderox(TM) DCR(TM) Drag Chain and Drag Slat Release Agent and Lubricant, Alderox(TM) Paver Blend paving equipment release agent and cleaner and Alderox(TM) TSR(TM) oil sands and mining release agent in liquid form that RCAI formulates and manufactures. RCAI authorizes CSR to promote, market, sell and provide customer service of and for these Products under the RCAI Trademarks. RCAI may, at its sole discretion and in writing, add additional Products to this Agreement as they become available. 1.2 `Territory' means the State of Rhode Island. 1.3 `Effective Date' means the date first written above which will be concurrent with the date when an authorized representative of the last party hereto executes this Agreement. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants CSR the right of distribution hereunder and as set forth in Schedule A hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to CSR hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, application or handling of the Products. 1.7 `Contract Sales Representative' or `CSR' means Rosiane Jacomini, and any sub-subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of CSR herein are assigned or delegated upon the prior written consent of RCAI. SECTION 2: GRANT OF CONTRACT SALES REPRESENTATIVE RIGHTS AND RESPONSIBILITIES 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints CSR and CSR hereby accepts the appointment to promote, sell, market and provide customer service for the Products in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive rights granted herein will apply provided CSR achieves the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described below. 2.3 During the term hereof, CSR will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 During the term RCAI shall appoint no other sales agents to sell the Products within the Territory, provided minimum sales objectives are achieved as set out below. RCAI will use reasonable efforts to refer to CSR any customer inquiry or order originating from CSR's. 2.5 The rights of CSR to promote, sell or provide customer service for the Products include the right of subcontract, but only upon the prior written consent of RCAI. All other rights not expressly granted in this Agreement to CSR are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby grants CSR the nonexclusive, nontransferable right to use the Trademarks set forth in Schedule A attached hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may amend Schedule A from time to time. 3.2 CSR will comply with all RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, CSR will represent to customers and other third parties that CSR is an authorized independent representative of RCAI and the Products for the Territories. CSR will refrain from using any trademarks or other identifying symbols that may be considered by customers or other third parties to be misleading as to the identity of CSR, the relationship of RCAI and CSR, or the origin or nature of the Products. SECTION 4: MINIMUM SALES 4.1 The minimum volume of sales of the Products that CSR commits to use its best efforts to achieve in the Territory on an annual basis in the first Agreement Year is 60,000 gallons (avg. 5,000 gallons per month). RCAI will review the annual volumes of sales of the Products prior to the beginning of any successive term during which this Agreement may continue and RCAI may change and adjust such minimums as it, in its sole judgment, sees fit. 4.2 Contract Sales Representative will use its best efforts to achieve the Minimum Sales in any given Agreement Year. In particular, Contract Sales Representative will: a) actively promote, sell and service the Products in the Territories; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of Sections 8 and 9 hereof on training and advertising; e) respond promptly and fully to any of RCAI's requests for information on customers or market conditions in Contract Sales Representative's Territory. 4.3 In the event that CSR fails to achieve the Minimum Sales in any Agreement Year, RCAI may, in its sole discretion, revise the Minimum Sales for the Territory, and/or revoke the exclusive appointment granted herein in the Territory with immediate effect and appoint other Contract Sales Representative(s) in the Territory, and/or terminate this Agreement in full immediately upon 90 days written notice to CSR. SECTION 5: TERMS OF DELIVERY 5.1 Unless otherwise agreed, all Products for which RCAI accepts purchase order are FOB RCAI's facility. Transportation and delivery fees are to be paid by customer. SECTION 6: TERMS OF PAYMENT 6.1 Purchase Orders from Customers will be sent directly to RCAI with copy to CSR. 6.2 RCAI's Suggested Retail Price for all Alderox(TM) products, excluding cleaning products, is $9.00 per gallon. Should CSR sell any Alderox(TM) product at a price in excess of the Suggested Retail Price, the `overage' will be split 60 (CSR)/40 (RCAI). 6.3 Invoices will be sent directly from RCAI to Customer with copy to CSR. 6.4 CSR will be paid a sales commission of $1.50 per gallon of product purchased by customers within the Territory. 6.5 Sales commission payments will be made to CSR by RCAI immediately upon receipt of payment from the customer. 6.6 CSR shall pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. 6.7 Upon receipt of payment of the License Fee, RCAI will provide CSR with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(TM) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. 6.8 Although CSR will not actively seek out contacts/customers in areas outside of the Territory, it is understood that certain customers may have facilities/operations in numerous territories and may wish to purchase product for a number of facilities/operations in different territories from a single Contract Sales Representative or in an area not covered by another Contract Sales Representative. In this event, the following will apply: (a) Should CSR receive orders for products in an area outside of the Territory and within a Territory covered by another Contract Sales Representative, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order is responsible for servicing the account. (b) Should CSR receive orders for product in an area outside the Territory and in an area not covered by another Contract Sales Representative, CSR will receive full commissions and will be fully responsible for servicing the account. When appointment is made for a representative within the territory, CSR will receive 50% commissions and be responsible for servicing of the account. (c) In the event that another Contract Sales Representative receives orders for product within CSR's Territory, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order will be responsible for servicing the account unless otherwise agreed between the two parties. SECTION 7: QUALITY CONTROL & SAFETY STANDARDS 7.1 Contract Sales Representative will: a) employ and maintain sufficient personnel to perform the obligations of CSR as defined herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; b) furnish all market development information reasonably requested by RCAI concerning the customers of Products sold by CSR; and c) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to CSR's attention, of any customer complaints regarding the Products. d) Advertise and publicize the Products in the Territory in accordance with any RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any sales training or market development assistance by RCAI. All advertising and/or promotional material related to the Alderox(TM) products must be approved in writing by RCAI prior to use. SECTION 8: LIMITED WARRANTIES FOR PRODUCTS 8.1 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the pick-up date. 8.2 RCAI's entire liability and CSR's customers' exclusive remedy is limited to the replacement without charge, of any Products which prove not to function as intended within the warranty period. 8.3 RCAI will not be liable for the replacement of Products which, in RCAI's sole opinion, have been subjected to misuse, accident, alteration, neglect or damage. 8.4 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 8.5 IN NO EVENT WILL RCAI BE LIABLE FOR DAMAGES OF ANY KIND, DIRECT OR INDIRECT, INCLUDING, WITHOUT LIMITATION, GENERAL AND SPECIAL DAMAGES SUFFERED BY CONTRACT SALES REPRESENTATIVE OR ANY CUSTOMER OR SUBCONTRACTOR ARISING FROM BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE OR OTHER TORT, EQUITY, OR ANY OTHER LEGAL GROUND OF ACTION. SECTION 9: CONTRACT SALES REPRESENTATIVE'S LIABILITY 9.1 CSR will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 10: PROPRIETARY RIGHTS 10.1 CSR on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants CSR the rights to sell and use pursuant to the provisions of this Agreement; and b) will refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 10.2 Promptly after CSR learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, CSR will notify RCAI of said unauthorized use or disclosure. 10.3 Should RCAI decide in its sole discretion to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in CSR's Territory, CSR will, upon RCAI's request, render any assistance RCAI may require, at RCAI's expense. SECTION 11: TERM AND TERMINATION 11.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of five (5) years (Initial Term). This Agreement may be renewed at RCAI's sole option for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice by RCAI to CSR. At the time of renewal CSR will: a) have complied with its best efforts obligation to achieve the Minimum Sales Objective for the Agreement term concerned; and b) have complied with all other obligations of this Agreement to RCAI's satisfaction. 11.2 This Agreement may be terminated without cause by either party hereto if the party wishing to terminate gives prior written notice to the other party at least 90 days prior to the end of the Initial Term or any Successive Term. 11.3 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to CSR, notice effective upon the date given, in the event of any one or more of the following: a) the failure of CSR to achieve the Minimum Sales, provided, however, that RCAI may elect in lieu of termination, to revise the Minimum Sales, appoint other Contract Sales Representative(s) in the Territory or take any other measures to ensure that the market in CSR's Territory is optimally developed; b) CSR's default in payment when due of any amount payable to RCAI, provided however, in lieu of or in addition to termination, RCAI may take any measures to mitigate or reduce the extent of CSR's default. c) CSR's breach of any obligation concerning RCAI's proprietary rights; d) CSR's breach of any obligation or representation, other than those of paragraphs a), b) and c) above, e) CSR's attempted assignment of this Agreement or any of rights granted hereunder by CSR by agreement or operation of law, without the prior written consent of RCAI; f) CSR's unauthorized development of new products related to the Alderox(TM) products and/or unauthorized development of the Alderox(TM) products. g) any legal or business transaction or event which causes a change in majority ownership of CSR and effectively results in an assignment of this Agreement to owners substantially different from the owners of CSR at the time of execution of this Agreement without the prior written consent of RCAI; and h) any insolvency or inability of CSR to pay debts as and when due, or the initiation or tendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of CSR. SECTION 12: EFFECTS OF TERMINATION 12.1 Subject to Section 15.6, upon termination, CSR will immediately discontinue the promotion, selling and servicing of the Products and will cease to represent itself as an authorized Contract Sales Representative of RCAI. 12.2 CSR will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, CSR will certify destruction of Documentation. 12.3 CSR will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 12.4 Unless termination occurs for cause, CSR may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter must be disposed of by CSR and certified to RCAI. 12.5 Nothing herein will relieve or extinguish any of CSR's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by CSR, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other Contract Sales Representatives or customers. 12.6 CSR will offer to RCAI and RCAI may at its sole option, elect to assume the rights and obligations of any agreements between CSR and its customers for the service of the Products, effective as of the date of termination or expiration. 12.7 If either RCAI terminates this Agreement without cause, there will be no non-compete period following the termination of the Agreement. 12.8 If RCAI terminates this Agreement with cause, CSR may not compete with any of RCAI's products or services for a period of two (2) years. 12.9 If CSR terminates this Agreement without cause, CSR may not compete with any of RCAI's products or services of a period of five (5) years. 12.10 If CSR terminates this Agreement with cause, there will be no non-compete period following the termination of the Agreement. 12.11 In no event will termination or expiration with or without cause of this Agreement entitle CSR to any compensation by RCAI on any grounds whatsoever. SECTION 13: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 13.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California. 13.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') under its International Commercial Mediation Rules before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in accordance with its International Arbitration Rules. To the extent these rules require supplementation and do not contradict the aforesaid Rules, the arbitral tribunal will apply the California rules on Arbitration and Conciliation of International Commercial Disputes. Unless otherwise agreed, the place of arbitration will be Los Angeles, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 13.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, CSR acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against CSR for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA International Arbitration Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 13.4 The award of the arbitrator will be final and binding on the parties, provided said award does not contradict in whole or in part the state of the governing law hereof. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement. 13.5 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 14: GENERAL PROVISIONS 14.1 Relationship of the Parties. Contract Sales Representative is an independent sales representative of RCAI, but in all of its operations hereunder Contract Sales Representative will operate as an independent contractor and will conduct its business at its own cost. Contract Sales Representative has no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. RCAI is not be responsible for payment of any taxes, income or otherwise, on behalf of Contract Sales Representative nor is RCAI responsible to provide any benefits whatsoever. 14.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 14.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Contract Sales Representative unless prior written consent is obtained from RCAI and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Contract Sales Representative is bound and Contract Sales Representative remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 14.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 14.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 14.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 14.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 14.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth above, until changed by written notice. Notice shall be effective when given. IN WITNESS WHEREOF, RCAI and Contract Sales Representative have each caused this Agreement to be executed on its behalf by its duly authorized officer as of the date first written above. RCAI CONTRACT SALES REPRESENTATIVE By: /s/ GORDON DAVIES By: /s/ ROSIANE JACOMINI ----------------- -------------------- Gordon Davies Rosiane Jacomini President EX-10 15 july262005sb2ex1013.txt Exhibit 10.13 CONTRACT SALES REPRESENTATIVE AGREEMENT THIS AGREEMENT (Agreement) is entered into this 15th day of November 2004, by and between Reclamation Consulting and Applications Inc., a company organized under the laws of Colorado with its principal place of business at 23832 Rockfield Blvd., Suite 273, Lake Forest, California 92630, USA and Rosiane Jacomini, an individual having her principal place of business at 26 North Terrace Avenue, Mount Vernon, NY 10550 (`Contract Sales Representative' or `CSR'). RECITALS RCAI manufactures and distributes certain asphalt and cement product release agents, lubricants and cleaners, which are used in the construction, paving and similar industries and which are sold under the RCAI trademarks `Alderox(TM)', ASA-12(TM), KR7(TM), DCR(TM), Paver Blend and TSR(TM). RCAI desires to appoint CSR to promote, market, sell and service RCAI's products and CSR desires to promote, market, sell and provide customer service for RCAI products in the territory, defined herein below. In consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and CSR hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, lubricants and cleaners, specifically Alderox(TM) ASA-12(TM) Asphalt Release Agent, Alderox(TM) KR7(TM) Concrete Release Agent & Form Oil and Alderox(TM) DCR(TM) Drag Chain and Drag Slat Release Agent and Lubricant, Alderox(TM) Paver Blend paving equipment release agent and cleaner and Alderox(TM) TSR(TM) oil sands and mining release agent in liquid form that RCAI formulates and manufactures. RCAI authorizes CSR to promote, market, sell and provide customer service of and for these Products under the RCAI Trademarks. RCAI may, at its sole discretion and in writing, add additional Products to this Agreement as they become available. 1.2 `Territory' means the State of Vermont. 1.3 `Effective Date' means the date first written above which will be concurrent with the date when an authorized representative of the last party hereto executes this Agreement. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants CSR the right of distribution hereunder and as set forth in Schedule A hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to CSR hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, application or handling of the Products. 1.7 `Contract Sales Representative' or `CSR' means Rosiane Jacomini, and any sub-subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of CSR herein are assigned or delegated upon the prior written consent of RCAI. SECTION 2: GRANT OF CONTRACT SALES REPRESENTATIVE RIGHTS AND RESPONSIBILITIES 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints CSR and CSR hereby accepts the appointment to promote, sell, market and provide customer service for the Products in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive rights granted herein will apply provided CSR achieves the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described below. 2.3 During the term hereof, CSR will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 During the term RCAI shall appoint no other sales agents to sell the Products within the Territory, provided minimum sales objectives are achieved as set out below. RCAI will use reasonable efforts to refer to CSR any customer inquiry or order originating from CSR's. 2.5 The rights of CSR to promote, sell or provide customer service for the Products include the right of subcontract, but only upon the prior written consent of RCAI. All other rights not expressly granted in this Agreement to CSR are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby grants CSR the nonexclusive, nontransferable right to use the Trademarks set forth in Schedule A attached hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may amend Schedule A from time to time. 3.2 CSR will comply with all RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, CSR will represent to customers and other third parties that CSR is an authorized independent representative of RCAI and the Products for the Territories. CSR will refrain from using any trademarks or other identifying symbols that may be considered by customers or other third parties to be misleading as to the identity of CSR, the relationship of RCAI and CSR, or the origin or nature of the Products. SECTION 4: MINIMUM SALES 4.1 The minimum volume of sales of the Products that CSR commits to use its best efforts to achieve in the Territory on an annual basis in the first Agreement Year is 60,000 gallons (avg. 5,000 gallons per month). RCAI will review the annual volumes of sales of the Products prior to the beginning of any successive term during which this Agreement may continue and RCAI may change and adjust such minimums as it, in its sole judgment, sees fit. 4.2 Contract Sales Representative will use its best efforts to achieve the Minimum Sales in any given Agreement Year. In particular, Contract Sales Representative will: a) actively promote, sell and service the Products in the Territories; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of Sections 8 and 9 hereof on training and advertising; e) respond promptly and fully to any of RCAI's requests for information on customers or market conditions in Contract Sales Representative's Territory. 4.3 In the event that CSR fails to achieve the Minimum Sales in any Agreement Year, RCAI may, in its sole discretion, revise the Minimum Sales for the Territory, and/or revoke the exclusive appointment granted herein in the Territory with immediate effect and appoint other Contract Sales Representative(s) in the Territory, and/or terminate this Agreement in full immediately upon 90 days written notice to CSR. SECTION 5: TERMS OF DELIVERY 5.1 Unless otherwise agreed, all Products for which RCAI accepts purchase order are FOB RCAI's facility. Transportation and delivery fees are to be paid by customer. SECTION 6: TERMS OF PAYMENT 6.1 Purchase Orders from Customers will be sent directly to RCAI with copy to CSR. 6.2 RCAI's Suggested Retail Price for all Alderox(TM) products, excluding cleaning products, is $9.00 per gallon. Should CSR sell any Alderox(TM) product at a price in excess of the Suggested Retail Price, the `overage' will be split 60 (CSR)/40 (RCAI). 6.3 Invoices will be sent directly from RCAI to Customer with copy to CSR. 6.4 CSR will be paid a sales commission of $1.50 per gallon of product purchased by customers within the Territory. 6.5 Sales commission payments will be made to CSR by RCAI immediately upon receipt of payment from the customer. 6.6 CSR shall pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. 6.7 Upon receipt of payment of the License Fee, RCAI will provide CSR with one (1) spray applicator system suitable for demonstration projects, 300 gallons of Alderox(TM) product, all required sales, marketing and promotional materials, and a minimum of three (3) days product and sales training. 6.8 Although CSR will not actively seek out contacts/customers in areas outside of the Territory, it is understood that certain customers may have facilities/operations in numerous territories and may wish to purchase product for a number of facilities/operations in different territories from a single Contract Sales Representative or in an area not covered by another Contract Sales Representative. In this event, the following will apply: (a) Should CSR receive orders for products in an area outside of the Territory and within a Territory covered by another Contract Sales Representative, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order is responsible for servicing the account. (b) Should CSR receive orders for product in an area outside the Territory and in an area not covered by another Contract Sales Representative, CSR will receive full commissions and will be fully responsible for servicing the account. When appointment is made for a representative within the territory, CSR will receive 50% commissions and be responsible for servicing of the account. (c) In the event that another Contract Sales Representative receives orders for product within CSR's Territory, CSR and the other Contract Sales Representative will split the commissions 50/50. The Contract Sales Representative who received and filled the order will be responsible for servicing the account unless otherwise agreed between the two parties. SECTION 7: QUALITY CONTROL & SAFETY STANDARDS 7.1 Contract Sales Representative will: a) employ and maintain sufficient personnel to perform the obligations of CSR as defined herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; b) furnish all market development information reasonably requested by RCAI concerning the customers of Products sold by CSR; and c) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to CSR's attention, of any customer complaints regarding the Products. d) Advertise and publicize the Products in the Territory in accordance with any RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any sales training or market development assistance by RCAI. All advertising and/or promotional material related to the Alderox(TM) products must be approved in writing by RCAI prior to use. SECTION 8: LIMITED WARRANTIES FOR PRODUCTS 8.1 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the pick-up date. 8.2 RCAI's entire liability and CSR's customers' exclusive remedy is limited to the replacement without charge, of any Products which prove not to function as intended within the warranty period. 8.3 RCAI will not be liable for the replacement of Products which, in RCAI's sole opinion, have been subjected to misuse, accident, alteration, neglect or damage. 8.4 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 8.5 IN NO EVENT WILL RCAI BE LIABLE FOR DAMAGES OF ANY KIND, DIRECT OR INDIRECT, INCLUDING, WITHOUT LIMITATION, GENERAL AND SPECIAL DAMAGES SUFFERED BY CONTRACT SALES REPRESENTATIVE OR ANY CUSTOMER OR SUBCONTRACTOR ARISING FROM BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE OR OTHER TORT, EQUITY, OR ANY OTHER LEGAL GROUND OF ACTION. SECTION 9: CONTRACT SALES REPRESENTATIVE'S LIABILITY 9.1 CSR will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 10: PROPRIETARY RIGHTS 10.1 CSR on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants CSR the rights to sell and use pursuant to the provisions of this Agreement; and b) will refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 10.2 Promptly after CSR learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, CSR will notify RCAI of said unauthorized use or disclosure. 10.3 Should RCAI decide in its sole discretion to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in CSR's Territory, CSR will, upon RCAI's request, render any assistance RCAI may require, at RCAI's expense. SECTION 11: TERM AND TERMINATION 11.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of five (5) years (Initial Term). This Agreement may be renewed at RCAI's sole option for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice by RCAI to CSR. At the time of renewal CSR will: a) have complied with its best efforts obligation to achieve the Minimum Sales Objective for the Agreement term concerned; and b) have complied with all other obligations of this Agreement to RCAI's satisfaction. 11.2 This Agreement may be terminated without cause by either party hereto if the party wishing to terminate gives prior written notice to the other party at least 90 days prior to the end of the Initial Term or any Successive Term. 11.3 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to CSR, notice effective upon the date given, in the event of any one or more of the following: a) the failure of CSR to achieve the Minimum Sales, provided, however, that RCAI may elect in lieu of termination, to revise the Minimum Sales, appoint other Contract Sales Representative(s) in the Territory or take any other measures to ensure that the market in CSR's Territory is optimally developed; b) CSR's default in payment when due of any amount payable to RCAI, provided however, in lieu of or in addition to termination, RCAI may take any measures to mitigate or reduce the extent of CSR's default. c) CSR's breach of any obligation concerning RCAI's proprietary rights; d) CSR's breach of any obligation or representation, other than those of paragraphs a), b) and c) above, e) CSR's attempted assignment of this Agreement or any of rights granted hereunder by CSR by agreement or operation of law, without the prior written consent of RCAI; f) CSR's unauthorized development of new products related to the Alderox(TM) products and/or unauthorized development of the Alderox(TM) products. g) any legal or business transaction or event which causes a change in majority ownership of CSR and effectively results in an assignment of this Agreement to owners substantially different from the owners of CSR at the time of execution of this Agreement without the prior written consent of RCAI; and h) any insolvency or inability of CSR to pay debts as and when due, or the initiation or tendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of CSR. SECTION 12: EFFECTS OF TERMINATION 12.1 Subject to Section 15.6, upon termination, CSR will immediately discontinue the promotion, selling and servicing of the Products and will cease to represent itself as an authorized Contract Sales Representative of RCAI. 12.2 CSR will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, CSR will certify destruction of Documentation. 12.3 CSR will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 12.4 Unless termination occurs for cause, CSR may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter must be disposed of by CSR and certified to RCAI. 12.5 Nothing herein will relieve or extinguish any of CSR's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by CSR, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other Contract Sales Representatives or customers. 12.6 CSR will offer to RCAI and RCAI may at its sole option, elect to assume the rights and obligations of any agreements between CSR and its customers for the service of the Products, effective as of the date of termination or expiration. 12.7 If either RCAI terminates this Agreement without cause, there will be no non-compete period following the termination of the Agreement. 12.8 If RCAI terminates this Agreement with cause, CSR may not compete with any of RCAI's products or services for a period of two (2) years. 12.9 If CSR terminates this Agreement without cause, CSR may not compete with any of RCAI's products or services of a period of five (5) years. 12.10 If CSR terminates this Agreement with cause, there will be no non-compete period following the termination of the Agreement. 12.11 In no event will termination or expiration with or without cause of this Agreement entitle CSR to any compensation by RCAI on any grounds whatsoever. SECTION 13: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 13.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California. 13.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') under its International Commercial Mediation Rules before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in accordance with its International Arbitration Rules. To the extent these rules require supplementation and do not contradict the aforesaid Rules, the arbitral tribunal will apply the California rules on Arbitration and Conciliation of International Commercial Disputes. Unless otherwise agreed, the place of arbitration will be Los Angeles, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 13.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, CSR acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against CSR for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA International Arbitration Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 13.4 The award of the arbitrator will be final and binding on the parties, provided said award does not contradict in whole or in part the state of the governing law hereof. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement. 13.5 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 14: GENERAL PROVISIONS 14.1 Relationship of the Parties. Contract Sales Representative is an independent sales representative of RCAI, but in all of its operations hereunder Contract Sales Representative will operate as an independent contractor and will conduct its business at its own cost. Contract Sales Representative has no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. RCAI is not be responsible for payment of any taxes, income or otherwise, on behalf of Contract Sales Representative nor is RCAI responsible to provide any benefits whatsoever. 14.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 14.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Contract Sales Representative unless prior written consent is obtained from RCAI and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Contract Sales Representative is bound and Contract Sales Representative remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 14.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 14.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 14.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 14.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 14.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth above, until changed by written notice. Notice shall be effective when given. IN WITNESS WHEREOF, RCAI and Contract Sales Representative have each caused this Agreement to be executed on its behalf by its duly authorized officer as of the date first written above. RCAI CONTRACT SALES REPRESENTATIVE By: /s/ GORDON DAVIES By: /s/ ROSIANE JACOMINI ----------------- -------------------- Gordon Davies Rosiane Jacomini President EX-10 16 july262005sb2ex1014.txt Exhibit 10.14 ADDENDUM TO CONTRACT SALES REPRESENTATIVE AGREEMENT THIS ADDENDUM is to the Contract Sales Representative Agreement entered into on the 15th day of November 2004 between Reclamation Consulting and Applications Inc. and Rosiane Jacomini for the State of Connecticut. Under the terms of the Contract Sales Representative Agreement, Contract Sales Representative agrees to pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. With respect to the License Fee, RCAI offers to Contract Sales Representative and Contract Sales Representative accepts that the $25,000 license fee shall be paid out of Alderox(TM) product sales instead of a lump sum payment. Under this agreement, RCAI will increase Contract Sales Representative's commission from $1.50 to $2.00 per gallon. The $0.50 per gallon difference will be retained by RCAI upon payment from the customer and applied toward the outstanding balance on the License Fee. Contract Sales Representative may make additional payments against the License Fee at any time and without penalty. Once the License Fee has been paid in full, commissions will revert back to $1.50. Signed and agreed to by: RCAI Contract Sales Representative /s/ GORDON DAVIES /s/ ROSIANE JACOMINI - ----------------- -------------------- Gordon Davies, President/Director Rosiane Jacomini EX-10 17 july262005sb2ex1015.txt Exhibit 10.15 ADDENDUM TO CONTRACT SALES REPRESENTATIVE AGREEMENT THIS ADDENDUM is to the Contract Sales Representative Agreement entered into on the 15th day of November 2004 between Reclamation Consulting and Applications Inc. and Rosiane Jacomini for the State of New Hampshire. Under the terms of the Contract Sales Representative Agreement, Contract Sales Representative agrees to pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. With respect to the License Fee, RCAI offers to Contract Sales Representative and Contract Sales Representative accepts that the $25,000 license fee shall be paid out of Alderox(TM) product sales instead of a lump sum payment. Under this agreement, RCAI will increase Contract Sales Representative's commission from $1.50 to $2.00 per gallon. The $0.50 per gallon difference will be retained by RCAI upon payment from the customer and applied toward the outstanding balance on the License Fee. Contract Sales Representative may make additional payments against the License Fee at any time and without penalty. Once the License Fee has been paid in full, commissions will revert back to $1.50. Signed and agreed to by: RCAI Contract Sales Representative /s/ GORDON DAVIES /s/ ROSIANE JACOMINI - ----------------- -------------------- Gordon Davies, President/Director Rosiane Jacomini EX-10 18 july262005sb2ex1016.txt Exhibit 10.16 ADDENDUM TO CONTRACT SALES REPRESENTATIVE AGREEMENT THIS ADDENDUM is to the Contract Sales Representative Agreement entered into on the 15th day of November 2004 between Reclamation Consulting and Applications Inc. and Rosiane Jacomini for the State of New Jersey. Under the terms of the Contract Sales Representative Agreement, Contract Sales Representative agrees to pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. With respect to the License Fee, RCAI offers to Contract Sales Representative and Contract Sales Representative accepts that the $25,000 license fee shall be paid out of Alderox(TM) product sales instead of a lump sum payment. Under this agreement, RCAI will increase Contract Sales Representative's commission from $1.50 to $2.00 per gallon. The $0.50 per gallon difference will be retained by RCAI upon payment from the customer and applied toward the outstanding balance on the License Fee. Contract Sales Representative may make additional payments against the License Fee at any time and without penalty. Once the License Fee has been paid in full, commissions will revert back to $1.50. Signed and agreed to by: RCAI Contract Sales Representative /s/ GORDON DAVIES /s/ ROSIANE JACOMINI - ----------------- -------------------- Gordon Davies, President/Director Rosiane Jacomini EX-10 19 july262005sb2ex1017.txt Exhibit 10.17 ADDENDUM TO CONTRACT SALES REPRESENTATIVE AGREEMENT THIS ADDENDUM is to the Contract Sales Representative Agreement entered into on the 15th day of November 2004 between Reclamation Consulting and Applications Inc. and Rosiane Jacomini for the State of Rhode Island. Under the terms of the Contract Sales Representative Agreement, Contract Sales Representative agrees to pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. With respect to the License Fee, RCAI offers to Contract Sales Representative and Contract Sales Representative accepts that the $25,000 license fee shall be paid out of Alderox(TM) product sales instead of a lump sum payment. Under this agreement, RCAI will increase Contract Sales Representative's commission from $1.50 to $2.00 per gallon. The $0.50 per gallon difference will be retained by RCAI upon payment from the customer and applied toward the outstanding balance on the License Fee. Contract Sales Representative may make additional payments against the License Fee at any time and without penalty. Once the License Fee has been paid in full, commissions will revert back to $1.50. Signed and agreed to by: RCAI Contract Sales Representative /s/ GORDON DAVIES /s/ ROSIANE JACOMINI - ----------------- -------------------- Gordon Davies, President/Director Rosiane Jacomini EX-10 20 july262005sb2ex1018.txt Exhibit 10.18 ADDENDUM TO CONTRACT SALES REPRESENTATIVE AGREEMENT THIS ADDENDUM is to the Contract Sales Representative Agreement entered into on the 15th day of November 2004 between Reclamation Consulting and Applications Inc. and Rosiane Jacomini for the State of Vermont. Under the terms of the Contract Sales Representative Agreement, Contract Sales Representative agrees to pay RCAI a one-time License Fee of $25,000 upon execution of this Agreement. This License Fee will secure exclusive license for the RCAI Products within the Territory for a period of 5 years. With respect to the License Fee, RCAI offers to Contract Sales Representative and Contract Sales Representative accepts that the $25,000 license fee shall be paid out of Alderox(TM) product sales instead of a lump sum payment. Under this agreement, RCAI will increase Contract Sales Representative's commission from $1.50 to $2.00 per gallon. The $0.50 per gallon difference will be retained by RCAI upon payment from the customer and applied toward the outstanding balance on the License Fee. Contract Sales Representative may make additional payments against the License Fee at any time and without penalty. Once the License Fee has been paid in full, commissions will revert back to $1.50. Signed and agreed to by: RCAI Contract Sales Representative /s/ GORDON DAVIES /s/ ROSIANE JACOMINI - ----------------- -------------------- Gordon Davies, President/Director Rosiane Jacomini EX-10 21 july262005ex1019.txt Exhibit 10.19 DISTRIBUTORSHIP AGREEMENT THIS AGREEMENT (Agreement) is entered into this 10th day of August 2004, by and between Reclamation Consulting and Applications Inc., a Colorado, USA corporation ("RCAI") and Aurtech Marketing, Pty., Ltd., an Indian corporation ("Distributor") RECITALS WHEREAS, RCAI manufactures and distributes certain asphalt, cement and related product release agents, which are used in the construction and similar industries and which are sold under the RCAI trademarks `Alderox(TM)', `ASA-12(TM)', `TSR(TM)', DCR(TM) and `KR7(TM)'. WHEREAS, RCAI desires to appoint Distributor to promote, market, sell, distribute and service RCAI's products and Distributor desires to promote, market, sell, distribute and provide customer service for RCAI products in the territory, defined herein below. THEREFORE, in consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and Distributor hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, in liquid form which are non-toxic, non-explosive and environmentally compatible and that RCAI formulates and manufactures. RCAI authorizes Distributor to distribute these Products under the RCAI Trademarks. 1.2 `Territory' means the entire geographic area of India. 1.3 `Effective Date' means the date first written above which will be concurrent with the date when an authorized representative of the last party hereto executes this Agreement. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants Distributor the right of distribution hereunder and as set forth in Schedule A attached hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to Distributor hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, distribution, application or handling of the Products. 1.7 `Distributor' means Aurtech Marketing, Pty., Ltd., and any sub-distributor or subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of Distributor herein are assigned or delegated upon the prior written consent of RCAI. SECTION 2: GRANT OF EXCLUSIVE DISTRIBUTORSHIP 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints Distributor and Distributor hereby accepts the exclusive appointment to promote, distribute and provide customer service for the Products in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive right granted herein will apply provided Distributor uses its best efforts to achieve the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described in Section 4 below. 2.3 During the term hereof, Distributor will refrain from directly promoting, distributing or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory. 2.4 RCAI will use reasonable efforts to refer to Distributor any customer inquiry or order originating from Distributor's Territory and to advise Distributor of such inquiries. However, Distributor will not be liable to RCAI for compensation of any kind in the event of the sale, distribution or servicing of Products by RCAI in the Territory. 2.5 IThe rights of Distributor to promote, distribute or provide customer service for the Products include the right of sub-distribution or subcontract, upon the prior written consent of RCAI. All other rights not expressly granted in this Agreement to Distributor are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby grants Distributor the nontransferable right to use the Trademarks set forth in Schedule A hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may amend Schedule A from time to time. 3.2 Distributor will comply with all RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, Distributor will represent to customers and other third parties that Distributor is an authorized independent distributor of RCAI and the Products for the Territories. SECTION 4: MINIMUM SALES OBJECTIVE 4.1 Promptly after the Effective Date hereof, RCAI and Distributor will determine a minimum volume of sales of the Products that Distributor will aim to achieve in the first Agreement Year. RCAI will review the minimum volume of sales of the Products prior to the beginning of any successive term during which this Agreement may continue in consultation with Distributor. The minimum volume of sales for the Territory (`Minimum Sales Objective') for each Agreement Year will be set forth in Schedule B attached. 4.2 Distributor will use its best efforts to achieve the Minimum Sales Objective in any given Agreement Year. In particular, Distributor will: a) actively promote, distribute and service the Products in the Territories; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of Sections 8 and 9 hereof on training and advertising; and e) respond promptly and fully to any of RCAI's requests for information on customers or market conditions in Distributor's Territories. f) assist RCAI, when requested, in the development and testing of new products developed by RCAI SECTION 5: TERMS OF DELIVERY 5.1 Unless otherwise agreed, RCAI will deliver all Products for which it accepts purchase orders FOB designated India port, at which time and place title to the Products and risk of loss of the Products will pass to Distributor. 5.2 Distributor is responsible for all costs and risks of transportation, insurance, any import duties or other charges, sales, use or other taxes, and licenses or approvals required for the transport, import, promotion, distribution and sale of the Products in the Territory, and any loss or damage sustained. SECTION 6: TERMS OF PAYMENT 6.1 Payments made to Distributor from RCAI will reflect the prices set forth on RCAI's Price List for the Products, attached hereto as Schedule C. 6.2 RCAI may amend the Product/Price List of Schedule C from time to time, any changes to said prices to be effective upon ninety (90) days written notice by RCAI to Distributor. Any price changes will be based on increases in the cost of commodities, manufacturing and/or business operations. 6.4 If it is necessary to convert any amount paid or payable to US dollars from any other currency, the conversion will be made at the rate of exchange prevailing for the purchase of the US dollars at noon on the date when the payment was paid or became due. SECTION 7: QUALITY CONTROL, SAFETY STANDARDS 7.1 In order to ensure that a high standard of reliability, application and handling of the Products is maintained and that proper use of the Trademarks in connection with the Products is made, RCAI will exercise its rights of supervision and quality control over Distributor's provision of customer service for the Products during the term of this Agreement. 7.2 Distributor will: a) employ and maintain sufficient personnel to perform the obligations of Distributor herein and ensure their adequate training in accordance with Sections 8 and 9 hereof; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; c) furnish all market development information reasonably requested by RCAI concerning the customers of Products sold by Distributor; and d) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to Distributor's attention, of any customer complaints regarding the Products. e) advertise & publicize the Products in the Territory in accordance with any RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any training or market development assistance by RCAI. SECTION 8: LIMITED WARRANTIES FOR PRODUCTS 8.1 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the pick-up date. 8.2 RCAI's entire liability and Distributor's customers' exclusive remedy is limited to the replacement without charge, of any Products which prove not to function as intended within the warranty period. 8.3 RCAI will not be liable for the replacement of Products which, in RCAI's sole opinion, have been subjected to misuse, accident, alteration, neglect or damage. 8.4 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. SECTION 9: DISTRIBUTOR'S LIABILITY 9.1 Distributor will limit its representations on warranty with regard to the Products to correspond to the provisions of Section 11 hereof. SECTION 10: PROPRIETARY RIGHTS 10.1 Distributor on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants Distributor the rights to distribute and use pursuant to the provisions of this Agreement; and b) will refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 10.2 Promptly after Distributor learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, Distributor will notify RCAI of said unauthorized use or disclosure. 10.3 Should RCAI decide to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in the Distributor's Territory, Distributor will, upon RCAI's request, render any assistance RCAI may require, at RCAI's expense. SECTION 11: TERM AND TERMINATION 11.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of three (3) year (Initial Term). This Agreement may be renewed for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice of RCAI to Distributor. At the time of renewal Distributor will: a) have complied with its best efforts obligation to achieve the Minimum Sales Objective for the Agreement Year concerned; and b) have complied with all other obligations of this Agreement to RCAI's satisfaction. 11.2 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to Distributor, notice effective upon the date given, in the event of any one or more of the following: a) the failure of Distributor to use its best efforts to achieve the Minimum Sales Objective required hereunder. A minimum sales objective shall be mutually agreed upon commencing at the end of six (6) months from execution of this Agreement; b) Distributor's breach of any obligation concerning RCAI's proprietary rights; c) Distributor's breach of any obligation or representation, other than those of paragraphs a) and b) above; d) Distributor's assignment of this Agreement or any of rights granted hereunder by Distributor by agreement or operation of law, without the prior written consent of RCAI; f) any legal or business transaction or event which causes a change in majority ownership of Distributor and effectively results in an assignment of this Agreement to owners substantially different from the owners of Distributor at the time of execution of this Agreement without the prior written consent of RCAI; and g) any insolvency or inability of Distributor to pay debts as and when due, or the initiation or pendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of Distributor. 11.4 In the event that RCAI claims Distributor is in breach of any provision of this Agreement, it shall give six (6) months written notice of such deficiency and Distributor shall have a period of six (6) months to cure said deficiency. SECTION 12: EFFECTS OF TERMINATION 12.1 Subject to Section 15.6, upon termination, Distributor will immediately discontinue the promotion, distribution and servicing of the Products and will cease to represent itself as an authorized Distributor of RCAI. 12.2 Distributor will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, Distributor will certify destruction of Documentation. 12.3 Distributor will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 12.4 Unless termination occurs for cause, Distributor may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter shall be purchased by RCAI from Distributor at Distributor's blending cost. 12.5 Nothing herein will relieve or extinguish any of Distributor's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by Distributor, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other distributors or customers. 12.6 Distributor will offer to RCAI and RCAI may elect to assume the rights and obligations of any agreements between Distributor and its customers for the service of the Products, effective as of the date of termination or expiration. 12.7 In no event will termination or expiration with or without cause of this Agreement entitle Distributor to any compensation by RCAI on any grounds whatsoever. SECTION 13: OVERNING LAW, ARBITRATION, ATTORNEY'S FEES 13.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California, United States of America. 13.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in Orange County, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 13.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, Distributor acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against Distributor for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 13.4 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 14: GENERAL PROVISIONS 14.1 Relationship of the Parties. Nothing in this Agreement will be construed as creating a partnership or joint venture between the parties or making Distributor a shareholder, agent, employee or other representative of RCAI, but in all of its operations hereunder Distributor will be an independent contractor, conduct its business at its own cost and expense and make no representation, express or implied, that it is an employee, partner, shareholder, joint venture or other representative of RCAI. Distributor will have no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. 14.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 14.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Distributor unless prior written consent is obtained from RCAI and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Distributor is bound and Distributor remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 14.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 14.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 14.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 14.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 14.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth above, until changed by written notice. Notice shall be effective when given, provided it is given in accordance with this Section 17.8. If to RCAI: Gordon Davies RCAI 23832 Rockfield Blvd., Ste. 275 Lake Forest, CA 92630 If to Aurtech Marketing, Pty., Ltd. ---------------------- ---------------------- ---------------------- ---------------------- IN WITNESS WHEREOF, RCAI and Distributor have each caused this Agreement to be executed on its behalf by it's duly authorized officer as of the date first written above. RCAI AURTECH MARKETING, PTY., LTD. By: /s/ GORDON DAVIES By: /s/ SUNIL NEWATIA ----------------- ----------------- Gordon Davies Sunil Newatia President Managing Director EX-10 22 ex1020.txt Exhibit 10.20 DISTRIBUTORSHIP AGREEMENT THIS AGREEMENT (Agreement) is entered into this 5th day of December 2003, by and between Reclamation Consulting and Applications Inc., a Colorado, USA corporation ("RCAI") and Canadian Release Agents, Ltd., an Alberta, Canada corporation ("Distributor") RECITALS WHEREAS, RCAI manufactures and distributes the Products (as defined below) .. WHEREAS, RCAI desires to appoint Distributor to promote, market, sell, distribute and service the Products and Distributor desires to promote, market, sell, distribute and provide customer service for the Products in the Territory, defined herein below. THEREFORE, in consideration of the mutual representations, agreements and conditions contained in this Agreement, RCAI and Distributor hereby agree as follows: SECTION 1: DEFINITIONS 1.1 `Products' means asphalt, cement and related product release agents, cleaners and lubricants, in liquid form which are used in the construction and similar industries and which are sold under the Trademarks and which are non-toxic, non-explosive and environmentally compatible. New Products and markets developed and introduced by RCAI over the term of this Agreement may be sold by Distributor on a non-exclusive basis, unless otherwise agreed to in writing. 1.2 `Territory' means the entire geographic area of Canada. 1.3 `Effective Date' means the date first written above which will be concurrent with the date upon which an authorized representative of the last party to sign this Agreement does so. 1.4 `Agreement Year' means any partial or whole calendar year, commencing with the Effective Date hereof, or any such subsequent period during the continuance of this Agreement. 1.5 `Trademarks' means all trademarks, trade names, designs, logos or other protected or protectable commercial symbols used by RCAI to identify RCAI as the source of the Products to which RCAI grants Distributor the right of distribution hereunder and as set forth in Schedule A attached hereto. 1.6 `Documentation' means any promotional, advertising, technical or training materials developed and furnished by RCAI to Distributor hereunder, specifically intended for the public, including customers and potential customers and concerning the promotion, distribution, application or handling of the Products. 1.7 `Distributor' means the Distributor, and any sub-distributor or subcontractor, agent, representative, successor or assign to whom any of the rights or obligations of Distributor herein are assigned or delegated upon the prior written consent of RCAI as required under this Agreement. SECTION 2: GRANT OF EXCLUSIVE DISTRIBUTORSHIP 1 2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI hereby appoints Distributor and Distributor hereby accepts the exclusive appointment to promote, sell distribute and provide customer service for the Products under the Trademarks in the Territory under the terms and conditions of this Agreement. 2.2 The exclusive right granted herein will apply provided Distributor uses all reasonable efforts to achieve the Minimum Sales Objectives in the Territory for each Agreement Year during the term hereof as further described in Section 4 below. 2.3 During the term hereof, Contract Sales Representative will refrain from directly promoting, selling or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory without prior written consent from RCAI. 2.4 During the term hereof, Distributor will refrain from directly promoting, distributing or servicing the Products outside the Territory by soliciting orders, establishing or operating any branch or facilities for said purposes outside the Territory, or taking any other direct action to obtain customer orders outside of the Territory. 2.5 RCAI will use reasonable efforts to refer promptly to Distributor any customer inquiry or order originating from the Territory and to advise Distributor of such inquiries. However, Distributor will not be liable to RCAI for compensation of any kind in the event of the sale, distribution or servicing of Products by RCAI in the Territory. 2.6 The rights of Distributor to promote, distribute or provide customer service for the Products include the right of sub-distribution or subcontract, upon the prior written consent of RCAI such consent not to be unreasonably withheld or delayed. All other rights not expressly granted in this Agreement to Distributor are reserved to RCAI. SECTION 3: AUTHORIZED USE OF TRADEMARKS 3.1 As of the Effective Date and for the term hereof, RCAI hereby grants Distributor the nontransferable right to use the Trademarks set forth in Schedule A hereto in connection with the promotion, distribution and servicing of the Products in the Territory. RCAI may upon reasonable prior notice in writing to Distributor amend Schedule A from time to time. 3.2 Distributor will comply with all prior reasonable written RCAI requirements for affixing or using the Trademarks on or in connection with the Products. 3.3 During the term hereof, Distributor will represent to customers and other third parties that Distributor is an authorized independent distributor of RCAI and the Products for the Territory. SECTION 4: MINIMUM SALES OBJECTIVE 4.1 The parties acknowledge that the minimum volume of sales for the Territory (`Minimum Sales Objective') for each Agreement Year will be as described in Schedule B attached. 2 4.2 Distributor will use all reasonable efforts to achieve the Minimum Sales Objective in any given Agreement Year. In particular, Distributor will: a) actively promote, distribute and service the Products in the Territory; b) diligently pursue sales leads provided by RCAI; c) initiate sales programs, campaigns, surveys, promotions and advertising programs; d) comply with all provisions of this Agreement on training and advertising; and e) respond promptly and fully to any of RCAI's reasonable written requests for information on customers or market conditions in the Territory. f) reasonably assist RCAI at RCAI's expense, when requested, in the development and testing of new products developed by RCAI SECTION 5: SALES TRAINING & SUPPORT 5.1 All costs relating to sales, support, and technical training, performed by RCAI personnel, or appointed representatives will be billed to the Distributor at the rate of 50% of all reasonable and proper costs incurred by RCAI in providing the support. 5.2 All direct sales support including lead generation and sales generation performed by RCAI personnel or designated representatives and as previously agreed in writing with the Distributor will be billed for time and travel expenses at the rate of 50% of all reasonable and proper incurred costs. SECTION 6: TERMS OF DELIVERY 6.1 Unless otherwise agreed, RCAI will deliver all Products for which it accepts purchase orders CIF at which time and place title to the Products and risk of loss of the Products will pass to Distributor. 6.2 Distributor is responsible for all costs and risks of transportation, insurance, any import duties or other charges, sales, use or other taxes, and licenses or approvals required for the transport, import, promotion, distribution and sale of the Products in the Territory, and any loss or damage sustained. SECTION 7: TERMS OF PAYMENT 7.1 Payments made to RCAI from Distributor will reflect the prices set forth on RCAI's Price List for the Products, attached hereto as Schedule C. 7.2 RCAI may amend the Product/Price List of Schedule C from time to time, any changes to said prices to be effective upon ninety (90) days prior written notice by RCAI to Distributor. Any price changes will be based on increases in the cost of commodities, manufacturing and/or business operations. 7.3 If it is necessary to convert any amount paid or payable to US dollars from any other currency, the conversion will be made at the rate of exchange 3 prevailing for the purchase of the US dollars at noon on the date when the payment was paid or became due. 7.4 Distributor will tender payments to RCAI in USD either in cheque, money order, bank transfer or other unconditional methods of payment agreed by RCAI and shall pay the entire amount due for the Products upon acceptance of those Products by Distributor. SECTION 8: QUALITY CONTROL, SAFETY STANDARDS 8.1 In order to ensure that a high standard of reliability, application and handling of the Products is maintained and that proper use of the Trademarks in connection with the Products is made, RCAI will exercise in a reasonable manner its rights of supervision and quality control over Distributor's provision of customer service for the Products during the term of this Agreement. 8.2 Distributor will: a) employ and maintain sufficient personnel to perform the obligations of Distributor herein and ensure their adequate training in accordance with this Agreement; b) provide customers with adequate information and training on the safe and effective handling of the Product(s) and their applications; c) furnish all market development information reasonably requested by RCAI in writing concerning the customers of Products sold by Distributor; and d) notify RCAI by phone, confirming in writing or confirming by e-mail, as promptly as practicable after it comes to Distributor's attention, of any customer complaints regarding the Products. e) advertise & publicize the Products in the Territory in accordance with any reasonable RCAI advertising and promotional guidelines set forth in any Documentation or other materials, or as provided during any training or market development assistance by RCAI. SECTION 9: LIMITED WARRANTIES AND INDEMNIFICATION FOR PRODUCTS 9.1 RCAI hereby warrants to the Distributor:- 9.1.1 that all of the Products are completely non-hazardous, 100% bio-degradable and are made with a blend of all-natural materials and are not toxic or environmentally hazardous and that the manufacture of the Products is fully compliant with all requirements of any governmental agency in the United States or in the Territory, including specifically, but not limited to, any environmental laws. 9.1.2 that neither the sale nor use of the Products shall cause the Distributor to infringe any intellectual property rights owned or controlled by a third party. 9.1.3 that RCAI shall, at time of delivery of the Products, have legal title and rights of ownership of the Products and otherwise has all necessary rights, title and interest to grant the rights set forth herein to Distributor, 4 free of any claims, liens or conflicting rights in favor of any third parties. 9.2 RCAI hereby warrants with respect to all Products delivered to Distributor pursuant to the terms and conditions hereof that all such Products will be suitable for the applications intended, provided they are used as is intended from the date of delivery to Distributor until one (1) year from the purchase date by the end user. 9.3 Except as provided at Section 9.6 below, RCAI's entire liability and Distributor's customers' exclusive remedy is limited to either the replacement without charge, or refund of the sale price of any Products which prove not to function as intended within the warranty period. 9.4 RCAI will not be liable for the replacement of Products where it can be objectively demonstrated that those Products have been subjected to misuse, accident, alteration, neglect or damage. 9.5 The warranties provided herein are the only warranties made by RCAI and excludes all other express and implied warranties including those of merchantability and fitness of the Products for a particular purpose. 9.6 RCAI shall defend, indemnify and hold Distributor harmless from any claims, actions, costs, expenses (including reasonable Attorney's fees), losses, damages or liability incurred because of the actual or alleged violation of any regulation or law as mentioned in Section 9.1 and for any actual or alleged infringement as mentioned in Section 9.2. This indemnification shall not apply unless: 9.6.1 The Distributor shall first notify RCAI in writing of any such allegation; 9.6.2 The Distributor shall make no admissions without RCAI's consent; and 9.6.3 The Distributor shall allow RCAI to conduct and/or settle all negotiations and litigation and shall give RCAI all reasonable assistance in relation thereto (all the costs incurred or recovered in such negotiations and litigation being for RCAI's account). SECTION 10: DISTRIBUTOR'S LIABILITY 10.1 Distributor will limit its representations on warranty with regard to the Products to correspond to the provisions of this Agreement. SECTION 11: PROPRIETARY RIGHTS 11.1 Distributor on behalf of itself, its officers, employees, agents, representatives, and assigns: a) acknowledges that RCAI is the owner of all proprietary rights in the Products and the Trademarks, to which RCAI grants Distributor the rights to distribute and use pursuant to the provisions of this Agreement; and 5 b) will knowingly refrain from any unauthorized or infringing use of the Products, Trademarks or any Documentation for the term hereof and thereafter. 11.2 Promptly after Distributor learns of any suspected or actual unauthorized third party use of the Products, Trademarks or Documentation, Distributor will notify RCAI of said unauthorized use or disclosure. 11.3 Should RCAI decide to take any action to defend against or terminate said infringing or unauthorized use of its proprietary rights in the Distributor's Territory, Distributor will, upon RCAI's request, render any reasonable assistance RCAI may require, at RCAI's expense. SECTION 12: TERM AND TERMINATION 12.1 This Agreement will commence on the Effective Date hereof and will continue for an initial term of three (3) year (Initial Term). This Agreement may be renewed for one or more successive terms of 1 year each (Successive Term) by 90 days prior written notice of RCAI to Distributor. At the time of renewal Distributor will: a) have complied with its reasonable efforts obligation to achieve the Minimum Sales Objective for the Agreement Year concerned; and b) have complied with all other obligations of this Agreement to RCAI's reasonable satisfaction. 12.2 RCAI may terminate this Agreement at any time during the Initial Term or any Successive Term by giving written notice to Distributor, notice effective upon the date given, in the event of any one or more of the following: a) the failure of Distributor to use its reasonable efforts to achieve the Minimum Sales Objective required hereunder; b) Distributor's breach of any material obligation concerning RCAI's proprietary rights; c) Distributor's material breach of any obligation or representation, other than those of paragraphs a) and b) above; d) Distributor's assignment of this Agreement or any of rights granted hereunder by Distributor by agreement or operation of law, without the prior written consent of RCAI; f) any legal or business transaction or event which causes a change in majority ownership of Distributor and effectively results in an assignment of this Agreement to owners substantially different from the owners of Distributor at the time of execution of this Agreement without the prior written consent of RCAI; and 6 g) any insolvency or inability of Distributor to pay debts as and when due, or the initiation or pendency of any proceeding involving the insolvency, bankruptcy, reorganization, or liquidation of Distributor. 12.3 In the event that RCAI claims Distributor is in breach of any provision of this Agreement, it shall give three (3) months prior written notice of such deficiency and Distributor shall have a period of three (3) months from date of receipt of aforesaid notice to cure said deficiency. SECTION 13: EFFECTS OF TERMINATION 13.1 Subject to the terms of this Agreement, upon valid termination, Distributor will immediately discontinue the promotion, distribution and servicing of the Products and will cease to represent itself as an authorized Distributor of RCAI. 13.2 Distributor will further discontinue any use of RCAI's Trademarks and any Documentation. At RCAI's option, Distributor will certify destruction of Documentation. 13.3 Distributor will refrain from using any name, mark or logo which may create a likelihood of confusion with RCAI's Trademarks and will further refrain from copying in whole or in part any of the Confidential Information or Documentation. 13.4 Unless termination occurs for cause, Distributor may sell any Products remaining as of the date of termination, provided it does so within 30 days of the date of termination. All other Products remaining thereafter shall be purchased by RCAI from Distributor at either Distributor's blending cost which is the total of the raw materials cost of the Product and the labor costs to blend) or the cost of the Products. 13.5 Nothing herein will relieve or extinguish any of Distributor's payment obligations under any provision of this Agreement. Nevertheless, in the event of insolvency or refusal to pay for any reason by Distributor, RCAI may take reasonable actions to mitigate its losses by sale of the Products ordered to other distributors or customers. 13.6 Distributor will offer to RCAI and RCAI may elect to assume the rights and obligations of any agreements between Distributor and its customers for the service of the Products, effective as of the date of termination or expiration. 13.7 In no event will termination or expiration with or without cause of this Agreement entitle Distributor to any compensation by RCAI on any grounds whatsoever. SECTION 14: GOVERNING LAW, ARBITRATION, ATTORNEY'S FEES 14.1 Governing Law. This Agreement together with the Schedules hereto and any valid agreement subsequently entered into between the parties regarding the subject matter hereof will be governed and construed in accordance with the laws of California, United States of America. 14.2 Dispute Resolution. In the event of any controversy or claim arising out of or relating to this Agreement, the parties agree to try in good faith to settle the claim by mediation administered by the American Arbitration Association (`AAA') before resorting to arbitration. Any controversy or claim that cannot be resolved by mediation will be settled by arbitration administered by the AAA in Orange County, California. Judgment on the award rendered by the arbitrator will be final and may be entered in any court having jurisdiction thereof. 7 14.3 In the event of unauthorized use or disclosure of the Products, Trademarks, or Documentation, Distributor acknowledges that RCAI will be irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and obtain injunctive relief against Distributor for any harm arising from or relating to said unauthorized use or disclosure. Moreover, should the interim measures for injunctive relief under the AAA Rules prove inadequate, RCAI may seek injunctive relief, specific performance or any other equitable relief from any competent court having jurisdiction. 14.4 Attorney's Fees. In the event an action or arbitral proceeding is instituted relating to this Agreement, the party which the arbitrator or court of competent jurisdiction shall deem to have substantially prevailed therein shall be entitled to recover all costs, expenses, and attorney's fees adjudged by such arbitral tribunal or court. SECTION 15: GENERAL PROVISIONS 15.1 Relationship of the Parties. Nothing in this Agreement will be construed as creating a partnership or joint venture between the parties or making Distributor a shareholder, agent, employee or other representative of RCAI, but in all of its operations hereunder Distributor will be an independent contractor, conduct its business at its own cost and expense and make no representation, express or implied, that it is an employee, partner, shareholder, joint venture or other representative of RCAI. Distributor will have no authority to make any representation or warranty on behalf of RCAI, except as specified in this Agreement. 15.2 Force Majeure. In the event that either party is rendered wholly or partially unable to carry out its obligations under this Agreement due to reasons beyond its control (including, without limitation, acts of God, industrial disputes, war or civil disturbances, fire, floods, storms, earthquakes, landslides, acts of any governmental authority or agency, embargoes or unavailability of equipment or transport), the failure to so perform will be excused and not constitute default hereunder during the continuation of the intervention of such force majeure. The party affected shall give prompt notice to the other party, shall take all reasonable steps to eliminate the intervening event and shall resume performance as promptly as is practicable. 15.3 Assignment. This Agreement will be binding upon and inure to the benefit of RCAI, its successors and assigns. This Agreement will not be assignable or transferable by Distributor unless prior written consent is obtained from RCAI (such consent not to be unreasonably withheld or delayed) and provided that the assignee or transferee agrees in writing to be bound by all the terms, condition and obligations of this Agreement by which Distributor is bound and Distributor remains subject to the obligations on confidentiality and proprietary rights set forth herein. Any assignment of this Agreement or any rights or obligations arising therefrom without RCAI's prior written consent shall be deemed void. 15.4 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or other tribunal of competent jurisdiction, this Agreement will be considered divisible as to such provision and the remaining provisions hereof will remain valid and binding. 15.5 No Waiver. Failure or delay by either party to exercise or enforce any term, right, power or privilege of this Agreement will not operate as a waiver thereof nor will any single or partial exercise of any term, right, power or privilege preclude any other or further exercise thereof. 15.6 Entire Agreement. This Agreement, and all schedules hereto form the entire agreement of the parties hereto with respect to the subject matter 8 hereof. No modification, renewal, extension or waiver of this Agreement or any of its provisions will be binding unless made in writing and signed by each party's duly authorized representative, except as to the Schedules attached hereto, which RCAI may amend from time to time during the term hereof. 15.7 Survival. Neither termination nor expiration will affect any right or obligation of either party hereunder which by its terms continues beyond the effective date of termination or expiration. 15.8 Notices. Unless otherwise provided herein, any notice or other written communication required or permitted in connection with this Agreement will be properly given when made in writing and sent by first-class registered or certified airmail, return receipt requested, or by courier or other personal delivery service, and properly addressed to the appropriate party at the address set forth below, until changed by written notice. Notice shall be effective when given, provided it is given in accordance with this Section 15.8. If to RCAI: Gordon Davies RCAI 23832 Rockfield Blvd., Ste. 275 Lake Forest, CA 92630 If to Distributor: Bob Wolfe Canadian Release Agents, Ltd. 1720 Bow Trail SW Calgary, Alberta Canada 15.9 Third Party Rights. Except insofar as this Agreement expressly provides that a third party may in his own right enforce a term of this Agreement, a person who is not a party to this Agreement has no right to rely upon or enforce any term of this Agreement. Neither party may declare itself a trustee of the rights under this Agreement for the benefit of any third party IN WITNESS WHEREOF, RCAI and Distributor have each caused this Agreement to be executed on its behalf by it's duly authorized officer as of the date first written above. RCAI By: /s/ GORDON DAVIES By: /s/ BOB WOLFE ----------------- ------------- Gordon Davies Bob Wolfe President President 9 EX-23 23 ex231.txt Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the registration statement on Form SB-2 of Reclamation Consulting and Applications, Inc., of our report dated September 2, 2004 on our audit of the consolidated financial statements of Reclamation Consulting and Applications, Inc. as of June 30, 2004, and the results of its operations and cash flows for each of the years in two year period ended June 30, 2004, and the reference to us under the caption "Experts".. /s/ KABANI & COMPANY, INC. - ------------------------- Kabani & Company, Inc. Los Angeles, California July 26, 2005 -----END PRIVACY-ENHANCED MESSAGE-----