-----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, RblFNSaAKQ9zqkx2TGVKvawqu7ud7GgOkDCQBIIzD/2psjQcWgM5tKw64S/bKw26 1oGwGib646OhBI4ILFRc5A== 0001079372-04-000020.txt : 20040917 0001079372-04-000020.hdr.sgml : 20040917 20040917151422 ACCESSION NUMBER: 0001079372-04-000020 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20040915 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Material Modifications to Rights of Security Holders ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20040917 DATE AS OF CHANGE: 20040917 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AZTEC OIL & GAS, INC. CENTRAL INDEX KEY: 0000789606 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 870430834 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-32015 FILM NUMBER: 041035714 BUSINESS ADDRESS: STREET 1: 770 SOUTH POST OAK LANE, SUITE 435 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 713-877-9800 MAIL ADDRESS: STREET 1: 770 SOUTH POST OAK LANE, SUITE 435 CITY: HOUSTON STATE: TX ZIP: 77056 FORMER COMPANY: FORMER CONFORMED NAME: AZTEC COMMUNICATIONS GROUP INC DATE OF NAME CHANGE: 20000331 FORMER COMPANY: FORMER CONFORMED NAME: ASTERISK INC DATE OF NAME CHANGE: 19871209 8-K 1 aztecform8-k.txt CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): September 15, 2004 Aztec Oil & Gas, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Nevada 000-32015 87-0439834 - ---------------------------- ------------ ------------------ (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 770 South Post Oak Lane, Suite 435, Houston, Texas 77056 --------------------------------------------------- ------------- (Address of principal executive offices) (zip code) Issuers telephone number: (713) 877-9800 -------------- Aztec Communication Group, Inc. 3730 Kirby, Suite 1200, Houston, Texas 77098 -------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Item 1.01. Entry into a Material Definitive Agreement On September 15, 2004, the Registrant finalized a material agreement to purchase a 31.283% membership unit interest in Z2, LLC. (See Item 2.01 and Exhibit 10.5.) The Registrant entered into a Term Credit Agreement on August 12, 2004 with Hong Kong League Central Credit Union, whereby the Registrant borrowed $1,950,000 (USD) which is payable in full on July 31, 2005. This loan is subject to a ten percent per annum interest rate. The Registrant paid $100,000 origination fee for this loan, the Registrant in turn loaned $1,850,000 to Z2, LLC which owns 100 percent of the working interest in the Big Foot Oil Field, in Texas. The loan to Z2, LLC is guaranteed and secured by 51% of the share ownership in Z2, LLC. This loan agreement was contingent in acquiring a 31.283% membership unit interest in Z2, LLC by the Registrant. (See Item 2.01 below and Exhibit 10.6.) Prior to achieving the transaction(s) above, the Registrant entered into an Investment Advisory Agreement with SBI USA, LLC a California limited liability company and investment banker on July 8, 2004. Pursuant to the terms of the Investment Advisory Agreement, the Registrant engaged the services of SBI USA, LLC to provide services as an independent contractor to advise and consult with the Registrant in respect to: (i) developing a successful business plan, (ii) exploring strategic alliances, partnering opportunities and other cooperative ventures, (iii) evaluating possible acquisition and strategic partnering candidates, and marketing opportunities for the Company, (iv) the Company's business development activities, including major geographic and service expansion plans, (v) the Company's merger and acquisition strategies, including the evaluation of targets and the structuring of transactions; (vi) the Company's employee relations; and (vii) the Company's marketing strategy. This is a one year agreement. As compensation for their services, the Registrant has agreed to pay 2,900,950 shares of the Company's common stock in the form of registered S-8 stock, adjusted by future subdivisions, combinations or mergers; 50,000 shares of Series A Preferred Stock of the Company; and allow the advisor to purchase for $100.00 cash, 1,500,000 Class A, Class B, Class C and Class D Warrants exercisable at varying out-of-the money prices, adjusted by future subdivisions, combinations or mergers. (See Exhibit 10.1.) The Registrant subsequently entered into a Consulting Agreement with International Fluid Dynamics, Inc., a Texas corporation on July 22, 2004. Pursuant to the terms of the Consulting Agreement, the Registrant engaged the services of International Fluid Dynamics, Inc. as an independent contractor to advise and consult with it with respect to (i) developing successful business strategies, (ii) exploring strategic alliances, partnering opportunities and other cooperative ventures, (iii) evaluating possible acquisition and strategic partnering candidates and marketing opportunities for the Company, (iv) the Company's business development activities, including major geographic and service expansion plans, (v) the Company's acquisition strategies, including the evaluation of targets and the structuring of transactions; and (vi) the Company's product and services marketing strategy. The agreement was entered into on July 22, 2004 and ends on December 31, 2014. As compensation for such services, the Registrant agreed to provide the Consultant with cashless warrants, adjusted by future subdivisions, combinations or mergers, at out- of-the-money exercise prices as follows: a) 1,500,000 warrants with exercise price of $.75 (seventy five cents) per share b) 1,500,000 warrants per share with exercise price of $1.00 (one dollar) per share. c) 1,500,000 warrants per share with exercise price of $1.25 (one dollar twenty five cents) per share. d) 1,500,000 warrants per share with exercise price of $1.65 (one dollar sixty five cents) per share. Further, the consultant is entitled to a monthly retainer. At Consultant's sole discretion Consultant may request on any individual month's payment that the payment be made to Consultant in Company's unrestricted S-8 common stock valued against the monthly cash consulting fee due. (See Exhibit 10.2.) Item 2.01. Completion of Acquisition or Disposition of Assets The Registrant has agreed to purchase, effective September 15, 2004, a 31.283% membership unit interest in Z2, LLC, a Florida limited liability company, which 31.283% was presently owned by SBI Oil and Gas Resource Exploration, LLC, a Delaware limited liability company. Z2, LLC owns a 100% working interest in the Big Foot oil field in Texas. Under the terms of the Agreement, the Registrant will purchase a 31.283% membership unit interest in Z2, LLC through SBI Oil and Gas Resource Exploration, LLC. in return for the assumption and agreement to pay the unpaid balance of a partial units purchase price obligation in the amount of Two Hundred Sixty-Five Thousand Dollars ($265,000), owed by SBI Oil and Gas Resource Exploration, LLC to Business and Financial Consultants, LLC, a Florida limited liability company. Under the terms of the Agreement, Aztec further agrees to issue a Promissory Note, in the original principal amount of Two Hundred Fifty Thousand Dollars ($250,000) payable on or before the expiration of two years after date and convertible, at the option of the holder, into Two Hundred Fifty Thousand (250,000) shares of common stock of Aztec, plus to issue Four Hundred Thousand (400,000) shares of Aztec's restricted common stock. The restricted shares will not be registered under the Securities Act of 1933, as amended (the "Act") and will be issued in the reliance upon the exemption from registration provided by section 4(2) of the Act, on the basis that the issuance of these shares do not involve a public offering (See Exhibit 10.5). Item 3.02. Unregistered Sales of Equity Securities See Item 8.01 below. Item 3.03. Material Modifications to Rights of Security Holders On June 11, 2004, the Board of Directors approved Articles of Designation of Series A Preferred Stock. This represents a series of Preferred Stock designated as "Series A Preferred Stock," and the number of shares constituting such series shall be 100,000, par value $0.001. The shares of outstanding Series A Preferred Stock shall have the number of votes equal to seventy percent (70%) of votes of all outstanding shares of capital stock such that all the outstanding shares of Preferred Stock shall always constitute 70% of the voting rights of the Corporation, but the holders are not obliged or bound to vote together. Such Series A Preferred stock has no other extraordinary preferences. The Company's Articles of Designation is attached hereto as Exhibit 3.2 and is incorporated herein by reference. Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. Pursuant to the Definitive Information Statement on Schedule 14c, which was sent to the shareholders of the Registrant on June 25, 2004, the Registrant's Board of Directors amended Article I of the Company's Articles of Incorporation, filed effective August 26, 2004. The amended Articles include a corporate name change from Aztec Communications Group, Inc. to Aztec Oil & Gas, Inc. The Company's Certificate of Amendment to the Articles of Incorporation is attached hereto as Exhibit 3.1 and is incorporated herein by reference. Item 8.01. Other Events On September 15, 2004, the Company moved its corporate offices from 3730 Kirby, Suite 1200, Houston, Texas 77098 to 770 South Post Oak Lane, Suite 435, Houston, Texas 77056. On June 11, 2004, the Board of Directors of the Registrant approved the following resolutions: A. Change of the corporate name from Aztec Communications Group, Inc. to Aztec Oil & Gas, Inc. (See Exhibit 3.1) B. Designated Series A Preferred Stock (See Exhibit 3.2) C. Authorized the sale of 50,000 shares of Series A Preferred to Pragmatica Partners, LLC, a Delaware Limited Liability Company, for a $15,000 cash payment to Registrant's corporate law firm. D. Investment Advisory Agreement with SBI USA, LLC for (a) 2,900,950 shares of S-8 to SBI USA, LLC (to be issued to its principle). (b) Issue of Series A Preferred (c) Issue, for $100 cash, of Warrants (1,500,000, Series A, B, C, & D) each for exercisable at varying out-of-the-money prices (See Exhibit 10.1) E. Authorization of future Employment Agreement with James McCabe F. Authorization of future Employment Agreement with Richard Bednor G. Authorization of the acquisition of an interest in Z2, LLC. a Florida Limited Liability Company (See Exhibit 10.5). H. Consulting Agreement with International Fluid Dynamics, Inc. (a) Issue, for $100 cash, of Warrants (1,500,000, Series A, B, C, & D) each exercisable at varying out-of-the-money prices. (See Exhibit 10.2) I. Amend 2004 Employee Stock Award Plan (See Exhibit 10.3) J. Appointment of a Warrant Agent (See Exhibit 10.4) On August 13, 2004, the Board of Directors of the Registrant approved the following resolutions: A. A three-for-one forward common stock split. B. The number of Pre Increase Shares of the Corporation issuable upon the conversion of any outstanding securities, exercise of any warrant or option, or other right to receive shares of the Corporation be increased in the same manner as the increase in the number of Pre Increase Shares. Item 9.01. Financial Statement and Exhibits. (c) Exhibits 3.1 Certificate of Amendment to the Articles of Incorporation 3.2 Articles of Designation 10.1 Investment Advisory Agreement dated as of July 8, 2004 with SBI USA, LLC. 10.2 Consulting Agreement, dated as of July 22, 2004 with International Fluid Dynamics, Inc. 10.3 Amended 2004 Employee Stock Award Plan 10.4 Warrant Agreement dated as of August 6, 2004, between the Company and Cottonwood Stock Transfer Corporation, as warrant agent 10.5 Agreement for Sale of LLC Membership Units, dated as of September 15, 2004 10.6 Term Credit Agreement dated as of August 12, 2004, with Hong Kong League Central Credit Union SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: September 17, 2004 Aztec Oil & Gas, Inc. (f/n/a Aztec Communications Group, Inc.) By: /s/ L. Mychal Jefferson, II ------------------------------- Name: L. Mychal Jefferson, II Title: President and Chief Executive Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 3.1 Certificate of Amendment to the Articles of Incorporation 3.2 Articles of Designation 10.1 Investment Advisory Agreement dated as of July 8, 2004 with SBI USA, LLC. 10.2 Consulting Agreement, dated as of July 22, 2004 with International Fluid Dynamics, Inc. 10.3 Amended 2004 Employee Stock Award Plan 10.4 Warrant Agreement dated as of August 6, 2004, between the Company and Cottonwood Stock Transfer Corporation, as warrant agent 10.5 Agreement for Sale of LLC Membership Units, dated as of September 15, 2004 10.6 Term Credit Agreement dated as of August 12, 2004, with Hong Kong League Central Credit Union EX-3.1 2 exhibit3-1.txt AMENDED ARTICLES OF INCORPORATION Exhibit 3.1 FILED AUG 26 2004 Dean Heller Secretary of State ABOVE SPACE IS FOR OFFICE USE ONLY DEAN HELLER Secretary of State 204 North Carson Street, Suite 1 Carson City, Nevada 89701-4299 (775) 684-5708 Website: secretaryofstate.biz CERTIFICATE OF AMENDMENT (PURSUANT TO NRS 78.385 AND 78.390) Important: Read attached instructions before completing form. Certificate of Amendment to Articles of Incorporation ------------------------------------------------------ For Nevada Profit Corporations ------------------------------- (Pursuant to NRS 78.385 and 78.390 - After issuance of Stock) 1. Name of corporation: Aztec Communications Group, Inc. 2. The articles have been amended as follows (provide article numbers, if available): Article I. Name of Corporation: Aztec Oil & Gas, Inc. 3. The vote by which the stockholder holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation have voted in favor of the amendment is: 68.7% 4. Effective date of filing (optional) 5. Officer Signature (required): /s/ L. Mychal Jefferson, II ------------------------------- *If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless of limitations or restrictions on the voting power thereof. IMPORTANT: Failure to include any of the above information and submit the proper fees may cause this filing to be rejected. This form must be accompanied by appropriate fees. See attached fee schedule. EX-3.2 3 exhibit3-2.txt ARTICLES OF DESIGNATION Exhibit 3.2 Articles of Designation ARTICLES OF DESIGNATION of SERIES A PREFERRED STOCK of AZTEC OIL & GAS, INC. Pursuant to Section 78.195 of the Revised Statutes of the State of Nevada AZTEC OIL & GAS, INC., a corporation organized and existing under the laws of the State of Nevada (the "Corporation"), does hereby certify that, pursuant to the authority conferred on its board of directors (the "Board of Directors") by its articles of incorporation (the "Articles of Incorporation"), as amended, and in accordance with Section 78.195 of the Revised Statutes of the State of Nevada ("NRS"), the Board of Directors (or, as to certain matters allowed by law, a duly authorized committee thereof) adopted the following resolution establishing a series of 100,000 shares of Preferred Stock of the Corporation designated as "Series A Preferred Stock." RESOLVED, that pursuant to the authority conferred on the Board of Directors of this Corporation (the "Corporation") by the Articles of Incorporation, a series of Preferred Stock, $.001 par value, of the Corporation be and hereby is established and created, and that the designation and number of shares thereof and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions thereof are as follows: Preferred Stock 1. Designation and Amount. There shall be a series of Preferred Stock designated as "Series A Preferred Stock," and the number of shares constituting such series shall be 100,000. Such series is referred to herein as the "Preferred Stock." 2. Stated Capital. The amount to be represented in stated capital at all times for each share of Preferred Stock shall be $.001. 3. Rank. All shares of Preferred Stock shall rank pari passu with all of the Corporation's Common Stock, par value $.001 per share (the "Common Stock"), now or hereafter issued, as to distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, but not as to payment of dividends. 4. Dividends. No dividend shall be declared or paid on the Preferred Stock. 5. No Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of any series of preferred stock, having a priority on liquidation superior to that of the Preferred Stock, the holders of shares of Preferred Stock shall be entitled to participate with the Common Stock in all of the remaining assets of the Corporation available for distribution to its stockholders, ratably with the holders of Common Stock in proportion to the number of shares of Common Stock held by them, assuming for each holder of Preferred Stock on the record date for such distribution that each holder was the holder of record of the number (including any fraction) of shares of Common Stock into which the shares of Preferred Stock then held by such holder are then convertible. A liquidation, dissolution, or winding-up of the Corporation, as such terms are used in this Section 5, shall not be deemed to be occasioned by or to include any merger of the Corporation with or into one or more corporations or other entities, any acquisition or exchange of the outstanding shares of one or more classes or series of the Corporation, or any sale, lease, exchange, or other disposition of all or a part of the assets of the Corporation.. 6. Voting Rights. Except as otherwise required by law, the shares of outstanding Preferred Stock shall have the number of votes equal to seventy percent (70%) of votes of all outstanding shares of capital stock such that the holders of outstanding shares of Preferred Stock shall always constitute 70% of the voting rights of the Corporation. Except as otherwise required by law or by these Articles, the holders of shares of Common Stock and Preferred Stock shall vote as separate classes and not together. 7. No Redemption. The shares of Preferred Stock are not redeemable. 8. Conversion Provisions. The holders of Preferred Stock shall not have right to convert any or all of the shares of Preferred Stock into any other class or series of security. 9. Outstanding Shares. For purposes of these Articles of Designation, all shares of Preferred Stock shall be deemed outstanding except (i) from the date of surrender of certificates representing shares of Preferred Stock, all shares of Preferred Stock converted into Common Stock; and (ii) from the date of registration of transfer, all shares of Preferred Stock held of record by the Corporation or any subsidiary of the Corporation. 10. The Securities Act of 1933 (a) Securities Not Registered. The shares of Preferred Stock have not been registered under the Securities Act of 1933 or the laws of any state of the United States and may not be transferred without such registration or an exemption from registration. (b) Restrictive Legends. Each share of Preferred Stock and certificate for Common Stock issued upon the conversion of any shares of Preferred Stock, and each preferred stock certificate issued upon the transfer of any such shares of Preferred Stock or Common Stock (except as otherwise permitted by this Section 10), shall be stamped or otherwise imprinted with a legend in substantially the following form: "The securities represented hereby have not been registered under the Securities Act of 1933. Such securities may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act." 11. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. IN WITNESS WHEREOF, Aztec Oil & Gas, Inc. has caused this certificate to be signed by its President, and its corporate seal to be hereunto affixed and attested by its Secretary, as of the 24th day of August, 2004. AZTEC OIL & GAS, INC. [Corporate Seal] By: ------------------------------------ L. Mychal Jefferson, II, President Attest: By: ----------------------------- Monica Jefferson, Secretary ACKNOWLEDGMENT STATE OF TEXAS COUNTY OF HARRIS This instrument was acknowledged before me on August 24, 2004 by L. Mychal Jefferson, II as President and Monica Jefferson as Secretary of Aztec Oil & Gas, Inc. ____________________________ Signature of notarial officer My commission expires ______________ (Seal) EX-10.1 4 exhibit10-1.txt INVESTMENT ADVISORY AGREEMENT Exhibit 10.1 - Investment Advisory Agreement Investment Advisory Agreement THIS INVESTMENT ADVISORY AGREEMENT ("Agreement") is made and entered into effective as of July 8, 2004 (the "Effective Date") by and between Aztec Communications Group, Inc., a Nevada corporation, (the "Company"), whose address is 770 South Post Oak Lane, Suite 435, Houston, Texas 77056 and SBI USA, LLC, a California limited liability company, (the "Advisor"), whose address is 610 Newport Center Drive, Suite 1205, Newport Beach, California 92660. Recitals A. The Company wishes to engage the services of the Advisor to advise and consult with the Company on certain business and financial matters as set forth in this Agreement. B. The Advisor has extensive experience in investment banking, business and financial consulting, and entrepreneurial executive management. As a result, the Advisor has the expertise to advise and assist the Company in developing a successful business plan, and in evaluating businesses that may be likely candidates to strategically partner with the Company, on the terms and subject to the conditions set forth in this Agreement. C. The Company wishes to engage the services of the Advisor as an independent contractor to advise and consult with it with respect to (i) developing a successful business plan, (ii) exploring strategic alliances, partnering opportunities and other cooperative ventures, (iii) evaluating possible acquisition and strategic partnering candidates, and marketing opportunities for the Company, (iv) the Company's business development activities, including major geographic and service expansion plans, (v) the Company's merger and acquisition strategies, including the evaluation of targets and the structuring of transactions; (vi) the Company's employee relations; and (vii) the Company's marketing strategy; all on the terms and subject to the conditions set forth in this Agreement. D. The Advisor is willing to accept such engagement, on the terms set forth in this Agreement. Now therefore, in consideration of the foregoing recitals and the mutual covenants and obligations contained in this Agreement, including the payment of fees and other good and valuable consideration contained herein, the parties agree as follows: 1. Engagement. 1.1. Engagement. The Company hereby engages the Advisor to perform the Services, as defined and set forth in paragraph 1.4, for the Term as defined and set forth in paragraph 1.2, and the Advisor hereby accepts this engagement, on the terms and subject to the conditions set forth in this Agreement 1.2. Term. The term of the Advisor's engagement under this Agreement shall be for the period beginning on the Effective Date and ending when terminated as provided in paragraph 4 below (the "Term"). 1.3. Relationship. The relationship between the Company and the Advisor created by this Agreement is that of independent contractors, and the Advisor is not and shall not be deemed to be an employee of the Company for any purpose. 1.4. Services. The following services (the "Services") shall be rendered, from time to time by the Advisor during the Term, as the Company may request, but not to exceed 20 hours per month except at Advisor's sole discretion, solely for the Company's benefit and not for the benefit of any third party: (a) Assist management with the development of a successful business plan for the Company. (b) Explore strategic alliances, partnering opportunities and other cooperative ventures for the Company within and without the Company's present industry focus. (c) Evaluate possible acquisition and strategic partnering candidates, and marketing opportunities for the Company. (d) Evaluate the Company's business development activities, including major geographic and service expansion plans. (e) Evaluate the Company's merger and acquisition strategies, including the evaluation of targets and the structuring of transactions. (f) Evaluate the Company's employee relations. (g) Evaluate the Company's marketing strategy. (h) Advise and consult with the Company's board of directors (the "Board") and executive officers with respect to any of the above described matters. 1.5. No Capital Raising Services. The Services do not include consulting with or advising or assisting the Company, in any manner (i) in connection with the offer or sale of securities in any capital-raising transaction, or (ii) to directly or indirectly promote or maintain a market for any of the Company's securities. 1.6. No Investment Advisory or Brokerage Services; No Legal Services. The Services do not include requiring the Advisor to engage in any activities for which an investment advisor's registration or license is required under the U.S. Investment Advisors Act of 1940, or under any other applicable federal or state law; or for which a "broker's" or "dealer's" registration or license is required under the U.S. Securities Exchange Act of 1934, or under any other applicable federal or state law. Advisor's work on this engagement shall not constitute the rendering of legal advice, or the providing of legal services, to the Company. Accordingly, Advisor shall not express any legal opinions with respect to any matters affecting the Company. Advisor's work on this engagement shall not consist of effecting transactions in the Company's securities and Advisor shall not provide any securities broker-dealer services to the Company. 1.7. Location. The Company and the Advisor intend that the Services shall be rendered primarily from the Advisor's offices in Newport Beach, California and may be rendered by telephone, facsimile and e-mail communication. The Advisor understands and acknowledges it may be necessary to travel to perform the Services, and that the Advisor shall be required to do so at its own expense (the Advisor's Fee having been agreed to in consideration thereof). The Advisor shall be reasonably available by telephone to consult with the Board at regular and special meetings thereof. 1.8. Time; Non-exclusive. The Advisor shall devote as much time to the performance of the Services as is reasonably necessary, but the Advisor shall not required to devote any fixed number of hours or days to the performance of the Services. The Company recognizes that the Advisor has and will continue to have other clients and business, and agrees that this engagement is non-exclusive. 1.9. Support Staff and Facilities. The Advisor shall furnish its own support staff, office, telephone, and other facilities and equipment necessary to the performance of the Services, and the Company shall not be required to provide the Advisor with any such staff, facilities or equipment. 1.10. Confidentiality. The Advisor shall not disclose any non-public, confidential or proprietary information, including but not limited to confidential information concerning the Company's products, methods, engineering designs and standards, analytical techniques, technical information, customer information, or employee information, unless required to do so by applicable law. 2. Advisor's Fees and Expenses. 2.1. The Advisor's Fee. As the Company has minimal cash and assets at this time, the Advisor agrees to accept compensation for its services under this Agreement in the form of shares of the Company's common stock, that the board of directors of the Company has determined has a fair market value of $29,010 or $.01 per share, subject to future subdivisions, combinations or mergers, rather than in cash, on the following terms: (a) The Company shall issue and deliver to the Advisor, as a fee for its Services under this Agreement (the "Advisor's Fee") 2,900,950 shares of the Company's common stock, adjusted by future subdivisions, combinations or mergers and issued as the Advisor directs (the "Shares") which shall be fully earned and non- refundable in consideration of its execution of this Agreement. The Company shall issue the Shares in the name of Shelly Singhal, the Advisor's alter ego as that term is defined in the Amendments to Form S-8 promulgated by the Securities Exchange Commission ("SEC") Release No. 33-7646. (b) In connection with the formation of a strategic plan for 2004, the Board adopted a directors and officers stock option and stock award plan (the "Plan"). The Company filed a registration statement on Form S-8 (the "Registration Statement") with the SEC that registers the issuance of shares of common stock and options under the terms of the Plan. The Company shall issue the Advisor's Fee pursuant to and in accordance with the Plan. The certificates representing the Shares shall be free and clear of any legends or restrictions. (c) The Company shall issue instructions to its transfer agent to issue the certificates representing the Shares free and clear of any legend, restriction or stop order, and deliver the shares, so registered, to Advisor. The Company warrants that the Shares shall be freely transferable on the books and records of the Company. Nothing in this Section 2.1(c) shall affect in any way the Advisor's obligations and agreement to comply with all applicable securities laws upon resale of the Shares. (d) Additionally, the Company shall issue to Advisor immediately 50,000 shares of Series A Preferred Stock of the Company. (e) The Advisor shall purchase 1,500,000 Class A, Class B, Class C and Class D Warrants, adjusted by future subdivisions, combinations or mergers, for the cash price of $100.00. 2.2. Offset; Withholding; Taxes. The Company shall pay the Advisor's Fee to the Advisor without offset, deduction or withholding of any kind or for any purpose. The Advisor shall pay any federal, state and local taxes payable by it with respect to the Advisor's Fee. 2.3. The Advisor's Expenses. Except for expenses incurred in attending meetings of the Board such other expenses as the Company shall first expressly agree in writing to pay or reimburse to Advisor, the Advisor shall pay all expenses incurred by it in connection with its performance of the Services under this Agreement. 3. Representations, Warranties and Covenants: 3.1. Representations and Warranties of the Company. The Company represents and warrants to and covenants with the Advisor that: (a) Incorporation, Good Standing, and Due Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Nevada; has the corporate power and authority to own its assets and to transact the business in which it is now engaged and proposes to be engaged in; and is duly qualified as a foreign corporation and in good standing under the laws of each other jurisdiction in which such qualification is required. (b) Corporate Power and Authority. The execution, delivery and performance by the Company of this Agreement, including the issuance of the Warrants and the Shares have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the Company's shareholders; (ii) contravene the Company's certificate of incorporation or bylaws; (iii) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Company; (iv) result in a breach of or constitute a default under any agreement or other instrument to which the Company is a party. (c) Legally Enforceable Agreement. This Agreement is the, legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. 3.2. Representations and Warranties of the Advisor. The Advisor represents and warrants to and covenants with the Company that: (a) Power and Authority. The execution, delivery and performance by the Advisor of this Agreement, does not and will not (i) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Advisor; (ii) result in a breach of or constitute a default under any agreement or other instrument to which the Advisor is a party. (b) Power and Authority. The execution, delivery and performance by the Advisor of this Agreement, have been duly authorized by all necessary action and do not and will not (i) require any consent or approval of the Advisor's partners; (ii) contravene the Advisor's organizational documents; (iii) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Advisor; (iv) result in a breach of or constitute a default under any agreement or other instrument to which the Advisor is a party. (c) Legally Enforceable Agreement. This Agreement is the, legal, valid and binding obligation of the Advisor, enforceable against it in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. (d) Advisor: (i) is not the subject of any court order, judgment or decree, not subsequently reversed, suspended or vacated, permanently or temporarily enjoining it or her from, or otherwise limiting their involvement in any of the following activities: (A) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission ("CFT") or any associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; (B) Engaging in any type of business practice; or (C) Engaging in any activity in connection with the purchase or sale of any security or commodity, or in connection with any violation of federal or state securities laws or federal commodities laws. (ii) was not the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days its or her right to engage in any activity described in subparagraph (i) above, or to be associated with persons engaged in any such activity. (iii) was not found by a court in a civil action or by the state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended or vacated. (iv) was not found by a court in a civil action or by the CFTC to have violated any federal commodities law, and the judgment in such civil action or finding by the CFTC has not been subsequently reversed, suspended or vacated. 4. Termination. This Agreement shall be terminate at the expiration of one year from the date hereof, unless terminated sooner by mutual written agreement of the parties: 5. Confidential Information. 5.1. The parties hereto recognize that a major need of the Company is to preserve its specialized knowledge, trade secrets, and confidential information. The strength and good will of the Company is derived from the specialized knowledge, trade secrets, and confidential information generated from experience with the activities undertaken by the Company and its subsidiaries. The disclosure of this information and knowledge to competitors would be beneficial to them and detrimental to the Company, as would the disclosure of information about the marketing practices, pricing practices, costs, profit margins, design specifications, analytical techniques, and similar items of the Company and its subsidiaries. By reason of his being a Advisor to the Company, Advisor has or will have access to, and will obtain, specialized knowledge, trade secrets and confidential information about the Company's operations and the operations of its subsidiaries, which operations may extend through the United States. Therefore, Advisor recognizes that the Company is relying on these agreements in entering into this Agreement: 5.2 During and after the Term, Advisor will not use, disclose to others, or publish any inventions or any confidential business information about the affairs of the Company, including but not limited to confidential information concerning the Company's products, methods, engineering designs and standards, analytical techniques, technical information, customer information, employee information, and other confidential information acquired by him in the course of his past or future services for the Company. Advisor agrees to hold as the Company's property all memoranda, books, papers, letters, formulas and other data, and all copies thereof and therefrom, in any way relating to the Company's business and affairs, whether made by him or otherwise coming into his possession, and on termination of his employment, or on demand of the Company, at any time, to deliver the same to the Company within twenty four hours of such termination or demand. 5.3 During the Term, Advisor will not induce any employee of the Company to leave the Company's employ or hire any such employee (unless the Board of Directors of the Company shall have authorized such employment and the Company shall have consented thereto in writing). 6. General Provisions. 6.1. Entire Agreement; Modification; Waivers. This Agreement contains the entire agreement of the parties, and supersedes any prior agreements with respect to its subject matter. There are no agreements, understandings or arrangements of the parties with respect to the subject matter of this Agreement that are not contained herein. This Agreement shall not be modified except by an instrument in writing signed by the parties. No waiver of any provision of this Agreement shall be effective unless made in writing and signed by the party making the waiver. The waiver of any provision of this Agreement shall not be deemed to be a waiver of any other provision or any future waiver of the same provision. 6.2. Notices. All notices given under this Agreement shall be in writing, addressed to the parties as set forth below, and shall be effective on the earliest of (i) the date received, or (ii) on the second business day after delivery to a major international air delivery or air courier service (such as Federal Express or Network Couriers): If to the Company: If to the Advisor: Aztec Communications Group, Inc. SBI USA, LLC 3730 Kirby, Suite 1200 610 Newport Center Drive Houston, Texas 77098 Suite 1205 Attention: L. Mychal Jefferson Newport Beach, CA 92660 Chairman & CEO 6.3. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California; provided, however, that if any provision of this Agreement is unenforceable under such law but is enforceable under the laws of the State of Nevada, then Nevada law shall govern the construction and enforcement of that provision. 6.4. Jurisdiction and Venue. The courts of the State of California sitting in Orange County (the "Orange County Court") shall have exclusive jurisdiction to hear, adjudicate, decide, determine and enter final judgment in any action, suit, proceeding, case, controversy or dispute, whether at law or in equity or both, and whether in contract or tort or both, arising out of or related to this Agreement, or the construction or enforcement hereof or thereof (any such action, suit, proceeding, case, controversy or dispute, a "Related Action"). The Company and the Advisor hereby irrevocably consent and submit to the exclusive personal jurisdiction of the Orange County Courts to hear, adjudicate, decide, determine and enter final judgment in any Related Action. The Company and the Advisor hereby irrevocably waive and agree not to assert any right or claim that it is not personally subject to the jurisdiction of the Orange County Courts in any Related Action, including any claim of forum non conveniens or that the Orange County Courts are not the proper venue or form to adjudicate any Related Action. If any Related Action is brought or maintained in any court other than the Orange County Courts, then that court shall, at the request of the Company or the Advisor, dismiss that action. The parties may enter a judgment rendered by the Orange County Courts under this Agreement for enforcement in the courts of Nevada and the party against whom such judgment is taken will not contest the authority of such courts to enforce such a judgment. 6.5 Waiver of Jury Trial. The Company and the Advisor hereby waive trial by jury in any Related Action. 6.6 Attorney's Fees. The prevailing party in any Related Action shall be entitled to recover that party's costs of suit, including reasonable attorney's fees. 6.7 Binding Effect. This Agreement shall be binding on, and shall inure to the benefit of the parties and their respective successors in interest. 6.8 Construction, Counterparts. This Agreement shall be construed as a whole and in favor of the validity and enforceability of each of its provisions, so as to carry out the intent of the parties as expressed herein. Heading are for the convenience of reference, and the meaning and interpretation of the text of any provision shall take precedence over its heading. This Agreement may be signed in one or more counterparts, each of which shall constitute an original, but all of which, taken together shall constitute one agreement. A faxed copy or photocopy of a party's signature shall be deemed an original for all purposes. In Witness Whereof, the parties have executed this Agreement effective as of the Effective Date The Compaany: The Advisor: AZTEC COMMUNICATIONS GROUP, INC. SBI USA, LLC By ____________________________ By: ____________________ L. Mychal Jefferson Name: Chairman & CEO Title: EX-10.2 5 exhibit10-2.txt CONSULTING AGREEMENT Exhibit 10.2 Consulting Agreement Consulting Agreement THIS CONSULTING AGREEMENT ("Agreement") is made and entered into effective as of July 22, 2004 (the "Effective Date") by and between Aztec Communications Group, Inc., a Nevada corporation (the "Company"), whose address is 3730 Kirby, Suite 1200, Houston, Texas 77098 and International Fluid Dynamics, Inc. ("Consultant"), a Texas corporation, whose address is One Riverway, Suite 1700, Houston, Texas 77056. Recitals -------- A. The Company is a public corporation seeking to engage in the oil and gas business. B. The Company wishes to engage the services of the Consultant to advise and consult with the Company on certain business and financial matters as set forth in this Agreement. C. The Consultant has extensive experience in investment banking, business and financial consulting, and entrepreneurial executive management advice. As a result, the Consultant has the expertise to advise and assist the Company in developing business strategies and plans, and in evaluating businesses that may be likely candidates to strategically partner with the Company or become clients of the Company D. The Company wishes to engage the services of the Consultant as an independent contractor to advise and consult with it with respect to (i) developing successful business strategies, (ii) exploring strategic alliances, partnering opportunities and other cooperative ventures, (iii) evaluating possible acquisition and strategic partnering candidates and marketing opportunities for the Company, (iv) the Company's business development activities, including major geographic and service expansion plans, (v) the Company's acquisition strategies, including the evaluation of targets and the structuring of transactions; and (vi) the Company's marketing strategy; all on the terms and subject to the conditions set forth in this Agreement. E. The Consultant is willing to accept such engagement on the terms set forth in this Agreement. Now therefore in consideration of the foregoing recitals and the mutual covenants and obligations contained in this Agreement, including the payment of fees and other good and valuable consideration contained herein the parties agree as follows: 1. Engagement: 1.1. Engagement. The Company hereby engages the Consultant to perform the Services, as defined and set forth. in paragraph 1.4, for the Term as defined and set forth in paragraph 1.2, and the Consultant hereby accepts this engagement, on the terms and subject to the conditions set forth in this Agreement 1.2. Term. The term of the Consultant's engagement under this Agreement for all services, save and except those related to commissions as provided in section 2.3 hereof, shall be for the period beginning on January 1, 2005 and ending on December 31, 2014 (the "Term"), unless sooner terminated as provided in paragraph 4 below, or unless extended by mutual, written consent of the parties hereto. 1.3. Relationship. The relationship between the Company and the Consultant created by this Agreement is that of independent contractor as regards the Consultant, and the Consultant is not, and shall not be deemed to be, an employee or agent of the Company for any purpose. 1.4. Services. The following services (the "Services") shall be rendered, from time to time by the Consultant during the Term as the Company may request, solely for the Company's benefit and not for the benefit of any third party: (a) Assist management with the development of successful strategies for the Company. (b) Assist in exploring strategic alliances, partnering opportunities and other cooperative ventures for Company, within and without Company's present industry focus. (c) Assist in evaluating possible acquisition and strategic partnering candidates, and marketing opportunities for the Company. (d) Assist in evaluating the Company's business development activities, including major geographic and service expansion plans. (e) Assist in evaluating the Company's acquisition strategies, including, assisting in the evaluation of targets and the structuring of transactions. (f) Assist in evaluating the Company's marketing strategy. (g) Advise and consult with the Company's board of directors (the "Board") and executive officers with respect to any of the above described matters. 1.5 No Capital Raising Services. The Services do NOT include consulting with or advising or assisting the Company, in any manner (i) in connection with the offer or sale of securities in any capital-raising transaction, or (ii) to directly or indirectly promote or maintain a market for any of the Company's securities. 1.6. No Investment Advisory or Brokerage Services; No Legal Services. The Services do not include requiring the Consultant to engage in any activities for which an investment advisor's registration or license is required under the U.S. Investment Advisors Act of 1940, or under any other applicable federal or state law; or for which a "broker's" or "dealer's" registration or license is required under the U.S. Securities Exchange Act of 1934, or under any other applicable federal or state law. Consultant's work on this engagement shall not constitute the rendering of legal advice, or the providing of legal services, to the Company or any other person or entity. Accordingly, Consultant shall not, nor shall Company request of Consultant to, express any legal opinions or give legal advice with respect to any matter, including matters relating to, or affecting, the Company. Consultant's work on this engagement shall not consist of effecting transactions in the Company's securities regarding capital-raising transactions, etc. or the promotion or maintenance of a market for the Company's Securities, and Consultant shall not provide, or be requested to provide, any securities broker-dealer services to the Company. 1.7. Location. The Company and the Consultant intend that the Services shall be rendered primarily from the Consultant's offices and may be rendered by telephone and e-mail communication. The Consultant understands and acknowledges it may be necessary to travel to perform the Services, and that the Consultant shall only do so at Company's sole expense. The Consultant will, if requested by the Company, and at the Company's expense, attend meetings of the Company's Board at reasonable times for the Consultant. The Consultant will be reasonably available by telephone to consult with the Board at regular and special meetings thereof 1.8. Time; Non-exclusive. The Consultant shall devote as much time to the performance of the Services as is reasonably necessary in Consultant's sole discretion, but the Consultant shall not be required to devote any fixed number of hours or days to the performance of the Services. The Company recognizes that the Consultant has and will continue to have other clients and business, and agrees that this engagement is non-exclusive. Company also acknowledges that Consultant has been providing substantial consulting services to Company prior to the date of this Agreement for which Consultant has not been compensated. It is contracted and agreed that part of the compensation hereunder is in consideration for said prior advice and services, and that all of the benefits and protection provided hereunder to Consultant extends fully to such prior advice and services. 1.9. Support Staff and Facilities. The Consultant shall furnish its own support, office, telephone, and other facilities and equipment necessary to the performance of the Services, and the Company shall not be required to provide the Consultant with any such staff, facilities or equipment unless special requests are made of Consultant and special compensation arranged by Company for Consultant. 1.10. Confidentiality. The Consultant shall not disclose any non-public, confidential or proprietary information, which confidential information is more specifically outlined in Section 5 hereof, concerning the Company's products, methods, engineering designs and standards, analytical techniques, technical information, customer information, or employee information, unless required to do so by applicable law. The same foregoing confidentialities are agreed, granted, guaranteed and shall be continually afforded to Consultant by Company; its officers, directors, employees and agents. 2. Consultant's Fee(s) and Expenses: As Consultant has already provided substantial consulting for Company, Consultant's fees shall be divided into three categories. Consultant shall be compensated with a set number of warrants for common shares of Company stock, plus a cash monthly retainer for the Term of this Agreement, plus commissions for certain business, if any, which Consultant causes company to participate in or obtain, all more specifically outlined as follows: 2.1. Warrants. Upon payment of $100.00 cash to the Company by Consultant, which payment is acknowledged as being paid and received simultaneously with execution of this Agreement, Company shall immediately issue warrants for shares of restricted common stock of Company to Consultant or Consultant's designees and such shares shall have "piggy back" registration rights in any future registration(s) by Company plus demand registration rights after the expiration of six (6) months after each and every exercise, if not sooner registered. The value of the total of all such warrant shares are declared and agreed to presently be $100.00 plus such warrants shall have "cashless" exercise rights, total due to the warrants' restricted nature and the fact that their exercise price far exceeds any present or foreseeable market for Company's shares. Such warrants shall have a five (5) year term, shall be exercisable in whole, or parts, and shall be in amounts and exercise prices as follows: A. 1,500,000 warrants with exercise price of $.75 (seventy five cents) B. 1,500,000 warrants per share with exercise price of $1.00 (one dollar) per share. C. 1,500,000 warrants per share with exercise price of $1.25 (one dollar twenty five cents) per share. D. 1,500,000 warrants per share with exercise price of $1.65 (one dollar sixty five cents) per share. 2.2. Monthly Retainer. Consultant shall be paid monthly retainers, in cash, in the amounts and within the dates set out below each on the first day of each month, beginning January 1, 2005, with the last retainer being due December 31, 2014, unless extended thereafter by mutual consent. All such retainers shall be considered earned, but not paid, or received, at the Effective Date of this Agreement. The retainers shall be as follows: (A) $10,000 (Ten Thousand & 00/Dollars) per month beginning on January 1, 2005 through December 2007. (B) $12,500 (Twelve Thousand Five Hundred & 00/XX) Dollars) per month beginning on, January 1, 2007 through December, 2010. (C) $15,000 (Fifteen Thousand & 00/XX Dollars) per month beginning on, January 1, 2011 through December 2014. At Consultant's sole discretion Consultant may request on any individual month's payment that the payment be made to Consultant in Company's unrestricted S-8 common stock valued against the monthly cash consulting fee due. For purposes of determining the number of shares due Consultant in lieu of cash, the S8 stock shall be valued at 75% of the average closing, public market price for the Company's common stock for the five (5) trading days precedent to the day (the first of each month) that the monthly consulting payment is due. The foregoing 75% average price per share shall be divided into the monthly consulting fee due and said shares delivered to consultant within 10 calendar days of the date each monthly consulting fee is due. Consultant shall give Company notice of Consultant's election to take S8 stock in lieu of cash payments a minimum of 2 days before any one or more payments are due Consultant. If notice of such election covers more than one month's payment such election may be revoked by Consultant at any time for payments not already received by Consultant at the time of revoking the election. Any revoking of such an election does not impair Consultant's right to elect to receive stock in lieu of cash at any time(s) in the future. Nothing herein shall preclude cumulative payments at Consultant's sole discretion, or cash and/or stock prepayments at Company's election with Consultant's written agreement. 2.3. Commissions. Consultant, or its designee(s) shall be paid a commission(s) equal to 5% (five percent) of any and all payments received Directly or indirectly by Company, its successors, assigns, affiliates, subsidiaries, etc., from any contracts, business arrangements, affiliations or the like, which are reasonably, directly or indirectly, the result or continuance of an introduction, revealing or referral made by Consultant to, or in behalf of, Company. Such commission(s), if any, shall be earned and due and payable to Consultant, or its designee(s), for any compensatable event(s) reasonably includable hereunder for a period of five (5) years from the inception of any initial payment(s), in whatever form, received by Company for, or from, the specific related event, person, entity or customer, and shall apply to all contracts and payments which are reasonably included hereunder, including those for which payments to Company do not begin until after the termination of this Agreement. In further definition and agreement, Company, hereby irrevocably agrees not to circumvent, avoid, bypass, or obviate International Fluid Dynamics, Inc. its successors in interest, and/or its affiliated persons, companies or designee(s) (collectively "IFD") directly or indirectly to avoid payment/collection of fees, commissions or interests in any transaction with any corporation, partnership or individual introduced, referred or revealed by IFD to the Company with the intent of creating the possibility of a business/financial transaction in connection with any project(s), purchase(s), sale(s), contract(s), agreement(s), rollover(s), etc. or third party assignments thereof, and any renewals or extensions thereof. 2.4. Offset; Withholding; Taxes. The Company shall pay the Consultant's Fee to the Consultant without offset, deduction or withholding of any kind or for any purpose. The Consultant shall pay any federal, state and local taxes payable by it with respect to the Consultant's Fee(s) or Commissions. 2.5. The Consultant's Expenses. Company shall reimburse Consultant for all reasonable expenses, outside of Consultant's normal office expenses, incurred by Consultant in rendering services hereunder requested by Company. 3. Representations, Warranties and Covenants: 3.1. Representations and Warranties of the Company. The Company represents and warrants to and covenants with the Consultant that: (a) Incorporation, Good Standing, and Due Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Nevada; has the corporate power and authority to own its assets and to transact the business in which it is now engaged and in which it proposes to be engaged; and is duly qualified as a foreign corporation and in good standing under the laws of Texas and of each other jurisdiction in which such qualification is required. (b) Corporate Power and Authority. The execution, delivery and performance by the Company of this Agreement have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the Company's shareholders, or any other body, entity or person; (ii) contravene the Company's certificate of incorporation or bylaws; (iii) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree determination or award presently in effect having applicability to the Company; (iv) result in a breach of or constitute a default under any agreement or other instrument to which the Company is a party. (c) Legally Enforceable Agreement. This Agreement is the, legal, valid and binding obligation of the Company, enforceable against it, its successors, assigns, etc. in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. 3.2. Representations and Warranties of the Consultant. The Consultant represents and warrants to and covenants with the Company that: (a) Power and Authority. The execution, delivery and performance by the Consultant of this Agreement, does not and will not (i) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Consultant, (ii) result in a breach of or constitute a default under any agreement or other instrument to which the Consultant is a party. (b) Corporate Power and Authority. The execution, delivery and performance by the Consultant of this Agreement, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the Consultant's stockholders, or any other body, entity or person; (ii) contravene the Consultant's charter or bylaws; (iii) violate any provision of any law, rule, regulation., order, writ, judgment, injunction., decree, determination or award presently in effect having applicability to the Consultant; (iv) result in a breach of or constitute a default under any agreement or other instrument to which the Consultant is a party. (c) Legally Enforceable Agreement. This Agreement is the, legal, valid and binding obligation of the Consultant, enforceable against it in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. (d) The Consultant is an accredited investor as defined in SEC Rule 501 (a). (e) The Consultant has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the election to receive part of the Consultant's Fee in the form of the shares of Company, rather than in cash. (f) Consultant: (i) is not the subject of any court order, judgment or decree, not subsequently reversed, suspended or vacated, permanently or temporarily enjoining it or him from, or otherwise limiting his involvement in any of the following activities subject to proper licensing: (A) Acting as a futures commission merchant introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission ("CFTC") or any associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; (B) Engaging in any type of business practice, or (C) Engaging in any activity in connection with (the purchase or sale of any security or commodity, or in connection with any violation of federal or state securities laws or federal commodities laws. (ii) was not the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days its right to engage in any activity described in subparagraph (i) above, or to be associated with persons engaged in any such activity. (iii) was not found by a court in a civil action or by the Securities and Exchange Commission ("SEC") to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended or vacated. (iv) was not found by a court in a civil action or by the CFTC to have violated any federal commodities law, and the judgment in such civil action or finding by the CFTC has not been subsequently reversed, suspended or vacated. 4. Termination: 4.1. This Agreement may not be terminated prior to the expiration of the Term except by written, specific mutual consent of the parties hereto. 5. Confidential Information: 5.1. The parties hereto recognize that a major need of the Company and the Consultant is to preserve their respective specialized knowledge, trade secrets, and confidential information. The strength and good will of the Company and Consultant are derived from the specialized knowledge, trade secrets, and confidential information generated from experience with the activities undertaken by the Company and Consultant and their subsidiaries and Consultant's affiliates. The disclosure of this information and knowledge to competitors would be beneficial to them and detrimental to the Company or Consultant as would the disclosure of information about the marketing practices, pricing practices, costs, profit margins, design specifications, analytical techniques, customer lists, contacts, suppliers, subcontractors and similar items or assets of the Company or Consultant and their subsidiaries. By reason of Consultant being a consultant to the Company and Company being a client of Consultant, Consultant and/or Company has or will have access to, and will obtain, specialized knowledge, trade secrets and confidential information (but not necessarily "insider" information) about the Company's and/or Consultant's operations and the operations of their subsidiaries, wherever located; therefore, Consultant and Company each recognizes that the other is relying on the warranties, representations and agreements of the other in entering into this Agreement including the agreement not to disclose Confidential Information. 5.2. During the Term, Consultant will not induce any employee of the Company to leave the Company's employ or hire any such employee (unless the Board of Directors of the Company shall have authorized such employment and the Company shall have consented thereto in writing). Likewise Company shall not directly or indirectly use, employ, hire or contract with any of Consultant's subcontractors, employees, contractors, affiliates, sources or service providers without the specific written consent of Consultant for each such individual event, person, entity or occurrence. 6. General Provisions: 6.1 Entire Agreement; Waivers. This Agreement contains the entire agreement of the parties, and supersedes any prior agreements with respect to its subject matter. There are no agreements, understandings or arrangements of the parties with respect to the subject matter of this Agreement that are not contained herein. This Agreement shall not be modified except by a specific, written, signed by the parties. No waiver of any provision of this Agreement shall be effective unless made in writing and signed by the party making the waiver. The waiver of any provision of this Agreement shall not be deemed to be a waiver of any other provision or any future waiver of the same provision, 6.2. Notices. All notices given under this Agreement shall be in writing, addressed to the parties as set forth below, and shall be effective on the earliest of (i) the date received or (ii) on the second business day after delivery to a major international air delivery or air courier service (such as but not limited to, Federal Express or to the U.S. Post Office via registered mail, return receipt.): If to the Company: If to the Consultant: Aztec Communication Group, Inc. (At the address below the signature hereto.) c/o Sonfield & Sonfield 770 South Post Oak Lane, Suite 435 Houston, Texas 77056 6.3. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas; provided, however, that if any provision of this Agreement is unenforceable under such law but is enforceable under the laws of the State of domicile of Company then that domicile state law shall govern the construction and enforcement of that provision. 6.4. Jurisdiction and Venue. Subject to subsection 6.3. hereof, the courts of the State of Texas shall have exclusive jurisdiction to hear, adjudicate, decide, determine and enter final judgment in any action., suit, proceeding, case, controversy or dispute, whether at law or in equity or both, and whether in contract or tort or both, arising out of or related to this Agreement, or the construction or enforcement hereof or thereof ("Related Action"). The Company and the Consultant hereby irrevocably consent and submit to the exclusive personal jurisdiction of the Texas Courts to hear, adjudicate, decide, determine and enter final judgment in any Related Action. The Company and the Consultant hereby irrevocably waive and agree not to assert any right or claim that it is not personally subject to the jurisdiction of the Texas Courts in any Related Action, including any claim of forum non conveniens or that the Texas Courts are not the proper venue or form to adjudicate any Related Action. If any Related Action is brought or maintained in any court other than the Texas Courts; other than as provided in subsection 6.3. hereof, then that court shall, at the separate, unilateral request of the Company or the Consultant dismiss that action. The parties may enter a judgment rendered by the Texas Courts under this Agreement for enforcement in the courts of Company's state of domicile, or any other state or sovereignty, and the party against whom such judgment is taken will not contest the authority of such courts to enforce such a judgment. 6.5. Waiver of Jury Trial. The Company and the Consultant hereby waive trial by jury in any Related Action., unless mutually agreed in specific writing to submit to a jury trial. 6.6. Attorney's Fees. The prevailing party in any Related Action shall be entitled to recover that party's costs of suit, including reasonable attorney's fees. 6.7. Binding Effect. This Agreement shall be binding on, and shall inure to the benefit of the parties and their respective successors in interest. 6.8. Construction, Counterparts. This Agreement shall be construed as a whole and in favor of the validity and enforceability of each of its provisions, so as to carry out the intent of the parties as expressed herein. Headings are for the convenience of reference, and the meaning and interpretation of the text of any provision shall take precedence over its heading. This Agreement may be signed in one or more counterparts, each of which shall constitute an original, but all of which, taken together shall constitute one agreement. A faxed copy or photocopy of a party's signature shall be deemed an original for all purposes. 6.9. Advisory. Any and all suggestions, opinions or advice given Company, its successor(s) or acquirer(s) by Consultant are advisory only and the ultimate responsibility, liability and decision regarding any action(s) taken or decisions made lies solely with Company, its successor(s) or acquirer(s) and not with Consultant. 6.10. Disclaimer of Responsibility for Acts of the Company. The obligations of the Consultant described in this Agreement consist solely of the furnishing of information and advice to the Company in the form of suggestions and services. In no event shall Consultant be required to act in behalf of, or as an agent for, or represent or make management decisions for the Company, nor shall Consultant do so. All final decisions with respect to acts and omissions of the Company or any affiliates and subsidiaries, shall be solely those of the Company or such affiliates and subsidiaries, and Consultant shall under no circumstances be liable for any direct or indirect expense or cost incurred, or loss suffered, by the Company, its shareholders, or any other entity or party as a consequence of such acts or omissions, and Company shall so indemnify Consultant from any and all such expense, cost and liability. 6.11. Indemnity by the Company. The Company shall protect, defend, indemnify and hold Consultant and its assigns and attorneys, accountants, agents, consultants, employees, officer and directors harmless from and against all losses, liabilities, damages, judgments, claims, counterclaims, demands, actions, proceedings, cost and expenses (including reasonable attorneys' fees) of every kind and character resulting from, relating to or arising out of (a) the suggestions and advice provided by Consultant pursuant to this Agreement, (b) the inaccuracy, non-fulfillment or breach of any representation warranty, covenant or agreement made by the Company; or (c) any legal action, including any counterclaim, representation, warranty, covenant or agreement made by the Company or any third party; (d) negligent or willful misconduct, occurring during the term hereof, or thereafter, with respect to any decisions made by the Company; or (e) any action by third parties. 6.12. Waiver of Breach. Any waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by any party. 6.13. Assignment. This Agreement and the rights and obligations of the Consultant hereunder shall be assignable by Consultant to a successor of Consultant and the Company does acknowledge that Consultant will use outside sources and consultants to perform some of its services and obligations hereunder. Nothing herein shall preclude Consultant from assigning or pledging it proceeds hereunder or designating some other entity or person to be paid any monies or shares due Consultant hereunder. 6.14. Licensing. Nothing contained herein shall require Consultant, or its officers or principals, to be licensed by any agency or body or to engage in practices or activities which violate any law(s), regulations or statutes. 6.15. Consultant cannot guarantee the results or effectiveness of any of the advice or services rendered or to be rendered by Consultant hereunder. Rather, Consultant shall use its best efforts to conduct its services and affairs in a professional manner and in accordance with good industry practice. 6.16 Time, Place and Manner of Performance. The Consultant shall be available for advice and counsel to the officers and directors of the Client at such reasonable and convenient times and places as may be mutually agreed upon. As aforesaid, the time, place and manner of performance of the services hereunder, including the amount of time to be allocated by the Consultant to any specific service, shall be determined at sole discretion of the Consultant unless contrary arrangements are made and agreed in specific writing and for additional compensation to Consultant. 6.17. Currency. All references to currency in this Agreement are to United States Dollars, 6.18. Review of Agreement. Each party acknowledges that it has had time to review this Agreement and, as desired, consult with legal and/or other counsel. In the interpretation of this Agreement, no adverse presumption shall be made against any party on the basis that it has prepared, or participated in the preparation of, this Agreement. 6.19. Survival of Representations, Warranties and Covenants. Unless otherwise specifically indicated otherwise, all representations, warranties and covenants contained herein or made pursuant to this Agreement, including those in Section 2 hereof, shall survive and shall continue in full force and effect to the extent necessary to effectuate the purposes of this Agreement. In witness whereof, the parties have executed this Agreement effective as of the Effective Date The Company: The Consultant: Aztec Communications Group, Inc. International Fluid Dynamics, Inc. By By: - ------------------------------- -------------------------- L. Mychal JeffersonPresident Franklin C. Fisher, Jr. President & Director President Address: Address: One Riverway Suite 1700 Houston, Texas 77056 713-840-6322 "DISCLOSURE" Franklin C. Fisher, Jr. is a licensed Texas attorney who performs consulting and other work for International Fluid Dynamics, Inc. (IFD) in his capacity as an officer and consultant, and not as an attorney. Mr. Fisher may, or will, have contact with Aztec Communication Group, Inc., or its successor or acquirer (collectively "Company") and/or its/their officers, directors, employees and agents. It is clearly understood, agreed and acknowledged that Mr. Fisher does not represent IFD or Company or any of their respective officers, directors, employees or agents as an attorney, nor will Mr. Fisher be giving legal advice to, or performing any function for, IFD or Company, or any of their respective officers, directors, employees or agents, as an attorney, but Mr. Fisher shall be acting only in his capacity as an officer of IFD and/or as a business consultant. Nothing contained herein shall prevent Mr. Fisher from acting for IFD as an attorney in the future, if he so chooses and such representation is controlled by separate, specific agreement between Mr. Fisher, in his capacity as an attorney, and IFD. Please sign below to acknowledge this disclosure and your waiver of any potential conflict of interests or other claims. Very Truly Yours, - ----------------------- Franklin C. Fisher, Jr. Aztec Communications Group, Inc. By: --------------------------- Mychal Jefferson, President EX-10.3 6 exhibit10-3.txt AMENDED 2004 EMPLOYEE STOCK AWARD PLAN Exhibit 10.3 Amended 2004 Employee Stock Award Plan Aztec Communications Group, Inc. 2004 DIRECTORS, OFFICERS AND CONSULTANTS STOCK OPTION, STOCK WARRANT AND STOCK AWARD PLAN SECTION 1. PURPOSE OF THE PLAN. The purpose of the 2004 Directors, Officers and Consultants Stock Option, Stock Warrant and Stock Award Plan ("Plan") is to maintain the ability of Aztec Communications Group, Inc., a Nevada corporation (the "Company") and its subsidiaries to attract and retain highly qualified and experienced directors, employees and consultants and to give such directors, employees and consultants a continued proprietary interest in the success of the Company and its subsidiaries. In addition the Plan is intended to encourage ownership of common stock, $.001 par value ("Common Stock"), of the Company by the directors, employees and consultants of the Company and its Affiliates (as defined below) and to provide increased incentive for such persons to render services and to exert maximum effort for the success of the Company's business. The Plan provides eligible employees and consultants the opportunity to participate in the enhancement of shareholder value by the grants of warrants, options, restricted common or convertible preferred stock, unrestricted common or convertible preferred stock and other awards under this Plan and to have their bonuses and/or consulting fees payable in warrants, restricted common or convertible preferred stock, unrestricted common or convertible preferred stock and other awards, or any combination thereof. In addition, the Company expects that the Plan will further strengthen the identification of the directors, employees and consultants with the stockholders. Certain options and warrants to be granted under this Plan are intended to qualify as Incentive Stock Options ("ISOs") pursuant to Section 422 of the Internal Revenue Code of 1986, as amended ("Code"), while other options and warrants and preferred stock granted under this Plan will be nonqualified options or warrants which are not intended to qualify as ISOs ("Nonqualified Options"), either or both as provided in the agreements evidencing the options or warrants described in Section 5 hereof and shares of preferred stock. As provided in the designation described in Section 7. Employees, consultants and directors who participate or become eligible to participate in this Plan from time to time are referred to collectively herein as "Participants". As used in this Plan, the term "Affiliates" means any "parent corporation" of the Company and any "subsidiary corporation" of the Company within the meaning of Code Sections 424(e) and (f), respectively. SECTION 2. ADMINISTRATION OF THE PLAN. (a) Composition of Committee. The Plan shall be administered by the Board of Directors of the Company (the "Board"). When acting in such capacity the Board is herein referred to as the "Committee," which shall also designate the Chairman of the Committee. If the Company is governed by Rule 16b-3 promulgated by the Securities and Exchange Commission ("Commission") pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act"), no director shall serve as a member of the Committee unless he or she is a "disinterested person" within the meaning of such Rule 16b-3. (b) Committee Action. The Committee shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum, and all determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by a majority of the members shall be fully as effective as if it had been made by a majority vote of its members at a meeting duly called and held. The Committee may designate the Secretary of the Company or other Company employees to assist the Committee in the administration of the Plan, and may grant authority to such persons to execute award agreements or other documents on behalf of the Committee and the Company. Any duly constituted committee of the Board satisfying the qualifications of this Section 2 may be appointed as the Committee. (c) Committee Expenses. All expenses and liabilities incurred by the Committee in the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons. SECTION 3. STOCK RESERVED FOR THE PLAN. Subject to adjustment as provided in Section 5(d)(xiii) hereof, the aggregate number of shares that may be optioned, subject to conversion or issued under the Plan is 15,000,000 shares of Common Stock, warrants, options, preferred stock or any combination thereof. The shares subject to the Plan shall consist of authorized but unissued shares of Common Stock and such number of shares shall be and is hereby reserved for sale for such purpose. Any of such shares which may remain unsold and which are not subject to issuance upon exercise of outstanding options or warrants or conversion of outstanding shares of preferred stock at the termination of the Plan shall cease to be reserved for the purpose of the Plan, but until termination of the Plan or the termination of the last of the options or warrants granted under the Plan, whichever last occurs, the Company shall at all times reserve a sufficient number of shares to meet the requirements of the Plan. Should any option or warrant expire or be cancelled prior to its exercise in full, the shares theretofore subject to such option or warrant may again be made subject to an option, warrant or shares of convertible preferred stock under the Plan. Immediately upon the grant of any option, warrant, shares of preferred stock or award, the number of shares of Common Stock that may be issued or optioned under the Plan will be increased. The number of shares of such increase shall be an amount such that immediately after such increase the total number of shares issuable under the Plan and reserved for issuance upon exercise of outstanding options, warrants or conversion of shares of preferred stock will equal 15% of the total number of issued and outstanding shares of Common Stock of the Company. Such increase in the number of shares subject to the Plan shall occur without the necessity of any further corporate action of any kind or character. SECTION 4. ELIGIBILITY. The Participants shall include directors, employees, including officers, of the Company and its divisions and subsidiaries, and consultants and attorneys who provide bona fide services to the Company. Participants are eligible to be granted warrants, options, restricted common or convertible preferred stock, unrestricted common or convertible preferred stock and other awards under this Plan and to have their bonuses and/or consulting fees payable in warrants, restricted common or convertible preferred stock, unrestricted common or convertible preferred stock and other awards. A Participant who has been granted an option, warrant or preferred stock hereunder may be granted an additional option, warrant options, warrants or preferred stock, if the Committee shall so determine. SECTION 5. GRANT OF OPTIONS OR WARRANTS. (a) Committee Discretion. The Committee shall have sole and absolute discretionary authority (i) to determine, authorize, and designate those persons pursuant to this Plan who are to receive warrants, options, restricted common or convertible preferred stock, or unrestricted common or convertible preferred stock under the Plan, (ii) to determine the number of shares of Common Stock to be covered by such grant or such options or warrants and the terms thereof, (iii) to determine the type of Common Stock granted: restricted common or convertible preferred stock, unrestricted common or convertible preferred stock or a combination of restricted and unrestricted common or convertible preferred stock, and (iv) to determine the type of option or warrant granted: ISO, Nonqualified Option or a combination of ISO and Nonqualified Options. The Committee shall thereupon grant options or warrants in accordance with such determinations as evidenced by a written option or warrant agreement. Subject to the express provisions of the Plan, the Committee shall have discretionary authority to prescribe, amend and rescind rules and regulations relating to the Plan, to interpret the Plan, to prescribe and amend the terms of the option or warrant agreements (which need not be identical) and to make all other determinations deemed necessary or advisable for the administration of the Plan. (b) Stockholder Approval. All ISOs granted under this Plan are subject to, and may not be exercised before, the approval of this Plan by the stockholders prior to the first anniversary date of the Board meeting held to approve the Plan, by the affirmative vote of the holders of a majority of the outstanding shares of the Company present, or represented by proxy, and entitled to vote thereat, or by written consent in accordance with the laws of the State of Nevada, provided that if such approval by the stockholders of the Company is not forthcoming, all options or warrants and stock awards previously granted under this Plan other than ISOs shall be valid in all respects. (c) Limitation on Incentive Stock Options and Warrants. The aggregate fair market value (determined in accordance with Section 5(d)(ii) of this Plan at the time the option or warrant is granted) of the Common Stock with respect to which ISOs may be exercisable for the first time by any Participant during any calendar year under all such plans of the Company and its Affiliates shall not exceed $3,000,000. (d) Terms and Conditions. Each option or warrant granted under the Plan shall be evidenced by an agreement, in a form approved by the Committee, which shall be subject to the following express terms and conditions and to such other terms and conditions as the Committee may deem appropriate: (i) Option or Warrant Period. The Committee shall promptly notify the Participant of the option or warrant grant and a written agreement shall promptly be executed and delivered by and on behalf of the Company and the Participant, provided that the option or warrant grant shall expire if a written agreement is not signed by said Participant (or his agent or attorney) and returned to the Company within 60 days from date of receipt by the Participant of such agreement. The date of grant shall be the date the option or warrant is actually granted by the Committee, even though the written agreement may be executed and delivered by the Company and the Participant after that date. Each option or warrant agreement shall specify the period for which the option or warrant thereunder is granted (which in no event shall exceed ten years from the date of grant) and shall provide that the option or warrant shall expire at the end of such period. If the original term of an option or warrant is less than ten years from the date of grant, the option or warrant may be amended prior to its expiration, with the approval of the Committee and the Participant, to extend the term so that the term as amended is not more than ten years from the date of grant. However, in the case of an ISO granted to an individual who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or its Affiliate ("Ten Percent Stockholder"), such period shall not exceed five years from the date of grant. (ii) Option or Warrant Price. The purchase price of each share of Common Stock subject to each option or warrant granted pursuant to the Plan shall be determined by the Committee at the time the option or warrant is granted and, in the case of ISOs, shall not be less than 100% of the fair market value of a share of Common Stock on the date the option or warrant is granted, as determined by the Committee. In the case of an ISO granted to a Ten Percent Stockholder, the option or warrant price shall not be less than 110% of the fair market value of a share of Common Stock on the date the option or warrant is granted. The purchase price of each share of Common Stock subject to a Nonqualified Option or Warrant under this Plan shall be determined by the Committee prior to granting the option or warrant. The Committee shall set the purchase price for each share subject to a Nonqualified Option or Warrant at either the fair market value of each share on the date the option or warrant is granted, or at such other price as the Committee in its sole discretion shall determine. At the time a determination of the fair market value of a share of Common Stock is required to be made hereunder, the determination of its fair market value shall be made by the Committee in such manner as it deems appropriate. (iii) Exercise Period. The Committee may provide in the option or warrant agreement that an option or warrant may be exercised in whole, immediately, or is to be exercisable in increments. In addition, the Committee may provide that the exercise of all or part of an option or warrant is subject to specified performance by the Participant. (iv) Procedure for Exercise. Options or warrants shall be exercised in the manner specified in the option or warrant agreement. The notice of exercise shall specify the address to which the certificates for such shares are to be mailed. A Participant shall be deemed to be a stockholder with respect to shares covered by an option or warrant on the date specified in the option or warrant agreement. As promptly as practicable, the Company shall deliver to the Participant or other holder of the warrant, certificates for the number of shares with respect to which such option or warrant has been so exercised, issued in the holder's name or such other name as holder directs; provided, however, that such delivery shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited such certificates with a carrier for overnight delivery, addressed to the holder at the address specified pursuant to this Section 6(d). (v) Termination of Employment. If an executive officer to whom an option or warrant is granted ceases to be employed by the Company for any reason other than death or disability, any option or warrant which is exercisable on the date of such termination of employment may be exercised during a period beginning on such date and ending at the time set forth in the option or warrant agreement; provided, however, that if a Participant's employment is terminated because of the Participant's theft or embezzlement from the Company, disclosure of trade secrets of the Company or the commission of a willful, felonious act while in the employment of the Company (such reasons shall hereinafter be collectively referred to as "for cause"), then any option or warrant or unexercised portion thereof granted to said Participant shall expire upon such termination of employment. Notwithstanding the foregoing, no ISO may be exercised later than three months after an employee's termination of employment for any reason other than death or disability. (vi) Disability or Death of Participant. In the event of the determination of disability or death of a Participant under the Plan while he or she is employed by the Company, the options or warrants previously granted to him may be exercised (to the extent he or she would have been entitled to do so at the date of the determination of disability or death) at any time and from time to time, within a period beginning on the date of such determination of disability or death and ending at the time set forth in the option or warrant agreement, by the former employee, The guardian of his estate, the executor or administrator of his estate or by the person or persons to whom his rights under the option or warrant shall pass by will or the laws of descent and distribution, but in no event may the option or warrant be exercised after its expiration under the terms of the option or warrant agreement. Notwithstanding the foregoing, no ISO may be exercised later than one year after the determination of disability or death. A Participant shall be deemed to be disabled if, in the opinion of a physician selected by the Committee, he or she is incapable of performing services for the Company of the kind he or she was performing at the time the disability occurred by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long, continued and indefinite duration. The date of determination of disability for purposes hereof shall be the date of such determination by such physician. (vii) Assignability. An option or warrant shall be assignable or otherwise transferable, in whole or in part, by a Participant as provided in the option, warrant or designation of the series of preferred stock. (viii) Incentive Stock Options. Each option or warrant agreement may contain such terms and provisions as the Committee may determine to be necessary or desirable in order to qualify an option or warrant designated as an incentive stock option. (ix) Restricted Stock Awards. Awards of restricted stock under this Plan shall be subject to all the applicable provisions of this Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Committee shall determine: (A) Awards of restricted stock may be in addition to or in lieu of option or warrant grants. Awards may be conditioned on the attainment of particular performance goals based on criteria established by the Committee at the time of each award of restricted stock. During a period set forth in the agreement (the "Restriction Period"), the recipient shall not be permitted to sell, transfer, pledge, or otherwise encumber the shares of restricted stock; except that such shares may be used, if the agreement permits, to pay the option or warrant price pursuant to any option or warrant granted under this Plan, provided an equal number of shares delivered to the Participant shall carry the same restrictions as the shares so used. Shares of restricted stock shall become free of all restrictions if during the Restriction Period, (i) the recipient dies, (ii) the recipient's directorship, employment, or consultancy terminates by reason of permanent disability, as determined by the Committee, (iii) the recipient retires after attaining both 59 1/2 years of age and five years of continuous service with the Company and/or a division or subsidiary, or (iv) if provided in the agreement, there is a "change in control" of the Company (as defined in such agreement). The Committee may require medical evidence of permanent disability, including medical examinations by physicians selected by it. Unless and to the extent otherwise provided in the agreement, shares of restricted stock shall be forfeited and revert to the Company upon the recipient's termination of directorship, employment or consultancy during the Restriction Period for any reason other than death, permanent disability, as determined by the Committee, retirement after attaining both 59 1/2 years of age and five years of continuous service with the Company and/or a subsidiary or division, or, to the extent provided in the agreement, a "change in control" of the Company (as defined in such agreement), except to the extent the Committee, in its sole discretion, finds that such forfeiture might not be in the best interests of the Company and, therefore, waives all or part of the application of this provision to the restricted stock held by such recipient. Certificates for restricted stock shall be registered in the name of the recipient but shall be imprinted with the appropriate legend and returned to the Company by the recipient, together with a stock power endorsed in blank by the recipient. The recipient shall be entitled to vote shares of restricted stock and shall be entitled to all dividends paid thereon, except that dividends paid in Common Stock or other property shall also be subject to the same restrictions. (B) Restricted Stock shall become free of the foregoing restrictions upon expiration of the applicable Restriction Period and the Company shall then deliver to the recipient Common Stock certificates evidencing such stock. Restricted stock and any Common Stock received upon the expiration of the restriction period shall be subject to such other transfer restrictions and/or legend requirements as are specified in the applicable agreement. (x) Bonuses and Past Salaries and Fees Payable in Unrestricted Stock. (A) In lieu of cash bonuses otherwise payable under the Company's or applicable division's or subsidiary's compensation practices to employees and consultants eligible to participate in this Plan, the Committee, in its sole discretion, may determine that such bonuses shall be payable in unrestricted Common Stock or partly in unrestricted Common Stock and partly in cash. Such bonuses shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of unrestricted Common Stock subject to such terms as the Committee may determine in its sole discretion. The number of shares of unrestricted Common Stock payable in lieu of a bonus otherwise payable shall be determined by dividing such bonus amount by the fair market value of one share of Common Stock on the date the bonus is payable, with fair market value determined as of such date in accordance with Section 5(d) (ii). (B) In lieu of salaries and fees otherwise payable by the Company to employees, attorneys and consultants eligible to participate in this Plan that were incurred for services rendered during, prior or after the year of 2004, the Committee, in its sole discretion, may determine that such unpaid salaries and fees shall be payable in unrestricted Common Stock or partly in unrestricted Common Stock and partly in cash. Such awards shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of unrestricted Common Stock subject to such terms as the Committee may determine in its sole discretion. The number of shares of unrestricted Common Stock payable in lieu of a salaries and fees otherwise payable shall be determined by dividing each calendar month's of unpaid salary or fee amount by the average trading value of the Common Stock for the calendar month during which the subject services were provided. (xi) No Rights as Stockholder. No Participant shall have any rights as a stockholder with respect to shares covered by an option or warrant until the option or warrant is exercised as provided in clause (d) above. (xii) Extraordinary Corporate Transactions. The existence of outstanding options or warrants shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issuance of Common Stock or other securities or subscription rights thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. If the Company recapitalizes or otherwise changes its capital structure, or merges, consolidates, sells all of its assets or dissolves (each of the foregoing a "Fundamental Change"), then thereafter upon any exercise of an option or warrant theretofore granted the Participant shall be entitled to purchase under such option or warrant, in lieu of the number of shares of Common Stock as to which option or warrant shall then be exercisable, the number and class of shares of stock and securities to which the Participant would have been entitled pursuant to the terms of the Fundamental Change if, immediately prior to such Fundamental Change, the Participant had been the holder of record of the number of shares of Common Stock as to which such option or warrant is then exercisable. If (i) the Company shall not be the surviving entity in any merger or consolidation (or survives only as a subsidiary of another entity), (ii) the Company sells all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary), (iii) any person or entity (including a "group" as contemplated by Section 13(d)(3) of the Exchange Act) acquires or gains ownership or control of (including, without limitation, power to vote) more than 50% of the outstanding shares of Common Stock, (iv) the Company is to be dissolved and liquidated, or (v) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board (each such event in clauses (i) through (v) above is referred to herein as a "Corporate Change"), the Committee, in its sole discretion, may accelerate the time at which all or a portion of a Participant's option or warrants may be exercised for a limited period of time before or after a specified date. (xiii) Changes in Company's Capital Structure. If the outstanding shares of Common Stock or other securities of the Company, or both, for which the option or warrant is then exercisable at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, recapitalization, or reorganization, the number and kind of shares of Common Stock or other securities which are subject to the Plan or subject to any options or warrants theretofore granted, and the option or warrant prices, shall be adjusted only as provided in the option or warrant. (xiv) Acceleration of Options and Warrants. Except as hereinbefore expressly provided, (i) the issuance by the Company of shares of stock or any class of securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, (ii) the payment of a dividend in property other than Common Stock or (iii) the occurrence of any similar transaction, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to options or warrants theretofore granted or the purchase price per share, unless the Committee shall determine, in its sole discretion, that an adjustment is necessary to provide equitable treatment to Participant. Notwithstanding Anything to the contrary contained in this Plan, the Committee may, in its sole discretion, accelerate the time at which any option or warrant may be exercised, including, but not limited to, upon the occurrence of the events specified in this Section 5, and is authorized at any time (with the consent of the Participant) to purchase options or warrants pursuant to Section 6. SECTION 6. RELINQUISHMENT OF OPTIONS OR WARRANTS. (a) The Committee, in granting options or warrants hereunder, shall have discretion to determine whether or not options or warrants shall include a right of relinquishment as hereinafter provided by this Section 6. The Committee shall also have discretion to determine whether an option or warrant agreement evidencing an option or warrant initially granted by the Committee without a right of relinquishment shall be amended or supplemented to include such a right of relinquishment. Neither the Committee nor the Company shall be under any obligation or incur any liability to any person by reason of the Committee's refusal to grant or include a right of relinquishment in any option or warrant granted hereunder or in any option or warrant agreement evidencing the same. Subject to the Committee's determination in any case that the grant by it of a right of relinquishment is consistent with Section 1 hereof, any option or warrant granted under this Plan, and the option or warrant agreement evidencing such option or warrant, may provide: (i) That the Participant, or his or her heirs or other legal representatives to the extent entitled to exercise the option or warrant under the terms thereof, in lieu of purchasing the entire number of shares subject to purchase thereunder, shall have the right to relinquish all or any part of the then unexercised portion of the option or warrant (to the extent then exercisable) for a number of shares of Common Stock to be determined in accordance with the following provisions of this clause (i): (A) The written notice of exercise of such right of relinquishment shall state the percentage of the total number of shares of Common Stock issuable pursuant to such relinquishment (as defined below) that the Participant elects to receive; (B) The number of shares of Common Stock, if any, issuable pursuant to such relinquishment shall be the number of such shares, rounded to the next greater number of full shares, as shall be equal to the quotient obtained by dividing (i) the Appreciated Value by (ii) the purchase price for each of such shares specified in such option or warrant; (C) For the purpose of this clause (C), "Appreciated Value" means the excess, if any, of (x) the total current market value of the shares of Common Stock covered by the option or warrant or the portion thereof to be relinquished over (y) the total purchase price for such shares specified in such option or warrant; (ii) That such right of relinquishment may be exercised only upon receipt by the Company of a written notice of such relinquishment which shall be dated the date of election to make such relinquishment; and that, for the purposes of this Plan, such date of election shall be deemed to be the date when such notice is sent by registered or certified mail, or when receipt is acknowledged by the Company, if mailed by other than registered or certified mail or if delivered by hand or by any telegraphic communications equipment of the sender or otherwise delivered; provided, that, in the event the method just described for determining such date of election shall not be or remain consistent with the provisions of Section 16(b) of the Exchange Act or the rules and regulations adopted by the Commission thereunder, as presently existing or as may be hereafter amended, which regulations exempt from the operation of Section 16(b) of the Exchange Act in whole or in part any such relinquishment transaction, then such date of election shall be determined by such other method consistent with Section 16(b) of the Exchange Act or the rules and regulations thereunder as the Committee shall in its discretion select and apply; (iii) That the "current market value" of a share of Common Stock on a particular date shall be deemed to be its fair market value on that date as determined in accordance with Paragraph 5(d)(ii); and (iv) That the option or warrant, or any portion thereof, may be relinquished only to the extent that (A) it is exercisable on the date written notice of relinquishment is received by the Company, and (B) the holder of such option or warrant pays, or makes provision satisfactory to the Company for the payment of, any taxes which the Company is obligated to collect with respect to such relinquishment. (b) The Committee shall have sole discretion to consent to or disapprove, and neither the Committee nor the Company shall be under any liability by reason of the Committee's disapproval of, any election by a holder of preferred stock to relinquish such preferred stock in whole or in part as provided in Paragraph 7(a), except that no such consent to or approval of a relinquishment shall be required under the following circumstances. Each Participant who is subject to the short-swing profits recapture provisions of Section 16(b) of the Exchange Act ("Covered Participant") shall not be entitled to receive shares of Common Stock when options or warrants are relinquished during any window period commencing on the third business day following the Company's release of a quarterly or annual summary statement of sales and earnings and ending on the twelfth business day following such release ("Window Period"). A Covered Participant shall be entitled to receive shares of Common Stock upon the relinquishment of options or warrants outside a Window Period. (c) The Committee, in granting options or warrants hereunder, shall have discretion to determine the terms upon which such options or warrants shall be relinquishable, subject to the applicable provisions of this Plan, and including such provisions as are deemed advisable to permit the exemption from the operation from Section 16(b) of the Exchange Act of any such relinquishment transaction, and options or warrants outstanding, and option agreements evidencing such options, may be amended, if necessary, to permit such exemption. If options or warrants are relinquished, such option or warrant shall be deemed to have been exercised to the extent of the number of shares of Common Stock covered by the option or warrant or part thereof which is relinquished, and no further options or warrants may be granted covering such shares of Common Stock. (d) Any options or warrants or any right to relinquish the same to the Company as contemplated by this Paragraph 6 shall be assignable by the Participant, provided the transaction complies with any applicable securities laws. (e) Except as provided in Section 6(f) below, no right of relinquishment may be exercised within the first six months after the initial award of any option or warrant containing, or the amendment or supplementation of any existing option or warrant agreement adding, the right of relinquishment. (f) No right of relinquishment may be exercised after the initial award of any option or warrant containing, or the amendment or supplementation of any existing option or warrant agreement adding the right of relinquishment, unless such right of relinquishment is effective upon the Participant's death, disability or termination of his relationship with the Company for a reason other than "for cause." SECTION 7. GRANT OF CONVERTIBLE PREFERRED STOCK. (a) Committee Discretion. The Committee shall have sole and absolute discretionary authority (i) to determine, authorize, and designate those persons pursuant to this Plan who are to receive restricted preferred stock, or unrestricted preferred stock under the Plan, and (ii) to determine the number of shares of Common Stock to be issued upon conversion of such shares of preferred stock and the terms thereof. The Committee shall thereupon grant shares of preferred stock in accordance with such determinations as evidenced by a written preferred stock designation. Subject to the express provisions of the Plan, the Committee shall have discretionary authority to prescribe, amend and rescind rules and regulations relating to the Plan, to interpret the Plan, to prescribe and amend the terms of the preferred stock designation (which need not be identical) and to make all other determinations deemed necessary or advisable for the administration of the Plan. (b) Terms and Conditions. Each series of preferred stock granted under the Plan shall be evidenced by a designation in the form for filing with the Secretary of State of the state of incorporation of the Company, containing such terms as approved by the Committee, which shall be subject to the following express terms and conditions and to such other terms and conditions as the Committee may deem appropriate: (i) Conversion Ratio. The number of shares of Common Stock issuable upon conversion of each share of preferred stock granted pursuant to the Plan shall be determined by the Committee at the time the preferred stock is granted. The conversion ration may be determined by reference to the fair market value of each share of Common Stock on the date the preferred stock is granted, or at such other price as the Committee in its sole discretion shall determine. At the time a determination of the fair market value of a share of Common Stock is required to be made hereunder, the determination of its fair market value shall be made in accordance with Paragraph 5(d)(ii). (ii) Conversion Period. The Committee may provide in the preferred stock agreement that an preferred stock may be converted in whole, immediately, or is to be convertible in increments. In addition, the Committee may provide that the conversion of all or part of an preferred stock is subject to specified performance by the Participant. (iii) Procedure for Conversion. Shares of preferred stock shall be converted in the manner specified in the preferred stock designation. The notice of conversion shall specify the address to which the certificates for such shares are to be mailed. A Participant shall be deemed to be a stockholder with respect to shares covered by preferred stock on the date specified in the preferred stock agreement . As promptly as practicable, the Company shall deliver to the Participant or other holder of the warrant, certificates for the number of shares with respect to which such preferred stock has been so converted, issued in the holder's name or such other name as holder directs; provided, however, that such delivery shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited such certificates with a carrier for overnight delivery, addressed to the holder at the address specified pursuant to this Section 6(d). (iv) Termination of Employment. If an executive officer to whom preferred stock is granted ceases to be employed by the Company for any reason other than death or disability, any preferred stock which is convertible on the date of such termination of employment may be converted during a period beginning on such date and ending at the time set forth in the preferred stock agreement; provided, however, that if a Participant's employment is terminated because of the Participant's theft or embezzlement from the Company, disclosure of trade secrets of the Company or the commission of a willful, felonious act while in the employment of the Company (such reasons shall hereinafter be collectively referred to as "for cause"), then any preferred stock or unconverted portion thereof granted to said Participant shall expire upon such termination of employment. Notwithstanding the foregoing, no ISO may be converted later than three months after an employee's termination of employment for any reason other than death or disability. (v) Disability or Death of Participant. In the event of the determination of disability or death of a Participant under the Plan while he or she is employed by the Company, the preferred stock previously granted to him may be converted (to the extent he or she would have been entitled to do so at the date of the determination of disability or death) at any time and from time to time, within a period beginning on the date of such determination of disability or death and ending at the time set forth in the preferred stock agreement, by the former employee, the guardian of his estate, the executor or administrator of his estate or by the person or persons to whom his rights under the preferred stock shall pass by will or the laws of descent and distribution, but in no event may the preferred stock be converted after its expiration under the terms of the preferred stock agreement. Notwithstanding the foregoing, no ISO may be converted later than one year after the determination of disability or death. A Participant shall be deemed to be disabled if, in the opinion of a physician selected by the Committee, he or she is incapable of performing services for the Company of the kind he or she was performing at the time the disability occurred by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long, continued and indefinite duration. The date of determination of disability for purposes hereof shall be the date of such determination by such physician. (vi) Assignability. Preferred stock shall be assignable or otherwise transferable, in whole or in part, by a Participant. (vii) Restricted Stock Awards. Awards of restricted preferred stock under this Plan shall be subject to all the applicable provisions of this Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Committee shall determine: (A) Awards of restricted preferred stock may be in addition to or in lieu of preferred stock grants. Awards may be conditioned on the attainment of particular performance goals based on criteria established by the Committee at the time of each award of restricted preferred stock. During a period set forth in the agreement (the "Restriction Period"), the recipient shall not be permitted to sell, transfer, pledge, or otherwise encumber the shares of restricted preferred stock. Shares of restricted preferred stock shall become free of all restrictions if during the Restriction Period, (i) the recipient dies, (ii) the recipient's directorship, employment, or consultancy terminates by reason of permanent disability, as determined by the Committee, (iii) the recipient retires after attaining both 59 1/2 years of age and five years of continuous service with the Company and/or a division or subsidiary, or (iv) if provided in the agreement, there is a "change in control" of the Company (as defined in such agreement). The Committee may require medical evidence of permanent disability, including medical examinations by physicians selected by it. Unless and to the extent otherwise provided in the agreement, shares of restricted preferred stock shall be forfeited and revert to the Company upon the recipient's termination of directorship, employment or consultancy during the Restriction Period for any reason other than death, permanent disability, as determined by the Committee, retirement after attaining both 59 1/2 years of age and five years of continuous service with the Company and/or a subsidiary or division, or, to the extent provided in the agreement, a "change in control" of the Company (as defined in such agreement), except to the extent the Committee, in its sole discretion, finds that such forfeiture might not be in the best interests of the Company and, therefore, waives all or part of the application of this provision to the restricted preferred stock held by such recipient. Certificates for restricted preferred stock shall be registered in the name of the recipient but shall be imprinted with the appropriate legend and returned to the Company by the recipient, together with a preferred stock power endorsed in blank by the recipient. The recipient shall be entitled to vote shares of restricted preferred stock and shall be entitled to all dividends paid thereon, except that dividends paid in Common Stock or other property shall also be subject to the same restrictions. (B) Restricted preferred stock shall become free of the foregoing restrictions upon expiration of the applicable Restriction Period and the Company shall then deliver to the recipient Common Stock certificates evidencing such stock. Restricted preferred stock and any Common Stock received upon the expiration of the restriction period shall be subject to such other transfer restrictions and/or legend requirements as are specified in the applicable agreement. (x) Bonuses and Past Salaries and Fees Payable in Unrestricted Preferred stock. (A) In lieu of cash bonuses otherwise payable under the Company's or applicable division's or subsidiary's compensation practices to employees and consultants eligible to participate in this Plan, the Committee, in its sole discretion, may determine that such bonuses shall be payable in unrestricted Common Stock or partly in unrestricted Common Stock and partly in cash. Such bonuses shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of unrestricted Common Stock subject to such terms as the Committee may determine in its sole discretion. The number of shares of unrestricted Common Stock payable in lieu of a bonus otherwise payable shall be determined by dividing such bonus amount by the fair market value of one share of Common Stock on the date the bonus is payable, with fair market value determined as of such date in accordance with Section 5(d)(ii). (B) In lieu of salaries and fees otherwise payable by the Company to employees, attorneys and consultants eligible to participate in this Plan that were incurred for services rendered during, prior or after the year of 2004, the Committee, in its sole discretion, may determine that such unpaid salaries and fees shall be payable in unrestricted Common Stock or partly in unrestricted Common Stock and partly in cash. Such awards shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of unrestricted Common Stock subject to such terms as the Committee may determine in its sole discretion. The number of shares of unrestricted Common Stock payable in lieu of a salaries and fees otherwise payable shall be determined by dividing each calendar month's of unpaid salary or fee amount by the average trading value of the Common Stock for the calendar month during which the subject services were provided. (xi) No Rights as Stockholder. No Participant shall have any rights as a stockholder with respect to shares covered by an preferred stock until the preferred stock is converted as provided in clause (b)(iii) above. (xii) Extraordinary Corporate Transactions. The existence of outstanding preferred stock shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issuance of Common Stock or other securities or subscription rights thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. If the Company recapitalizes or otherwise changes its capital structure, or merges, consolidates, sells all of its assets or dissolves (each of the foregoing a "Fundamental Change"), then thereafter upon any conversion of preferred stock theretofore granted the Participant shall be entitled to the number of shares of Common Stock upon conversion of such preferred stock, in lieu of the number of shares of Common Stock as to which preferred stock shall then be convertible, the number and class of shares of stock and securities to which the Participant would have been entitled pursuant to the terms of the Fundamental Change if, immediately prior to such Fundamental Change, the Participant had been the holder of record of the number of shares of Common Stock as to which such preferred stock is then convertible. If (i) the Company shall not be the surviving entity in any merger or consolidation (or survives only as a subsidiary of another entity), (ii) the Company sells all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary), (iii) any person or entity (including a "group" as contemplated by Section 13(d)(3) of the Exchange Act) acquires or gains ownership or control of (including, without limitation, power to vote) more than 50% of the outstanding shares of Common Stock, (iv) the Company is to be dissolved and liquidated, or (v) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board (each such event in clauses (i) through (v) above is referred to herein as a "Corporate Change"), the Committee, in its sole discretion, may accelerate the time at which all or a portion of a Participant's shares of preferred stock may be converted for a limited period of time before or after a specified date. (xiii) Changes in Company's Capital Structure. If the outstanding shares of Common Stock or other securities of the Company, or both, for which the preferred stock is then convertible at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, recapitalization, or reorganization, the number and kind of shares of Common Stock or other securities which are subject to the Plan or subject to any preferred stock theretofore granted, and the conversion ratio, shall be adjusted only as provided in the designation of the preferred stock. (xiv) Acceleration of Conversion of Preferred Stock. Except as hereinbefore expressly provided, (i) the issuance by the Company of shares of stock or any class of securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the conversion of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, (ii) the payment of a dividend in property other than Common Stock or (iii) the occurrence of any similar transaction, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to preferred stock theretofore granted, unless the Committee shall determine, in its sole discretion, that an adjustment is necessary to provide equitable treatment to Participant. Notwithstanding anything to the contrary contained in this Plan, the Committee may, in its sole discretion, accelerate the time at which any preferred stock may be converted, including, but not limited to, upon the occurrence of the events specified in this Section 7(xiv). SECTION 8. AMENDMENTS OR TERMINATION. The Board may amend, alter or discontinue the Plan, but no amendment or alteration shall be made which would impair the rights of any Participant, without his consent, under any option, warrant or preferred stock theretofore granted. SECTION 9. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant and exercise of options or warrants and grant and conversion of preferred stock thereunder, and the obligation of the Company to sell and deliver shares under such options, warrants or preferred stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any governmental or regulatory agency as may be required. The Company shall not be required to issue or deliver any certificates for shares of Common Stock prior to the completion of any registration or qualification of such shares under any federal or state law or issuance of any ruling or regulation of any government body which the Company shall, in its sole discretion, determine to be necessary or advisable. Any adjustments provided for in subparagraphs 5(d)(xii), (xiii) and (xiv) shall be subject to any shareholder action required by the corporate law of the state of incorporation of the Company. SECTION 10. PURCHASE FOR INVESTMENT. Unless the options, warrants, shares of convertible preferred stock and shares of Common Stock covered by this Plan have been registered under the Securities Act of 1933, as amended, or the Company has determined that such registration is unnecessary, each person acquiring or exercising an option or warrant under this Plan or converting shares of preferred stock may be required by the Company to give a representation in writing that he or she is acquiring such option or warrant or such shares for his own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof. SECTION 11. TAXES. (a) The Company may make such provisions as it may deem appropriate for the withholding of any taxes which it determines is required in connection with any options, warrants or preferred stock granted under this Plan. (b) Notwithstanding the terms of Paragraph 11 (a), any Participant may pay all or any portion of the taxes required to be withheld by the Company or paid by him or her in connection with the exercise of a nonqualified option or warrant or conversion of preferred stock by electing to have the Company withhold shares of Common Stock, or by delivering previously owned shares of Common Stock, having a fair market value, determined in accordance with Paragraph 5(d)(ii), equal to the amount required to be withheld or paid. A Participant must make the foregoing election on or before the date that the amount of tax to be withheld is determined ("Tax Date"). All such elections are irrevocable and subject to disapproval by the Committee. Elections by Covered Participants are subject to the following additional restrictions: (i) such election may not be made within six months of the grant of an option or warrant, provided that this limitation shall not apply in the event of death or disability, and (ii) such election must be made either six months or more prior to the Tax Date or in a Window Period. Where the Tax Date in respect of an option or warrant is deferred until six months after exercise and the Covered Participant elects share withholding, the full amount of shares of Common Stock will be issued or transferred to him upon exercise of the option or warrant, but he or she shall be unconditionally obligated to tender back to the Company the number of shares necessary to discharge the Company's withholding obligation or his estimated tax obligation on the Tax Date. SECTION 12. REPLACEMENT OF OPTIONS, WARRANTS AND PREFERRED STOCK. The Committee from time to time may permit a Participant under the Plan to surrender for cancellation any unexercised outstanding option or warrant or unconverted Preferred stock and receive from the Company in exchange an option, warrant or preferred stock for such number of shares of Common Stock as may be designated by the Committee. The Committee may, with the consent of the holder of any outstanding option, warrant or preferred stock, amend such option, warrant or preferred stock, including reducing the exercise price of any option or warrant to not less than the fair market value of the Common Stock at the time of the amendment, increasing the conversion ratio of any preferred stock and extending the exercise or conversion term of and warrant, option or preferred stock. SECTION 13. NO RIGHT TO COMPANY EMPLOYMENT. Nothing in this Plan or as a result of any option or warrant granted pursuant to this Plan shall confer on any individual any right to continue in the employ of the Company or interfere in any way with the right of the Company to terminate an individual's employment at any time. The option, warrant or preferred stock agreements may contain such provisions as the Committee may approve with reference to the effect of approved leaves of absence. SECTION 14. LIABILITY OF COMPANY. The Company and any Affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant or other persons as to: (a) The Non-Issuance of Shares. The non-issuance or sale of shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company's counsel to be necessary to the lawful issuance and sale of any shares hereunder; and (b) Tax Consequences. Any tax consequence expected, but not realized, by any Participant or other person due to the exercise of any option or warrant or the conversion of any preferred stock granted hereunder. SECTION 15. EFFECTIVENESS AND EXPIRATION OF PLAN. The Plan shall be effective on the date the Board adopts the Plan. The Plan shall expire ten years after the date the Board approves the Plan and thereafter no option, warrant or preferred stock shall be granted pursuant to the Plan. SECTION 16. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption by the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation, the granting of restricted stock or stock options, warrants or preferred stock otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. SECTION 17. GOVERNING LAW. This Plan and any agreements hereunder shall be interpreted and construed in accordance with the laws of the state of incorporation of the Company and applicable federal law. SECTION 18. CASHLESS EXERCISE. The Committee also may allow cashless exercises as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions. or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. The proceeds from such a payment shall be added to the general funds of the Company and shall be used for general corporate purposes. EX-10.4 7 exhibit10-4.txt WARRANT AGREEMENT Exhibit 10.4 - Warrant Agreement WARRANT AGREEMENT THIS WARRANT AGREEMENT, dated as of the 6th day of August, 2004, is entered into by and between Aztec Communications Group, Inc., a Nevada corporation (the "Company"), and Cottonwood Stock Transfer Corporation, as warrant agent (the "Warrant Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company has authorized the issuance of a maximum of 12,000,000 warrants ("Warrants"); WHEREAS, 3000,000 of such Warrants shall be designated as Class A Warrants, each entitling the holder to purchase one share (subject to adjustment as provided in Section 8) of the Company's common stock, $.001 par value (the "Shares"); WHEREAS, 3,000,000 of such Warrants shall be designated as Class B Warrants, each entitling the holder to purchase one of the Shares (subject to adjustment as provided in Section 8); WHEREAS, 3,000,000 of such Warrants shall be designated as Class C Warrants, each entitling the holder to purchase one of the Shares (subject to adjustment as provided in Section 8); WHEREAS, 3,000,000 of such Warrants shall be designated as Class D Warrants, each entitling the holder to purchase one of the Shares (subject to adjustment as provided in Section 8); WHEREAS, the Warrants and the Shares issuable upon their exercise are to be issued pursuant to the Company's directors, officers and consultants stock option, stock warrant and stock award plan covered by a registration statement filed with and declared effective by the Securities and Exchange Commission; WHEREAS, the Company desires to provide for the issuance of certificates representing the Warrants; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to act in connection with the issuance, registration, transfer and exchange of Warrants and the exercise of the Warrants. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations hereunder of the Company, the Registered Holders of Warrants, and the Warrant Agent, the parties hereto agree as follows: SECTION 1 DEFINITIONS In addition to those terms defined above, as used herein, the following terms shall have the following meanings, unless the context shall otherwise require: "Corporate Office" The office of the Warrant Agent (or its successor) at which its principal business shall be administered, which office is located at the date hereof at Cottonwood Stock Transfer Corporation, 5199 South State Street, Salt Lake City, Utah, 84107. "Exercise Date" As to any Warrant, the date on which the Warrant Agent shall have received both (i) the Warrant Certificate representing such Warrant, with the notice of exercise form therefor duly executed by the Registered Holder thereof or his duly authorized attorney (in writing), and (ii) instructions for delivery as provided in paragraph 4.3. "Exercise Price" The dollar amount to be paid for one fully paid and nonassessable Share. The initial Exercise Price for each Class A Warrant, subject to adjustment in the events specified in Section 8, is $0.75 per share. The initial Exercise Price for each Class B Warrant, subject to adjustment in the events specified in Section 8, is $1.00 per share. The initial Exercise Price for each Class C Warrant, subject to adjustment in the events specified in Section 8, is $1.25 per share. The initial Exercise Price for each Class D Warrant, subject to adjustment in the events specified in Section 8, is $1.65 per share. "Expiration Date" The Expiration Date of the Warrants shall be 5:00 p.m. (New York time) or the earlier of (i)(A) the date which is the last day of the 60 month period commencing on the Initial Warrant Exercise Date, or (B) such later date as the Company may at its option determine; or (ii) the Redemption Date as defined in Section 9 hereof. If such Expiration Date shall be a holiday in the State of Texas or shall be a day on which banks are authorized to close in Houston, then Expiration Date shall mean 5:00 p.m. (Houston time) on the next following day that in the State of Texas is not a holiday or a day on which banks are authorized to close. "Initial Warrant Exercise Date" The first to occur of: (i) the effective date of a Recapitalization Event (as defined in Section 5.1), or (ii) the effective date of the Registration Statement (as defined in Section 5.2), or (iii) 30 days from the date hereof. "Purchase Price" The dollar amount derived by multiplying the Exercise Price by the number of Shares issuable upon the exercise. "Registered Holder" The person in whose name any certificate representing Warrants shall be registered on the books maintained by the Warrant Agent pursuant to Section 6. "Settlement Date" The third business day following delivery of the Shares in accordance with the instructions contained in the notice of exercise form, free and clear of any legend, restriction or stop order. Electronic delivery shall be for the account specified in the notice of exercise form. Certificates shall be registered in the name specified in the notice of exercise form. "Shares" The shares of the Company's common stock, $.001 par value (the "Common Stock"), issuable upon exercise of the Warrants. "Stock" The shares of the Company's capital stock of any class, whether now or thereafter authorized, that has the right to participate in the distribution of earnings and assets of the Company without limit as to amount or percentage, which at the date hereof consists of 100,000,000 shares of common stock, par value $.001 per share and 20,000,000 shares of preferred stock, $.001 par value per share. SECTION 2 Warrants and Issuance of Warrants 2.1. Warrant Each Warrant shall entitle the Registered Holder of the Warrant representing such Warrant to purchase one Share upon the exercise thereof, subject to modification and adjustment as provided in Section 8. 2.2. Execution of Warrants Upon execution of this Agreement, Warrants representing an aggregate of 12,000,000 Warrants shall be executed by the Company and delivered to the Warrant Agent. At its request, additional Warrant Certificates shall be executed by the Company and delivered to the Warrant Agent. After certificates representing an aggregate of such number of Shares as shall be required in connection with the distribution of the Warrants, shall have been duly countersigned by the Company (or by the Transfer Agent, if one then be acting) and upon written order of the Company signed by its Chairman & CEO and by its Secretary, the Warrants shall be countersigned, issued, and delivered by the Warrant Agent. 2.3. Delivery of Additional Warrants From time to time, up to the Expiration Date, the Company (or the Transfer Agent if then acting) shall countersign and deliver stock certificates in required whole number denominations upon the exercise of Warrants in accordance with this Agreement. From time to time, up to the Expiration Date, the Warrant Agent shall countersign and deliver Warrants in required whole number denominations to the persons entitled thereto in connection with any transfer or exchange permitted under this Agreement. No Warrants shall be issued except (i) those initially issued hereunder, (ii) those issued on or after the Initial Warrant Exercise Date, upon the exercise of any Warrants pursuant to Section 4, to evidence any unexercised Warrants held by the exercising Registered Holder, (iii) those issued upon any transfer or exchange pursuant to Section 6, and (iv) those issued pursuant to Section 7. SECTION 3 Form and Execution of Warrant Certificates 3.1. Form of Warrants The Warrants shall be substantially in the form annexed hereto as Exhibit "A" (the provisions of which are hereby incorporated herein) and may have such letters, numbers, or other marks of identification or designation and such legends, summaries, or endorsements printed, lithographed, or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may be listed, or to conform to usage. The Warrants shall be dated the date of issuance thereof (whether upon initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen or destroyed Warrants). The Warrants shall be numbered serially. 3.2. Validity of Signatures Warrants shall be executed on behalf of the Company by its Chairman & CEO and by its Secretary, by manual signatures or by facsimile signatures printed thereon, and shall have imprinted thereon a facsimile of the Company's seal. Warrants shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who signed a Warrant ceases to be such officer of the Company before issuance of such Warrant, or before countersignature by the Warrant Agent and issuance and delivery thereof, such Warrant may nevertheless be countersigned by the Warrant Agent, and issued and delivered with the same force and effect as though the person who signed such Warrant had not ceased to be such officer of the Company. SECTION 4 Exercise 4.1. Exercise Procedures Each Warrant may be exercised at any time on or after the Initial Warrant Exercise Date, but not after the Expiration Date, as appropriate, upon the terms and subject to the conditions set forth herein and in the applicable Warrant. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the Exercise Date, and the person entitled to receive the Shares deliverable upon such exercise shall be treated for all purposes as the Registered Holder thereof with respect to such number of Shares as shall equal the aggregate number of full Shares issuable upon such exercise. As soon as practicable on or after the Exercise Date, and in conformity with usual practices respecting such conduct, the Warrant Agent (on behalf of the Company) shall cause to be issued and delivered to or for the account of the person designated by the Registered Holder in the notice of exercise a certificate or certificates for the Shares deliverable upon such exercise free and clear of any legend, restriction or stop order. The certificate or certificates shall be registered in the name specified in the notice of exercise, in proper form for transfer. 4.2 Relinquishment of Options. (a) The warrantholder in lieu of purchasing the entire number of shares subject to purchase hereunder, shall have the right to relinquish all or any part of the then unexercised portion of this Warrant (to the extent then exercisable) for a number of shares of common stock to be determined in accordance with the following provisions of this clause (a): (i) The number of shares of common stock, if any, issuable pursuant to such relinquishment shall be the number of such shares, rounded to the next greater number of full shares, as shall be equal to the quotient obtained by dividing (A) the Appreciated Value by (B) the purchase price per share of common stock specified in this Warrant; (ii) For the purpose of this clause (a), "Appreciated Value" means the excess of (x) the aggregate current market value of the shares of common stock covered by the option or the portion thereof to be relinquished over (y) the aggregate purchase price for such shares specified in this Warrant; (b) Such right of relinquishment may be exercised only upon receipt by the Company of a written notice of such relinquishment which shall be dated the date of election to make such relinquishment; and that, for the purposes of this Warrant, such date of election shall be deemed to be the date when such notice is sent by registered or certified mail, or when receipt is acknowledged by the Company, if mailed by other than registered or certified mail or if delivered by hand or by any telegraphic communications equipment of the sender or otherwise delivered; provided, that, in the event the method just described for determining such date of election shall not be or remain consistent with the provisions of Section 16(b) of the Exchange Act or the rules and regulations adopted by the Commission thereunder, as presently existing or as may be hereafter amended, which regulations exempt from the operation of Section 16(b) of the Exchange Act in whole or in part any such relinquishment transaction, then such date of election shall be determined by such other method consistent with Section 16(b) of the Exchange Act or the rules and regulations thereunder as the Company shall in its discretion select and apply; (c) The "current market value" of a share of common stock on a particular date shall be deemed to be the closing price of shares in the open market the day prior to the date of election; and (d) The Warrant, or any portion thereof, may be relinquished only to the extent that (A) it is exercisable on the date written notice of relinquishment is received by the Company, (B) the Holder pays, or makes provision satisfactory to the Company for the payment of, any taxes which the Company is obligated to collect with respect to such relinquishment. (e) If a Warrant is relinquished, such Warrant shall be deemed to have been exercised to the extent of the number of shares of common stock covered by the Warrant or part thereof which is relinquished, and no further Warrants will be isssued covering such shares of common stock. 4.3 Payment of Purchase Price Upon the exercise of any Warrant, the Warrant Agent shall promptly notify the Company in writing of such fact and of the number of Shares delivered upon such exercise, and shall promptly either (i) make payment to the Company the dollar amount of the Purchase Price in the manner specified by the Company in writing to the Warrant Agent, or (ii) provide instructions for such payment against delivery of the Shares. The Purchase Price shall be, derived by multiplying the Exercise Price by the number of Shares issuable upon the exercise and shall be paid on or before the Settlement Date by certified or bank check, bank or federal reserve wire transfer as specified in written instructions from the Company to the Registered Holder. In the event the Company does not specify the method of payment, payment shall be by bank check deposited on the Settlement Date with a commercial carrier for overnight delivery to the Company at the address specified in Section 12 of this Agreement, or per section 4.2 hereof. 4.4 Limitation on Right and Power to Exercise Any provision in the Warrant, this Agreement or any other document to the contrary not withstanding, the Registered Holder shall not have the right or power to exercise this warrant, either in whole or in part, if, and any attempt to do so shall be void, after having given effect to such exercise, the Registered Holder shall be or shall be deemed to be the beneficial owner of 95% or more of the then outstanding Common Stock within the meaning or for the purposes of the U.S. Securities Exchange Act of 1934, as amended, or as the term "beneficial owner" is defined in Rule 13d-3 of the U.S. Securities and Exchange Commission or otherwise. Any attempt to exercise the Warrant shall also be ineffective prior to the Initial Exercise Date or to the extent that the Company does not have sufficient authorized, unissued and unreserved Common Stock to issue the Shares. 4.5 No Fractional Shares Notwithstanding that the number of Shares purchasable upon the exercise of a Warrant is adjusted pursuant to Section 8 of this Agreement, the Company shall nonetheless not be required to issue fractions of Shares upon exercise of the Warrants or to distribute Shares certificates that evidence fractional Shares. In lieu of fractional Shares, there shall be returned to exercising Registered Holders of the Warrants upon such exercise an amount in cash, in United States dollars, equal to the amount in excess of that required to purchase the largest number of full Shares. The Registered Holder of a Warrant by the acceptance thereof expressly waives his right to receive any fractional Warrant or any fractional Shares upon exercise of a Warrant. 4.6 Partial Exercise In case the Registered Holder of any Warrant shall exercise fewer than all of the Warrants evidenced thereby, a new Warrant evidencing Warrants equivalent to the Warrants remaining unexercised shall be issued by the Warrant Agent to the Registered Holder of such Warrant or to his duly authorized assign, subject to the provisions of this Agreement. SECTION 5 Reservation of Shares; Listing; Payment of Taxes 5.1 Recapitalization A "Recapitalization Event" shall be deemed to occur upon either (i) effectiveness of a filing in the office of the Secretary of State of Nevada, or such other state in which the Company is legally domiciled, of an amendment to (or amendment and restatement of) the Articles of Incorporation or other charter document of the Company that increases the number of authorized shares of Common Stock to a sufficient number (after taking into account all shares reserved for issuance by the board of directors) so as to enable the exercise of all outstanding Warrants and the issuance of the total number of Shares issuable upon such exercise then in effect, (ii) a change in the number of authorized shares of capital stock that the Company is authorized to issue by any means, including a reduction in the number of outstanding shares, a merger for the principal purpose of a change of corporate domicile, or (iii) the effective date of any other corporate action that enables the exercise of all outstanding Warrants. 5.2. Registration Statement In connection with the formation of a strategic plan for 2004, the Company has adopted a directors and officers stock option and stock award plan (the "Plan"). The Company covenants that it has, in good faith, filed a registration statement on Form S-8 or other appropriate form (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") that registers the issuance of shares of common stock, preferred stock, options and warrants under the terms of the Plan. The Company shall issue the Warrants and the Shares pursuant to and in accordance with the Plan. The certificates representing the Warrants and the Shares shall be free and clear of any legends or restrictions; provided, however, that the Company shall not be required to issue Shares to any person, pursuant to exercise of the Warrants, who shall be resident in any state in which such exercise would be unlawful or if such qualification, registration or approval shall require the Company to file a general consent of service of process or qualify to do business as a foreign corporation in such state. Any Warrants or shares not registered or qualified on Form S-8 shall be registered in the other first registration of shares by the Company. 5.3. Reservation of Shares After, and only after, the Initial Exercise Date and the Company has a sufficient number of shares of authorized but unissued and unreserved Common Stock available to issue upon exercise, the Company covenants that it will at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of Warrants, such number of Shares as shall then be issuable upon the exercise of all outstanding Warrants. Provided the shares are covered by an effective registration, the Company covenants that all Shares that shall be issuable upon exercise of the Warrants shall be free and clear of any legend, restriction or stop order, duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issue thereof, and that upon issuance the Company shall use its best efforts to cause such Shares to be listed on each national securities exchange, if any, on which the Company's outstanding Stock is then listed. 5.4. Payment of Taxes The Company shall pay all documentary, stamp, or similar taxes and other governmental charges that may be imposed with respect to the issuance of Warrants, or the issuance or delivery of any Shares upon exercise of the Warrants, provided, however, that if Shares are to be delivered in a name other than the name of the Registered Holder of the Warrant representing any Warrant being exercised, then no such delivery shall be made unless the person requesting the same has paid to the Warrant Agent the amount of transfer taxes or charges incident thereto, if any. 5.5. Requisition of Shares The Warrant Agent is hereby irrevocably authorized by the Company to requisition, from time to time, certificates representing Shares required to be delivered upon exercise of the Warrants. SECTION 6 Exchange and Registration of Transfer 6.1. Exchanges and Transfers Warrants may be exchanged for other Warrants representing an equal aggregate number of Warrants or may be transferred, in whole or part, under the terms of this Agreement. Warrants to be exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and the Company shall execute and the Warrant Agent shall countersign, issue and deliver in exchange therefor the Warrant or Warrants that the Registered Holder making the exchange shall be entitled to receive. 6.2. Books and Records The Warrant Agent shall keep at such office books and records in which it shall register Warrants and the transfer thereof. Upon due presentment at such office of any Warrant for registration of transfer, the Company shall execute and the Warrant Agent shall issue and deliver to the transferee(s) a new Warrant or Warrants representing an equal aggregate number of Warrants. 6.3. Procedures of Transfers, etc. With respect to all Warrants presented for registration of transfer, or for exchange or exercise, the subscription form on the reverse thereof shall be duly endorsed, or be accompanied by a written instrument or instruments of transfer and subscription, in form satisfactory to the Company and the Warrant Agent. Such documentation shall be duly executed by the Registered Holder or his duly authorized attorney. The Company may require payment by the Registered Holders of Warrants of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with exchange or registration of transfer of Warrants. All Warrants so surrendered for exchange or transfer shall be promptly canceled by the Warrant Agent in accordance with previous instructions pertaining to the Company's Shares. 6.4. Registered Holders Prior to due presentment for registration of transfer, the Company and the Warrant Agent may deem and treat the Registered Holder of any Warrant as the absolute owner thereof and of each Warrant represented thereby, for all purposes (notwithstanding any notations of ownership or writing thereon made by anyone other than the Company or the Warrant Agent), and shall not be affected by any notice to the contrary. SECTION 7 Loss or Mutilation Upon receipt by the Company and the Warrant Agent of satisfactory evidence of the ownership of and the loss, theft, destruction, or mutilation of any Warrant, and (i) in the case of loss, theft or destruction, upon receipt by the Company and the Warrant Agent of indemnity satisfactory to them, or (ii) in the case of mutilation, upon surrender and cancellation upon receipt of such Warrant, the Company shall execute and the Warrant Agent shall countersign and deliver in lieu thereof a new Warrant representing an equal aggregate number of warrants. Applicants for a substitute Warrant shall comply with such other reasonable regulations and pay such other reasonable charges as the Warrant Agent may prescribe. SECTION 8 Adjustment of Exercise Price and Number of Shares Deliverable 8.1. Adjustment of Exercise Price The Exercise Price and the number of Shares issuable upon the exercise of each Warrant, respectively, shall be subject to adjustment from time to time as set forth in this Section 8. The Company shall give each Registered Holder notice of any event described below which requires an adjustment pursuant to this Section 8 at the time of such event. 8.2. Stock Dividends and Subdivisions. If at any time after the Initial Warrant Exercise Date the Company shall: (a) pay a dividend, or make any other distribution of, shares of Common Stock to all holders of its Common Stock, or (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, then (i) the number of Shares issuable upon the exercise of each Warrant immediately after the occurrence of any such event shall be adjusted to equal the number of Shares which a record holder of the same number of shares of Common Stock for which one Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (ii) the Exercise Price shall be adjusted to equal (A) the Exercise Price prior to the adjustment multiplied by the number of Shares issuable upon the exercise of each Warrant immediately prior to such adjustment divided by (B) the number of Shares issuable upon the exercise of each Warrant immediately after such adjustment. 8.3 Stock Combinations and Merger. If at any time before or after the Initial Warrant Exercise Date the Company shall: (a) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, (b) merge or consolidate with or into another corporation for the purpose of changing the corporate domicile; or (c) The occurrence of a Recapitalization Event. then, as a result of such consolidation, merger or Recapitalization Event, the Company, or such successor, as the case may be, shall make lawful and adequate provision whereby the Registered Holder of each Warrant then outstanding shall receive, on exercise of such Warrant, the kind and amount of securities at the same price receivable immediately prior to such consolidation, merger or Recapitalization Event without the necessity of any further action on the part of either the Company or the Registered Holder of the Warrants. 8.4. Notices of Adjustment Whenever the number of Shares issuable upon exercise of the Warrants or whenever the Exercise Price shall be adjusted pursuant to this Section 8, the Company shall forthwith prepare a certificate to be executed by the chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the facts, computations, and method by which such adjustment was calculated, specifying the number of Shares issuable upon exercise of the Warrants and any change in the Exercise Price. The Company shall promptly cause a signed copy of such certificate to be delivered to the Warrant Agent and to each Registered Holder in accordance with Section 12.2. The Company shall keep at its office or agency designated pursuant to Section 12 copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Registered Holder or any prospective purchaser of Warrants designated by a Registered Holder thereof. 8.5. No Impairment The Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Registered Holders against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Shares issuable upon the exercise of a Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of a Warrant, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant Agreement. SECTION 9 Redemption 9.1. General At any time on or after the Initial Warrant Exercise Date the Company may redeem the Warrants, at its option, upon thirty days' notice at a price of the actual difference between the average closing bid price on the over-the-counter market for the Shares for 10 consecutive trading days immediately prior to the date of notice of redemption and the Exercise Price of each Warrant. 9.2. Notice of Redemption If the Company exercises its right to redeem the Warrants, it shall mail a notice of redemption to Registered Holders of the Warrants proposed for redemption, first class, postage prepaid, not later than thirty days before the date fixed for redemption, at the Registered Holders' last addresses as shall appear on the records of the Warrant Agent. Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Registered Holder receives such notice. 9.3. Contents of Notice The notice of redemption shall specify the redemption price, date fixed for redemption, the place where the Warrant shall be delivered and the redemption price shall be paid, and that the right to exercise the Warrant shall terminate at 5:00 p.m. (Houston time) on the business day immediately preceding the date fixed for redemption. The date fixed for the redemption of the Warrants shall be the Redemption Date. 9.4. Early Redemption The Warrants may be called for redemption prior to the redemption date with respect to an entire class or classes, or in the alternative, with respect to any portion of a class or classes (and if called with respect to a portion of a class, such call shall be on a pro rata basis as to the holdings of each Registered Holder within such class). 9.5. Effect of Redemption Any right to exercise a Warrant shall terminate at 5:00 p.m. (Houston time) on the business day immediately preceding the Redemption Date. On and after the Redemption Date, Holders of the Warrants shall have no further rights except to receive, upon surrender of the Warrant, the redemption price as calculated per Section 9.1 above, without interest, per Warrant. SECTION 10 Concerning the Warrant Agent 10.1. Capacity The Warrant Agent acts hereunder as agent and in a ministerial capacity for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not, by issuing and delivering Warrants or by any other act hereunder, be deemed to make any representations as to (i) the validity or value or authorization of (A) the Warrant or the Warrants represented thereby, or (B) any securities or other property delivered upon exercise of any Warrant; or (ii) whether any Shares of capital stock issued upon exercise of any Warrant is fully paid and nonassessable. 10.2. Limitations of Responsibility The Warrant Agent shall not, at any time, be under any duty or responsibility to any Registered Holder of Warrants (i) to make or cause to be made any adjustment of the Exercise Price provided in this Agreement; (ii) to determine whether any fact exists that may require any such adjustments; (iii) to determine the nature or extent of any such adjustment, when made; or (iv) to determine the method employed in making any such adjustment. The Warrant Agent shall not be (i) liable for any recital or statement of fact contained herein or for any action taken, suffered, or omitted by it in reliance on any Warrant or other document or instrument believed by it in good faith to be genuine, and to have been signed or presented by the proper party or parties, (ii) responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in any Warrant, or (iii) liable for any act or omission in connection with this Agreement except for its own negligence or willful misconduct. 10.3. Advice of Counsel The Warrant Agent, may, at any time, consult with counsel satisfactory to it (who may be counsel for the Company) and shall incur no liability or responsibility for any action taken, suffered or omitted by it in good faith in accordance with the opinion or advice of such counsel. 10.4. Effect of Order of the Company Any notice, statement, instruction, request, direction, order, or demand of the Company shall be sufficiently evidenced by an instrument signed by any of the Chairman of the Board, Chairman & CEO, Secretary, or Assistant Secretary (unless other evidence in respect thereof is herein specifically prescribed). The Warrant Agent shall not be liable for any action taken, suffered, or omitted by it in accordance with such notice, statement, instruction, request, direction, order, or demand. 10.5. Compensation and Fees The Company agrees to pay the Warrant Agent reasonable compensation for its services hereunder and to reimburse it for its reasonable expenses hereunder, which compensation for the first year during which this Agreement is in force, exclusive of expenses and such amount as shall be mutually agreed upon by the parties hereto during subsequent years; it further agrees to indemnify the Warrant Agent and save it harmless against any and all losses, expenses and liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution of its duties and powers hereunder except losses, expenses, and liabilities arising as a result of the Warrant Agent's negligence or willful misconduct. 10.6. Resignation The Warrant Agent may resign its duties and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent's own negligence or willful misconduct), after giving 30 days' prior written notice to the Company. At least 15 days' prior to the date such resignation is to become effective, the Warrant Agent shall cause a copy of such notice of resignation to be mailed to the Registered Holder of each Warrant at the Company's expense. Upon such resignation the Company shall appoint a new warrant agent in writing. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation by the resigning Warrant Agent, then the Registered Holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a new warrant agent. Any new warrant agent, whether appointed by the Company or by such court, shall be (i) a bank or trust company having a capital and surplus, as shown by its last published report to its stockholders, of not less than $10,000,000 or (ii) a stock transfer company. After acceptance of such appointment by the new warrant agent is received by the Company, such new warrant agent shall be vested with the same powers, duties, rights, and responsibilities as if it had been originally named herein as Warrant Agent, without any further assurance, conveyance, act or deed; but if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act, or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the resigning warrant agent. No later than the effective date of any such appointment, the Company shall file notice thereof with the resigning warrant agent and shall forthwith cause a copy of such notice to be mailed to the Registered Holder of each Warrant. 10.7. Termination The Company may terminate the Warrant Agent hereunder and be discharged from all further duties and liabilities hereunder (except liabilities for the Warrant Agent's then-due compensation and expenses), after giving 90 days' prior written notice to the Warrant Agent. 10.8. Successors Any corporation into which the Warrant Agent or any new warrant agent may be converted or merged, or any corporation resulting from any consolidation to which the Warrant Agent (or any new warrant agent) shall be a party, or any corporation succeeding to the corporate trust business of the Warrant Agent shall be a successor warrant agent under this Agreement without any further act, provided that such corporation is eligible for appointment as successor to the Warrant Agent under the provisions of the preceding paragraph 10.6. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed to the Company and to the Registered Holder of each Warrant. 10.9. Permitted Transactions The Warrant Agent, its subsidiaries and affiliates, and any of its or their officers or directors, may buy and hold or sell Warrants or other securities of the Company and otherwise deal with the Company in the same manner and to the same extent as though the Warrant Agent were not the warrant agent hereunder. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. SECTION 11 Rights of the Registered Holder No Registered Holder shall, by virtue hereof, be entitled to any rights of a shareholder in the company, either at law or equity. The rights of the Registered Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth in this Agreement and in the Warrant Certificates. SECTION 12 General Provisions 12.1. Entire Agreement; Modification; Waivers This Agreement contains the entire agreement of the parties, and supersedes any prior agreements with respect to its subject matter. Except for the provisions of subsection 4.2, the Warrant Agent and the Company, by supplemental agreement, may make any changes in this Agreement (i) that they shall deem appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error herein contained; or (ii) that they may deem necessary or desirable and that shall not adversely affect the interests of the Registered Holders of Warrant Certificates (this provision, for instance, shall permit the Exercise Price to be decreased at the Company's option). 12.2. Notices All notices given under this Agreement shall be in writing, addressed to the parties as set forth below, and shall be effective on the earliest of (i) the date received, or (ii) on the second business day after delivery to a major international air delivery or air courier service (such as Federal Express or Network Couriers): If to the Company: Aztec Communications Group, Inc. 770 South Post Oak Lane, # 435 Houston, Texas 77056 If to the Registered Holder At the address of such holder as shown on the registry books maintained by the Warrant Agent If to the Warrant Agent: Cottonwood Stock Transfer Corporation 5199 South State Street Salt Lake City, Utah 84107 12.3. Governing Law This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada; provided, however, that if any provision of this Agreement is unenforceable under such law but is enforceable under the laws of the State of Delaware, then Delaware law shall govern the construction and enforcement of that provision. 12.4. Jurisdiction and Venue The courts of the State of Delaware, (the "Delaware Courts") shall have exclusive jurisdiction to hear, adjudicate, decide, determine and enter final judgment in any action, suit, proceeding, case, controversy or dispute, whether at law or in equity or both, and whether in contract or tort or both, arising out of or related to this Agreement, or the construction or enforcement hereof or thereof (any such action, suit, proceeding, case, controversy or dispute, a "Related Action"). The Company and the Registered Holder hereby irrevocably consent and submit to the exclusive personal jurisdiction of the Delaware Courts to hear, adjudicate, decide, determine and enter final judgment in any Related Action. The Company and the Registered Holder hereby irrevocably waive and agree not to assert any right or claim that it is not personally subject to the jurisdiction of the Delaware Courts in any Related Action, including any claim of forum non conveniens or that the Delaware Courts are not the proper venue or form to adjudicate any Related Action. If any Related Action is brought or maintained in any court other than the Delaware Courts, then that court shall, at the request of the Company or the Registered Holder, dismiss that action. 12.5. Specific Performance The Company hereby acknowledges and agrees that it is difficult, if not impossible to measure in money the damages that will accrue to the Registered Holder by reason of a failure to issue the Shares under this Agreement, and that the Registered Holder may seek to specifically enforce the Company's obligation to issue the Shares. Therefore, if the Registered Holder shall institute any action or proceeding to enforce the provisions hereof, the Company hereby waives all claims or defenses therein that the Registered Holder has an adequate remedy at law, and hereby agrees not to assert or otherwise raise any such claim or defense. 12.6. Waiver of Jury Trial The Company and the Registered Holder hereby waive trial by jury in any Related Action. 12.7. Attorney's Fees The prevailing party in any Related Action shall be entitled to recover that party's costs of suit, including reasonable attorney's fees. 12.8. Binding Effect This Agreement shall be binding on, and shall inure to the benefit of the parties and their respective successors in interest. 12.9. Construction, Counterparts This Agreement shall be construed as a whole and in favor of the validity and enforceability of each of its provisions, so as to carry out the intent of the parties as expressed herein. Heading are for the convenience of reference, and the meaning and interpretation of the text of any provision shall take precedence over its heading. This Agreement may be signed in one or more counterparts, each of which shall constitute an original, but all of which, taken together shall constitute one agreement. A faxed copy or photocopy of a party's signature shall be deemed an original for all purposes. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. The Company: Aztec Communications Group, Inc. By: ---------------------------- L. Mychal Jefferson, II, CEO The Warrant Agent: Cottonwood Stock Transfer Corporation By ________________________________ Name______________________________ Title_______________________________ EX-10.5 8 exhibit10-5.txt AGREEMENT FOR SALE OF LLC MEMBERSHIP UNITS Exhibit 10.5 Agreement for Sale of LLC Membership Units AGREEMENT FOR SALE OF LLC MEMBERSHIP UNITS -------------------- MEMBERSHIP UNIT PURCHASE AGREEMENT made and entered into as of September 15, 2004, by and between SBI Oil and Gas Resource Exploration LLC, a Delaware limited liability company (the "Seller") and Aztec Oil & Gas, Inc., a Nevada corporation (the "Buyer"). Whereas, the Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, a 31.283% membership unit interest (the "Units") in Z2, LLC, a Florida limited liability company ("Z2") on the terms and conditions set forth herein; Now, therefore, in consideration of the mutual covenants, agreements, undertakings, representations, and warranties contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Seller and the Buyer agree as follows: 1. Sale and Purchase of Membership Units. At the Closing provided for in Paragraph 3, the Seller shall sell and transfer the Units to the Buyer against payment by the Buyer of the Purchase Price provided for in Paragraph 2. 2. Purchase Price of Membership Units. The Purchase Price for the Units is: (a) The assumption and agreement to pay the unpaid balance of the Purchase Price Obligation in the amount of Two Hundred Sixty-Five Thousand Dollars ($265,000) described in that certain agreement for sale of 8.083 LLC Membership Units dated August 1, 2004 by and between Business and Financial Consultants, LLC, a Florida limited liability company, as Seller, and SBI Oil and Gas Resource Exploration, LLC, a Delaware limited liability company, as Buyer. (b) The execution and delivery by Buyer of a Promissory Note in the original principal amount of Two Hundred Fifty Thousand Dollars ($250,000) payable on or before the expiration of two years after date and convertible, at the option of the holder, into Two Hundred Fifty Thousand (250,000) shares of common stock of Buyer in the form and substance attached hereto as Exhibit A. (c) Four Hundred Thousand (400,000) shares of common stock of Buyer bearing the following restrictive legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS. 3. Closing. The Closing of the sale and purchase of the Units shall take place in Houston, Texas on such date and at such time as the Parties shall agree, with an effective date of September 15, 2004. At the Closing, the Seller shall deliver to the Buyer the original Membership Certificate, a copy of which is attached as Exhibit B, representing the Units, duly endorsed to the Buyer or as the Buyer may direct. At the Closing, the Seller and the Buyer shall execute and deliver an Assignment of Limited Liability Company Interest with respect to the Units (the "Assignment Document"), and the Seller shall obtain and deliver the signatures to such Assignment Document by all members of Z2 indicating their consent to the transfer of the Units and the admission of the Buyer as a member of Z2. 4. Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer as follows: (a) Organization and Qualification. Z2 is a duly organized and validly existing limited liability company under the laws of the State of Florida. Z2 has the power, authority and capacity to own, lease and operate its properties, and to carry on its business, as the same is now being conducted. Z2 is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to do so would not have an adverse material effect on Z2. The total outstanding equity ownership of Z2 consists of 100 membership units. (b) The Units. The Seller is the lawful owner of the Units, and the Seller has the full power and authority to sell such Units, free and clear of any liens or encumbrances whatsoever. All of the Units have been validly issued and are fully paid and nonassessable and not subject to any capital call or requirement to make any further capital contribution to Z2, except as provided in the Z2, LLC Agreement Between Equity Holders among the members of Z2 dated May 17, 2004 (the "Equity Holders' Agreement"). No person has any present or future right (conditional, preemptive or otherwise) to acquire any of the Units which has not been effectively waived with respect to the sale and transfer contemplated hereby. (c) Due Authorization; Enforceability. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (including, without limitation, the sale and transfer of the Units) has been duly authorized by all requisite action on the part of the managers and members of the Seller. This Agreement constitutes the valid and binding obligation of the Seller, enforceable in accordance with its terms. (d) No Breach or Conflict. The sale of the Units contemplated by this Agreement does not conflict with, or result in a breach of, or a default under, the Operating Agreement of Z2 or any agreement or instrument to which Z2 or the Seller is a party or by which Z2 or the Seller or the Units are bound. (e) Access to Information and Full Disclosure. The Seller has provided, and until the Closing will continue to provide, to the Buyer the opportunity to ask questions of and receive answers from representatives of Z2 concerning the business and prospects of Z2 and to obtain any additional information necessary to verify the information provided to the Buyer or otherwise relative to the finances and business of Z2, to the extent that the Seller possesses such information or can acquire it without unreasonable effort or expense. The Seller is not aware of any material fact regarding Z2, the business and prospects of Z2, or the industry in which Z2 operates which has not been disclosed to the Buyer. 5. Representations and Warranties of the Buyer. The Buyer represents and warrants to the Seller as follows: (a) Organization and Qualification. Buyer is a duly organized and validly existing limited liability company under the laws of the State of Nevada. Buyer has the power, authority and capacity to own, lease and operate its properties, and to carry on its business, as the same is now being conducted. (b) Due Authorization; Enforceability. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (including, without limitation, the sale and transfer of the Units) has been duly authorized by all requisite action on the part of the board of directors of the Buyer. This Agreement constitutes the valid and binding obligation of the Buyer, enforceable in accordance with its terms. (c) No Breach or Conflict. The sale of the Units contemplated by this Agreement does not conflict with, or result in a breach of, or a default under any agreement or instrument to which Buyer is a party or by which Buyer is bound. (d) Investment Intent. The Buyer is purchasing the Units for investment and has no present intent of engaging in a distribution (as such term is defined in the Securities Act of 1933, as amended) of such Units. (e) Knowledge and Experience. The Buyer is an "accredited investor" (as such term is defined in Registration D under the Securities Act of 1933, as amended), is knowledgeable and experienced in businesses of the sort conducted by Z2, and acknowledges that it has had the opportunity to make inquiry of management of Z2 concerning the business and financial condition of Z2 and has received answers to its inquiries that it considers fully responsive and satisfactory. (f) Investment Risk. The Buyer understands that the Units have not been registered under the Securities Act of 1933, as amended, were acquired by the Seller in a transaction exempt from the provisions of such Act, and are being sold and transferred to the Buyer in a transaction which the Seller (in reliance on the representations and warranties made by the Buyer herein) believes is exempt from such registration requirements; that there is no public market for the Units; and that the Buyer may be required to hold the Units indefinitely. The Buyer is capable of evaluating the merits and risks involved in the acquisition of the Units and is capable of bearing the economic risk of such investment. (g) Shares Duly Authorized. The 400,000 shares of common stock of Buyer described in paragraph 2(c) hereinabove, have been duly authorized and, when delivered to Seller, will be validly issued, fully paid and non-assessable shares of common stock of Buyer. 6. Corporate Governance. The Seller and the Buyer agree that the Buyer is acquiring the Units subject to the terms of the Equity Holders' Agreement and of the Articles of Organization and Regulations of Z2. 7. Provisions to Survive Delivery. The representations, warranties, covenants, indemnities, understandings, agreements, and other statements of the Seller and the Buyer set forth in, or made in connection with, this Agreement and the sale of the Units contemplated hereby, shall survive transfer of, and payment for, the Units. 8 Governing Law. This Agreement shall be construed in accordance with the laws of the State of Texas. All questions with respect to the construction of this Agreement and the rights and liabilities of the parties to this Agreement shall be governed by the laws of the State of Texas. Any action or proceeding arising out of or relating to this Agreement shall be brought in the State of Texas. 9. Assignment. Neither this Agreement nor any interest of any party herein may be assigned, pledged or transferred without the prior written consent of the parties hereto and subject to the provisions outlined in the Equity Holders' Agreement. 10. Binding Effect. This Agreement shall inure to the benefit of, and is binding upon, the parties hereto, and their respective heirs, representatives, successors, assigns, and controlling person, but nothing herein shall be construed as an authorization or right of any party to assign its rights and obligations under this Agreement. 11. Waiver. No waiver of any provision hereof shall be valid unless it is in writing and signed by the person against whom it is charged. 12. Notice. Any notice or demand required or permitted to be given pursuant hereto must be in writing delivered personally or mailed by certified mail, postage prepaid, addressed to the person at the address specified below, or at an address changed in this manner. If to the Buyer: L. Mychal Jefferson, II, CEO Aztec Oil & Gas, Inc. 770 South Post Oak Lane, Suite 435 Houston, Texas 77056 With a copy to: Robert L. Sonfield, Jr., Esq. Sonfield & Sonfield 770 South Post Oak Lane, Suite 435 Houston, Texas 77056 If to the Seller: Matthew McGovern SBI-USA LLC 610 Newport Center Drive, Suite 1205 Newport Beach, California 92660 With a copy to: Melissa A. Mahler, Esq. Nixon Peabody LLP Clinton Square P.O. Box 31051 Rochester, New York 14603 13. Entire Agreement. This Agreement constitutes the entire agreement upon the parties hereto with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the 15th day of September, 2004. SBI Oil and Gas Resource Exploration LLC By _______________________________ Shelly Singhal Aztec Oil & Gas, Inc. By _______________________________ L. Mychal Jefferson, II, CEO By _______________________________ Robert L. Sonfield, Jr. Attorney-In-Fact Exhibit 10.6 - Term Credit Agreement TERM CREDIT AGREEMENT THIS TERM CREDIT AGREEMENT (this "Agreement") is made and entered into as of August 12, 2004, by and between Aztec OIL & GAS, Inc., FKA Aztec Communications Inc. ("Borrower") and HONG KONG LEAGUE CENTRAL CREDIT UNION ("Lender"), with reference to the following: WITNESSETH: WHEREAS, Lender desires to make a Term Loan to Borrower, and Borrower desires to borrow from Lender the amount of such Term Loan, subject to and in accordance with the terms and conditions set forth herein, and in the Term Note Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the delivery, receipt, and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Business Day" means a day (a) other than Saturday or Sunday, and (b) on which commercial banks are open for business in New York, New York, and Los Angeles, California. "Closing Date" means the date each of the conditions precedent set forth in Section 5 hereof is fully satisfied. "Event of Default" has the meaning set forth in Section 8. "Interest Rate" has the meaning set forth in Section 2(c). "Maturity Date" has the meaning set forth in Section 2(b). "Note" has the meaning set forth in Section 2(d). "Person" means an individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization or any other juridical entity. "Term Loan" has the meaning set forth in Section 2(a). 2. Amount and Terms of the Term Loan. (a) Term Loan Advance. Subject to the terms and conditions of this Agreement, Lender hereby agrees to make a loan to Borrower (the "Term Loan") on the Closing Date m the principal amount of One Million Nine Hundred Fifty Thousand U.S. Dollars (U.S.$ 1,950,000), which amount may be repaid at any time prior to the Maturity Date without premium or penalty, but may not be reborrowed once repaid. 1 (b) Term. All unpaid principal and accrued but unpaid interest of the Term Loan shall, subject to subsection (c) below, be payable in full on July 31, 2005 (the "Maturity Date"). (c) Interest Rate and Interest Payments. Borrower shall pay interest on the unpaid principal amount of the Term Loan from the Closing Date until the Maturity Date, at a rate equal to ten percent (10.0) per annum (the "Interest Rate"). Subject to Section 2(e) and 2(g) below, interest on the outstanding principal amount of the Term Loan shall be due and payable to Lender in arrears on the last Business Day of each calendar month, commencing on the first of such dates following the Closing Date until the Maturity Date, at which time all accrued but unpaid interest shall be due and payable. (d) Promissory Note. The Term Loan shall be evidenced by a promissory note (the "Note") in the form of Exhibit "A" attached hereto, duly executed and delivered to Lender by Borrower. (e) Interest on Event of Default. Upon the occurrence and during the continuance of an Event of Default, Borrower agrees to pay interest on the entire unpaid principal amount of the Term Loan, as well as on any interest or other amount past due, from the date of such Event of Default until the date the same is cured in full, payable on demand, at a fluctuating rate per annum equal at all times to the Interest Rate plus two percent (2.0). (f) Manner of Payment. All payments of principal or interest hereunder or under the Note shall be delivered to Lender in immediately available funds on the date due at such place as Lender may from time to time designate. (g) Limitation on Interest Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder and charged or collected by Lender or any holder of the Note exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that Lender has charged or received interest hereunder or under the Note in excess of the highest applicable rate, the rate in effect hereunder and under the Note shall automatically be reduced to the maximum rate permitted by applicable law and Lender shall apply all interest paid in excess of the maximum lawful rate to the principal balance of the amounts outstanding hereunder and under the Note. It is the intent of the parties hereto that Borrower not pay or contract to pay, and that Lender not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by Borrower to Lender under applicable law. 3. Representations and Warranties, hi order to induce Lender to enter into this Agreement and to make the Term Loan contemplated hereunder. Borrower hereby represents and wan-ants to Lender as follows: (a) Legal Status. Borrower is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware. Borrower is qualified or licensed to do business, and is in good standing as a 2 foreign corporation in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on Borrower. (b) Authorization and Validity. This Agreement and the Note have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof and thereof will constitute legal, valid and binding agreements and obligations of Borrower, enforceable in accordance with their respective terms. (c) No Conflict. The execution, delivery, and performance by Borrower of this Agreement and the Note do not and will not conflict with the terms of the Certificate of Incorporation or bylaws of Borrower, violate any provision of any judgment, decree or order of any court or governmental authority by which Borrower is bound, or any provision of any law or regulation applicable to Borrower, or result in a breach of or constitute a default under any contract, obligation, indenture, or other instrument to which Borrower is a party or by which Borrower may be bound. (d) No Consents. The execution, delivery, and performance by Borrower of this Agreement and the Note do not and will not require any authorization, approval, or other action by, or notice to or filing with, any governmental authority, regulatory body, or any other person or entity. (e) Use of Proceeds. No proceeds of the Term Loan will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. (f) Margin Stock. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation G or U issued by the Board of Governors of the Federal Reserve System), and no proceeds of the Term Loan will be used to purchase or carry any margin stock or extend credit to others for the purpose of purchasing or carrying any margin stock, or be used for any purpose which violates or is inconsistent with the provisions of Regulation X of said Board of Governors. 4. Covenants. Borrower hereby covenants that until all amounts outstanding hereunder and under the Note have been indefeasibly paid in full, it shall: (a) Punctual Payments. Punctually pay the interest and principal with respect to the Term Loan as provided herein and in the Note. (b) Existence. Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence and comply with the provisions of all documents pursuant to which it is organized and/or which govern its continued existence; maintain all licenses, permits, governmental approvals, rights, privileges, and franchises necessary for the conduct of its business; and conduct its business in an orderly and regular manner and in accordance with all laws, rules, regulations, and orders of any governmental authority having jurisdiction over it or its business. (c) Books and Records. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, 3 and permit any representative of Lender, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect its assets and properties. 5. Conditions Precedent to Term Loan. The obligation of Lender to make the Term Loan shall be subject to the condition precedent that Lender shall have received each of the following, each in form and substance satisfactory to Lender: (a) This Agreement, duly executed by all of the parties hereto; (b) The Note, duly executed by Borrower; (c) Such additional supporting documents as Lender or its counsel may reasonably request. 6. Survival of Representations and Warranties. Borrower covenants, warrants and represents to Lender that all representations and warranties of Borrower contained in this Agreement or the Note shall be true at the time of Borrower's execution of this Agreement and the Note, and shall survive the execution, delivery and acceptance thereof by Lender and the parties thereto and the closing of the transactions described therein or related thereto. 7. Events of Default. The occurrence of any of the following shall constitute an "Event of Default" and shall, at the option of Lender, require immediate payment in full of all sums then remaining unpaid hereunder and under the Note: (a) Failure to Pay the Note. The failure of Borrower to pay any principal, interest or other amount due under the Note when due and payable. (b) Breach of Covenant. Representation or Warranty. The failure of Borrower to perform or observe any covenant, condition or agreement contained in this Agreement (other than the payment obligations, the breach of which shall be governed by subsection (a) above) where such failure is not cured within five (5) Business Days, or any representation or warranty made or deemed made by any of them under or in connection with this Agreement, shall prove to have been false or misleading in any material respect when made. (c) Non-Payment of Indebtedness. Borrower shall default in the payment when due of any indebtedness for borrowed money if the effect of any such default is to cause or permit the acceleration of such indebtedness, or to permit the holder of any note evidencing such indebtedness to cause the same to become due prior to its stated maturity. (d) Insolvency. Borrower shall become insolvent; admit in writing its inability to pay its debts as they mature; make an assignment for the benefit of creditors; or if bankruptcy proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against it and, if instituted against it, the same is not dismissed within thirty (30) days of the filing thereof. (e) Dissolution. Any order, judgment, or decree shall be entered against Borrower decreeing its involuntary dissolution or split up and such 4 order shall remain undischarged and unstayed for a period in excess of thirty (30) days; or Borrower shall otherwise dissolve or cease to exist. 8. Remedies. If an Event of Default shall occur, all amounts outstanding hereunder or under the Note, notwithstanding any term of this Agreement or the Note to the contrary, shall at Lender's option and without notice to Borrower become immediately due and payable, without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by Borrower. All rights, powers and remedies of Lender in connection with this Agreement and the Note may be exercised at any time by Lender and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity. 9. Miscellaneous. (a) Failure or Indulgence Not Waiver. No failure or delay on the part of Lender, or any holder of the Note in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof or of any other right, power or privilege. (b) Modification. No modification, amendment or waiver of any provision of this Agreement or the Note, nor the consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall have been approved by Lender and shall be in writing signed by Lender and, with respect to any amendment, Borrower. Such waiver or consent shall then be effective only in the specific instance and for the purpose for which given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in the same, similar or other circumstances. (c) Notices. Except as otherwise expressly provided herein, any notice herein required or permitted to be given shall be in writing and shall be deemed effective when personally delivered, mailed, telecopied (with a confirming copy sent by mail) or delivered by telex to the appropriate party at the address set forth below (or at such other address as may be designated by either party in a written notice sent in accordance with this Section): If to Borrower: Aztec Oil & Gas, Inc. 3730 Kirby Drive, Suite 1200 Houston, TX 77098 Telecopy No.: 949-679-7280 If to Lender: Hong Kong League Central Credit Union c/o Bermuda Trust (Hong Kong) Limited 44/F Edinburgh Tower The Landmark, 15 Queen's Road C Hong Kong with a copy to: SBI Advisors, LLC 2361 Campus Drive, Suite 210 5 Irvine.CA 92612 Telecopy No.: 949-679-7280 (d) Severability. In case any provision in this Agreement or the Note shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of such contract and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. (e) Applicable Law. This Agreement and the Note, and the rights and obligations of the parties thereto, shall be governed by the laws of the State of California, exclusive of its conflicts of laws and choice of laws rules that would or may cause the application of the laws of any jurisdiction other than the State of California. (f) Assignabilitv. Borrower shall not assign its rights or obligations hereunder, or under the Note to any other Person without the prior written consent of Lender, and any attempted assignment in violation hereof shall be null and void ab initio. Lender shall have the right to assign their rights and obligations hereunder and no consent or approval from Borrower is required in connection with any such assignment. (g) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (h) Section Headings. The various headings used in this Agreement are inserted for convenience only and shall not affect the meaning or interpretations of this Agreement or any provision hereof. (i) Attorneys' Fees. In the event any party institutes any action or proceeding to enforce the terms and conditions of this Agreement or the Note, the prevailing party shall be entitled to reasonable attorneys' fees and costs. (j) WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE NOTE OR THE SUBJECT MATTER HEREOF AND THEREOF OR ANY DOCUMENT RELATING HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT, TORT OR OTHERWISE. (k) Integration. This Agreement and the Note reflect the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, whether before or after the date hereof. 6 IN WITNESS WHEREOF, the parties hereto do execute this Agreement as of the date first above written. "BORROWER" AZTEC OIL & GAS, INC., FKA AZTEC COMMUNICATIONS, INC. L. Mychal Jeffe3rson, President By: /s/ Robert L. Sonfield, Jr. -------------------------- Name: Robert L. Sonfield, Jr. Its: Attorney-in-Fact "LENDER" HONG KONG LEAGUE CENTRAL CREDIT UNION By:_________________________ Name:________________________ Its:_________________________ 7 EXHIBITS Exhibit "A" - Term Note Exhibit A to the Term Credit Agreement FORM OF TERM NOTE TERM NOTE --------- Los Angeles, California U.S.$1,950,000 August 12, 2004 FOR VALUE RECEIVED, the undersigned, AZTEC OIL & GAS, INC., FKA AZTEC COMMUNICATIONS, INC. a Nevada corporation (the "Borrower") HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of HONG KONG LEAGUE CENTRAL CREDIT UNION (the "Lender"), without offset or counterclaim, the principal sum of ONE MILLION NINE HUNDRED FIFTY THOUSAND U.S. DOLLARS (U.S.$1,950,000) on or before the Maturity Date (as such term is defined in the Credit Agreement referred to below). The Borrower further promises to pay interest on the Term Loan outstanding hereunder from time to time at the interest rates, and payable on the dates, set forth in the Credit Agreement referred to below. This Term Note may be prepaid at any time prior to the Maturity Date without premium or penalty. 1. Payment. Both principal and interest are payable in lawful money of the United States of America and in immediately available funds to the Lender at c/o Bermuda Trust (Hong Kong) Limited, 44/F Edinburgh Tower, The Landmark, 15 Queen's Road C, Hong Kong, or such other place as the Lender may designate in writing to the Borrower from time to time. 2. Record Keeping. The Lender shall record the amount of principal and interest due and payable from time to time hereunder, each payment thereof and the resulting unpaid principal balance hereof, in the Lender's internal records, and any such recordation shall be rebuttable presumptive evidence of the accuracy of the information so recorded; provided, however, that the Lender's failure so to record shall not limit or otherwise affect the obligations of the Borrower hereunder and under the Credit Agreement to repay the principal of and interest on the Term Loan. 3. Credit Agreement. This Term Note is the Note referred to in, and is subject to and entitled to the benefits of, that certain Term Credit Agreement, dated of even date herewith (as amended, modified, renewed or extended from time to time, the "Credit Agreement") between the Borrower and the Lender. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement. The Credit Agreement provides, among other things, for acceleration (which in certain cases shall be automatic) of the maturity hereof upon the occurrence of certain stated events, in each case without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived. 4. Limitation on Interest Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under the 1 Credit Agreement and charged or collected by the Lender or any holder of this Term Note exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Lender has charged or received interest hereunder or under the Credit Agreement in excess of the highest applicable rate, the rate in effect hereunder and under the Credit Agreement shall automatically be reduced to the maximum rate permitted by applicable law and the Lender shall apply all interest paid in excess of the maximum lawful rate to reduce the principal balance of the amounts outstanding hereunder and under the Credit Agreement. It is the intent of the parties hereto that the Borrower not pay or contract to pay, and that the Lender not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of the maximum rate of interest that may be paid by the Borrower to the Lender under applicable law. 5. Governing Law. THIS TERM NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, EXCLUSIVE OF ITS CONFLICTS OF LAWS AND CHOICE OF LAWS RULES THAT WOULD OR MAY CAUSE THE APPICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. AZTEC OIL GAS, INC. By: ----------------------- Name: ----------------------- Its: ----------------------- 2 EX-10.6 9 exhibit10-6.txt TERM CREDIT AGREEMENT Exhibit 10.6 - Term Credit Agreement TERM CREDIT AGREEMENT THIS TERM CREDIT AGREEMENT (this "Agreement") is made and entered into as of August 12, 2004, by and between Aztec OIL & GAS, Inc., FKA Aztec Communications Inc. ("Borrower") and HONG KONG LEAGUE CENTRAL CREDIT UNION ("Lender"), with reference to the following: WITNESSETH: WHEREAS, Lender desires to make a Term Loan to Borrower, and Borrower desires to borrow from Lender the amount of such Term Loan, subject to and in accordance with the terms and conditions set forth herein, and in the Term Note Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the delivery, receipt, and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Business Day" means a day (a) other than Saturday or Sunday, and (b) on which commercial banks are open for business in New York, New York, and Los Angeles, California. "Closing Date" means the date each of the conditions precedent set forth in Section 5 hereof is fully satisfied. "Event of Default" has the meaning set forth in Section 8. "Interest Rate" has the meaning set forth in Section 2(c). "Maturity Date" has the meaning set forth in Section 2(b). "Note" has the meaning set forth in Section 2(d). "Person" means an individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization or any other juridical entity. "Term Loan" has the meaning set forth in Section 2(a). 2. Amount and Terms of the Term Loan. (a) Term Loan Advance. Subject to the terms and conditions of this Agreement, Lender hereby agrees to make a loan to Borrower (the "Term Loan") on the Closing Date m the principal amount of One Million Nine Hundred Fifty Thousand U.S. Dollars (U.S.$ 1,950,000), which amount may be repaid at any time prior to the Maturity Date without premium or penalty, but may not be reborrowed once repaid. 1 (b) Term. All unpaid principal and accrued but unpaid interest of the Term Loan shall, subject to subsection (c) below, be payable in full on July 31, 2005 (the "Maturity Date"). (c) Interest Rate and Interest Payments. Borrower shall pay interest on the unpaid principal amount of the Term Loan from the Closing Date until the Maturity Date, at a rate equal to ten percent (10.0) per annum (the "Interest Rate"). Subject to Section 2(e) and 2(g) below, interest on the outstanding principal amount of the Term Loan shall be due and payable to Lender in arrears on the last Business Day of each calendar month, commencing on the first of such dates following the Closing Date until the Maturity Date, at which time all accrued but unpaid interest shall be due and payable. (d) Promissory Note. The Term Loan shall be evidenced by a promissory note (the "Note") in the form of Exhibit "A" attached hereto, duly executed and delivered to Lender by Borrower. (e) Interest on Event of Default. Upon the occurrence and during the continuance of an Event of Default, Borrower agrees to pay interest on the entire unpaid principal amount of the Term Loan, as well as on any interest or other amount past due, from the date of such Event of Default until the date the same is cured in full, payable on demand, at a fluctuating rate per annum equal at all times to the Interest Rate plus two percent (2.0). (f) Manner of Payment. All payments of principal or interest hereunder or under the Note shall be delivered to Lender in immediately available funds on the date due at such place as Lender may from time to time designate. (g) Limitation on Interest Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder and charged or collected by Lender or any holder of the Note exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that Lender has charged or received interest hereunder or under the Note in excess of the highest applicable rate, the rate in effect hereunder and under the Note shall automatically be reduced to the maximum rate permitted by applicable law and Lender shall apply all interest paid in excess of the maximum lawful rate to the principal balance of the amounts outstanding hereunder and under the Note. It is the intent of the parties hereto that Borrower not pay or contract to pay, and that Lender not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by Borrower to Lender under applicable law. 3. Representations and Warranties, hi order to induce Lender to enter into this Agreement and to make the Term Loan contemplated hereunder. Borrower hereby represents and wan-ants to Lender as follows: (a) Legal Status. Borrower is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware. Borrower is qualified or licensed to do business, and is in good standing as a 2 foreign corporation in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on Borrower. (b) Authorization and Validity. This Agreement and the Note have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof and thereof will constitute legal, valid and binding agreements and obligations of Borrower, enforceable in accordance with their respective terms. (c) No Conflict. The execution, delivery, and performance by Borrower of this Agreement and the Note do not and will not conflict with the terms of the Certificate of Incorporation or bylaws of Borrower, violate any provision of any judgment, decree or order of any court or governmental authority by which Borrower is bound, or any provision of any law or regulation applicable to Borrower, or result in a breach of or constitute a default under any contract, obligation, indenture, or other instrument to which Borrower is a party or by which Borrower may be bound. (d) No Consents. The execution, delivery, and performance by Borrower of this Agreement and the Note do not and will not require any authorization, approval, or other action by, or notice to or filing with, any governmental authority, regulatory body, or any other person or entity. (e) Use of Proceeds. No proceeds of the Term Loan will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. (f) Margin Stock. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation G or U issued by the Board of Governors of the Federal Reserve System), and no proceeds of the Term Loan will be used to purchase or carry any margin stock or extend credit to others for the purpose of purchasing or carrying any margin stock, or be used for any purpose which violates or is inconsistent with the provisions of Regulation X of said Board of Governors. 4. Covenants. Borrower hereby covenants that until all amounts outstanding hereunder and under the Note have been indefeasibly paid in full, it shall: (a) Punctual Payments. Punctually pay the interest and principal with respect to the Term Loan as provided herein and in the Note. (b) Existence. Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence and comply with the provisions of all documents pursuant to which it is organized and/or which govern its continued existence; maintain all licenses, permits, governmental approvals, rights, privileges, and franchises necessary for the conduct of its business; and conduct its business in an orderly and regular manner and in accordance with all laws, rules, regulations, and orders of any governmental authority having jurisdiction over it or its business. (c) Books and Records. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, 3 and permit any representative of Lender, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect its assets and properties. 5. Conditions Precedent to Term Loan. The obligation of Lender to make the Term Loan shall be subject to the condition precedent that Lender shall have received each of the following, each in form and substance satisfactory to Lender: (a) This Agreement, duly executed by all of the parties hereto; (b) The Note, duly executed by Borrower; (c) Such additional supporting documents as Lender or its counsel may reasonably request. 6. Survival of Representations and Warranties. Borrower covenants, warrants and represents to Lender that all representations and warranties of Borrower contained in this Agreement or the Note shall be true at the time of Borrower's execution of this Agreement and the Note, and shall survive the execution, delivery and acceptance thereof by Lender and the parties thereto and the closing of the transactions described therein or related thereto. 7. Events of Default. The occurrence of any of the following shall constitute an "Event of Default" and shall, at the option of Lender, require immediate payment in full of all sums then remaining unpaid hereunder and under the Note: (a) Failure to Pay the Note. The failure of Borrower to pay any principal, interest or other amount due under the Note when due and payable. (b) Breach of Covenant. Representation or Warranty. The failure of Borrower to perform or observe any covenant, condition or agreement contained in this Agreement (other than the payment obligations, the breach of which shall be governed by subsection (a) above) where such failure is not cured within five (5) Business Days, or any representation or warranty made or deemed made by any of them under or in connection with this Agreement, shall prove to have been false or misleading in any material respect when made. (c) Non-Payment of Indebtedness. Borrower shall default in the payment when due of any indebtedness for borrowed money if the effect of any such default is to cause or permit the acceleration of such indebtedness, or to permit the holder of any note evidencing such indebtedness to cause the same to become due prior to its stated maturity. (d) Insolvency. Borrower shall become insolvent; admit in writing its inability to pay its debts as they mature; make an assignment for the benefit of creditors; or if bankruptcy proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against it and, if instituted against it, the same is not dismissed within thirty (30) days of the filing thereof. (e) Dissolution. Any order, judgment, or decree shall be entered against Borrower decreeing its involuntary dissolution or split up and such 4 order shall remain undischarged and unstayed for a period in excess of thirty (30) days; or Borrower shall otherwise dissolve or cease to exist. 8. Remedies. If an Event of Default shall occur, all amounts outstanding hereunder or under the Note, notwithstanding any term of this Agreement or the Note to the contrary, shall at Lender's option and without notice to Borrower become immediately due and payable, without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by Borrower. All rights, powers and remedies of Lender in connection with this Agreement and the Note may be exercised at any time by Lender and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity. 9. Miscellaneous. (a) Failure or Indulgence Not Waiver. No failure or delay on the part of Lender, or any holder of the Note in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof or of any other right, power or privilege. (b) Modification. No modification, amendment or waiver of any provision of this Agreement or the Note, nor the consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall have been approved by Lender and shall be in writing signed by Lender and, with respect to any amendment, Borrower. Such waiver or consent shall then be effective only in the specific instance and for the purpose for which given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in the same, similar or other circumstances. (c) Notices. Except as otherwise expressly provided herein, any notice herein required or permitted to be given shall be in writing and shall be deemed effective when personally delivered, mailed, telecopied (with a confirming copy sent by mail) or delivered by telex to the appropriate party at the address set forth below (or at such other address as may be designated by either party in a written notice sent in accordance with this Section): If to Borrower: Aztec Oil & Gas, Inc. 3730 Kirby Drive, Suite 1200 Houston, TX 77098 Telecopy No.: 949-679-7280 If to Lender: Hong Kong League Central Credit Union c/o Bermuda Trust (Hong Kong) Limited 44/F Edinburgh Tower The Landmark, 15 Queen's Road C Hong Kong with a copy to: SBI Advisors, LLC 2361 Campus Drive, Suite 210 5 Irvine.CA 92612 Telecopy No.: 949-679-7280 (d) Severability. In case any provision in this Agreement or the Note shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of such contract and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. (e) Applicable Law. This Agreement and the Note, and the rights and obligations of the parties thereto, shall be governed by the laws of the State of California, exclusive of its conflicts of laws and choice of laws rules that would or may cause the application of the laws of any jurisdiction other than the State of California. (f) Assignabilitv. Borrower shall not assign its rights or obligations hereunder, or under the Note to any other Person without the prior written consent of Lender, and any attempted assignment in violation hereof shall be null and void ab initio. Lender shall have the right to assign their rights and obligations hereunder and no consent or approval from Borrower is required in connection with any such assignment. (g) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (h) Section Headings. The various headings used in this Agreement are inserted for convenience only and shall not affect the meaning or interpretations of this Agreement or any provision hereof. (i) Attorneys' Fees. In the event any party institutes any action or proceeding to enforce the terms and conditions of this Agreement or the Note, the prevailing party shall be entitled to reasonable attorneys' fees and costs. (j) WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE NOTE OR THE SUBJECT MATTER HEREOF AND THEREOF OR ANY DOCUMENT RELATING HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT, TORT OR OTHERWISE. (k) Integration. This Agreement and the Note reflect the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, whether before or after the date hereof. 6 IN WITNESS WHEREOF, the parties hereto do execute this Agreement as of the date first above written. "BORROWER" AZTEC OIL & GAS, INC., FKA AZTEC COMMUNICATIONS, INC. L. Mychal Jeffe3rson, President By: /s/ Robert L. Sonfield, Jr. -------------------------- Name: Robert L. Sonfield, Jr. Its: Attorney-in-Fact "LENDER" HONG KONG LEAGUE CENTRAL CREDIT UNION By:_________________________ Name:________________________ Its:_________________________ 7 EXHIBITS Exhibit "A" - Term Note Exhibit A to the Term Credit Agreement FORM OF TERM NOTE TERM NOTE --------- Los Angeles, California U.S.$1,950,000 August 12, 2004 FOR VALUE RECEIVED, the undersigned, AZTEC OIL & GAS, INC., FKA AZTEC COMMUNICATIONS, INC. a Nevada corporation (the "Borrower") HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of HONG KONG LEAGUE CENTRAL CREDIT UNION (the "Lender"), without offset or counterclaim, the principal sum of ONE MILLION NINE HUNDRED FIFTY THOUSAND U.S. DOLLARS (U.S.$1,950,000) on or before the Maturity Date (as such term is defined in the Credit Agreement referred to below). The Borrower further promises to pay interest on the Term Loan outstanding hereunder from time to time at the interest rates, and payable on the dates, set forth in the Credit Agreement referred to below. This Term Note may be prepaid at any time prior to the Maturity Date without premium or penalty. 1. Payment. Both principal and interest are payable in lawful money of the United States of America and in immediately available funds to the Lender at c/o Bermuda Trust (Hong Kong) Limited, 44/F Edinburgh Tower, The Landmark, 15 Queen's Road C, Hong Kong, or such other place as the Lender may designate in writing to the Borrower from time to time. 2. Record Keeping. The Lender shall record the amount of principal and interest due and payable from time to time hereunder, each payment thereof and the resulting unpaid principal balance hereof, in the Lender's internal records, and any such recordation shall be rebuttable presumptive evidence of the accuracy of the information so recorded; provided, however, that the Lender's failure so to record shall not limit or otherwise affect the obligations of the Borrower hereunder and under the Credit Agreement to repay the principal of and interest on the Term Loan. 3. Credit Agreement. This Term Note is the Note referred to in, and is subject to and entitled to the benefits of, that certain Term Credit Agreement, dated of even date herewith (as amended, modified, renewed or extended from time to time, the "Credit Agreement") between the Borrower and the Lender. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement. The Credit Agreement provides, among other things, for acceleration (which in certain cases shall be automatic) of the maturity hereof upon the occurrence of certain stated events, in each case without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived. 4. Limitation on Interest Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under the 1 Credit Agreement and charged or collected by the Lender or any holder of this Term Note exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Lender has charged or received interest hereunder or under the Credit Agreement in excess of the highest applicable rate, the rate in effect hereunder and under the Credit Agreement shall automatically be reduced to the maximum rate permitted by applicable law and the Lender shall apply all interest paid in excess of the maximum lawful rate to reduce the principal balance of the amounts outstanding hereunder and under the Credit Agreement. It is the intent of the parties hereto that the Borrower not pay or contract to pay, and that the Lender not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of the maximum rate of interest that may be paid by the Borrower to the Lender under applicable law. 5. Governing Law. THIS TERM NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, EXCLUSIVE OF ITS CONFLICTS OF LAWS AND CHOICE OF LAWS RULES THAT WOULD OR MAY CAUSE THE APPICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. AZTEC OIL GAS, INC. By: ----------------------- Name: ----------------------- Its: ----------------------- 2 -----END PRIVACY-ENHANCED MESSAGE-----