Document:

ex103.htm

EXHIBIT 10.3

 

CONSULTING AGREEMENT

 

This Consulting Agreement (the “Agreement”) is entered into this ____ day of March, 2011 by and among EMERGING FUELS TECHNOLOGY INC. , a _______ corporation with a principal place of business located at 6024 S. 116th E. Avenue, Tulsa, Oklahoma  74146 (“EFT”), and CARBON SCIENCES INC., a Nevada corporation with a principal place of business located at Suite C, 5511 Ekwill Street, Santa Barbara, California, 93111 (the “Company”).

 

RECITALS

 

WHEREAS, the Company is in need of catalyst analysis assistance, catalyst enhancement, catalyst development and other consulting services related to the Company’s business of developing a commercial grade catalyst and related processes and technologies for the dry reforming of methane into synthesis gas (the “Technology Field”); and

 

WHEREAS, EFT has agreed to perform consulting work for the Company in providing technical / engineering support and consulting services and other related activities as directed by the Company and as specified in the February 11, 2011 Proposal to Carbon Sciences to Provide Laboratory Services to Support the Development of Catalytic Process to Convert CO2 and Methane to Syngas;

 

NOW, THEREFORE, for and in consideration of the premises, the mutual covenants, promises and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby covenant, promise and agree as follows:

 

1. EFT's Services. EFT shall be available and shall provide to the Company professional consulting services in the Technology Field, including prototype catalyst enhancement, commercial catalyst research and development, and engineering support (“Consulting services”) as requested. When requested by the Company, EFT agrees to render Consulting services to the Company for the term of this Agreement through the provision of the services of its employees, including but not limited to its principal owners, Kenneth Agee, Dr. Rafael Espinoza, and Dr. Kim Arcuri (the “EFT Employees”). EFT’s duties and obligations shall consist of such duties and obligations as reasonably requested by the Chief Executive Officer (“CEO”) of the Company. EFT also agrees to submit to the Company, in written form, any results of EFT’s work under this Agreement (“Results”) and all documentation of work performed under this Agreement upon request and in a timely manner.

 

  

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2. Consideration.

 

A. Rate.  In consideration for the Consulting Services to be performed by EFT under this Agreement, the Company will pay EFT at the standard rates as outlined in Exhibit A for time spent on Consulting Services. EFT shall submit written, signed reports of the time spent performing Consulting Services, itemizing in reasonable detail the dates on which services were performed, the number of hours spent on such dates and a brief description of the services rendered. The Company shall pay EFT the amounts due pursuant to submitted reports within 30 days of the EFT’s invoice date.

 

B. Expenses. Additionally, the Company will pay EFT for the following expenses if incurred while the Agreement between EFT and the Company exists and if the amounts are reasonable under the circumstances:

 

- All travel expenses to and from all work sites

 

- Meal expenses;

 

- Administrative expenses;

 

- Lodging Expenses if work demands overnight stays; and

 

- Miscellaneous travel-related expenses (parking and tolls)

 

EFT shall submit written documentation and receipts itemizing the amounts and dates on which expenses were incurred in a format and manner consistent with the Company’s expense reporting policy. The Company shall pay EFT the amounts due pursuant to submitted expense invoices within 30 days of the EFT’s invoice date.

 

3. Independent Contractor.  Nothing herein shall be construed to create an employer-employee relationship between the Company and EFT and/or the EFT Employees. EFT is an independent contractor and not an employee of the Company or any of its subsidiaries or affiliates. The consideration set forth in Section 2 shall be the sole consideration due EFT for the services rendered hereunder. It is understood that the Company will not withhold any amounts for payment of taxes from the compensation of EFT and/or the EFT Employees hereunder. EFT and/or the EFT Employees will not represent to be employees of the Company.

 

  

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4. Proprietary Information; Inventions; Confidentiality; Further Actions.

 

A. EFT understands that the Company possesses and will possess Proprietary Information, which is important to its business. For purposes of this Agreement, “Proprietary Information” is information that was developed, created, or discovered by or on behalf of the Company, or which became or will become known by, or was or is conveyed to the Company, which has commercial value in the Company’s business.  Proprietary Information includes, but is not limited to, information about software programs and subroutines, source and object code, algorithms, trade secrets, designs, technology, know-how, processes, data, ideas, techniques, inventions (whether patentable or not), works of authorship, formulas, business and product development plans, customer lists, terms of compensation and performance levels of Company EFTs, Company customers and other information concerning the Company’s actual or anticipated business, research or development, or which is received in confidence by or for the Company from any other person.  EFT understands that the contracting arrangement creates a relationship of confidence and trust between EFT and the Company with respect to Proprietary Information.

 

B. EFT understands that the Company possesses or will possess Company Documents and Materials, which are important to its business. For purposes of this Agreement, “Company Documents and Materials” are documents or other media that contain Proprietary Information or any other information concerning the business, operations or plans of the Company, whether such documents have been prepared by EFT or by others.  Company Documents and Materials include, but are not limited to, blueprints, drawings, photographs, charts, graphs, notebooks, customer lists, computer disks, sound recordings, tapes or printouts, and any printed, typewritten or handwritten documents, sample products, prototype and models.

 

C. All Proprietary Information and all patents, patent rights, copyrights, trade secret rights, trademark rights and other rights (including, without limitation, intellectual property rights) anywhere in the world in connection therewith is and shall be the sole property of the Company.  EFT hereby assigns to the Company any and all right, title and interest EFT may have or acquire in such Proprietary Information.  Any assignment of copyright hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights” (collectively “Moral Rights”).  To the extent such Moral Rights cannot be assigned under applicable law and to the extent the following is allowed by the laws in the various countries where Moral Rights exist, EFT hereby waives such Moral Rights and consents to any action consistent with the terms of this Agreement that would violate such Moral Rights in the absence of such consent.  EFT will confirm any such waivers and consents from time to time as requested by the Company.  At all times, both during the period EFT renders services to the Company and after the contracting arrangement is terminated, EFT will keep in confidence and trust and will not use or disclose any Proprietary Information without the prior written consent of an officer of the Company, except as may be necessary in the ordinary course of rendering services to the Company.

 

  

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D. All Company Documents and Materials are and shall be the sole property of the Company. EFT agrees that during the period EFT renders services to the Company, EFT will not remove any Company Documents and Materials from the business premises of the Company or deliver any Company Documents and Materials to any person or entity outside the Company, except as required to do in connection with rendering services to the Company. EFT further agrees that, immediately upon the Company's request and in any event upon completion of EFT's services to the Company or any termination of the contracting relationship by EFT or Company for any reason, EFT will return all Company Documents and Materials and any Company apparatus, equipment and other physical property, or any reproduction of such property, excepting only EFT’s copy of this Agreement.

 

E. EFT will promptly disclose in writing to the CEO of the Company, or to any other persons designated by the Company, all “Inventions.” For purposes of this Agreement, “Inventions” shall mean all improvements, inventions, works of authorship, computer programs, formulas, ideas, processes, designs, techniques, trade secrets, know-how and data, whether or not patentable, made or conceived or reduced to practice or developed by EFT on behalf of the Company in connection with the services provided to the Company hereunder, either alone or jointly with others, during the period.  EFT renders services to the Company.  EFT will also disclose to the CEO of the Company all things that would be Inventions if made during the period EFT renders Services to the Company, conceived, reduced to practice, or developed by EFT within 12 months of the completion of EFT’s services to the Company which resulted in whole or in part, from the EFT’s prior contracting arrangement with Company.  EFT will not disclose Inventions to any person outside the Company unless requested to do so by management personnel of the Company.

 

F. EFT agrees that all Inventions which EFT makes, discovers, conceives, reduces to practice or develops (in whole or in part, either alone or jointly with others) during the period EFT renders services to the Company shall be the sole property of the Company.  EFT agrees to assign and hereby assigns to the Company all rights to any such Inventions.  The Company shall be the sole owner of all patents, copyrights and other intellectual property or other rights in connection therewith.

 

  

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G. EFT agrees that if during the period EFT renders services to the Company, without the written permission of an officer of the Company, EFT incorporates into a product, process or machine an invention, development, or discovery owned by EFT, or in which EFT has an interest, the Company shall be and is hereby granted a worldwide, irrevocable, perpetual, non-exclusive, sublicenseable, transferable, fully paid-up, royalty-free license to practice such invention, development, or discovery and to make, have made, use, sell, lease, distribute or otherwise transfer such Invention, development, or discovery or any derivatives thereof as part of or in connection with any product, process or machine, without restriction to the extent of EFT’s ownership or interest in such invention, development, or discovery or any derivatives thereof.

 

H. EFT agrees to perform, during and after the period EFT renders services to the Company, all acts reasonably necessary to permit and assist the Company, without further compensation but at the Company’s expense, in further evidencing and perfecting the assignments made to the Company under this agreement and in obtaining, maintaining, defending and enforcing patents, patent rights, trade secret rights, copyrights, trademark rights or any other rights in connection with such Inventions and improvements thereto in any and all countries.  Such acts may include, but are not limited to, execution of documents and assistance or cooperation in legal proceedings, provided that Company shall reimburse EFT for any time spent by EFT in providing such assistance or cooperation at the rate of $200 per hour, if EFT is not currently providing services to the Company under the terms of this Agreement.

 

I. During the term of this Agreement, and for ten (10) years afterward, (i) EFT must hold in strict confidence any Confidential Information (as defined below), (ii) EFT must not disclose to any third party any Confidential Information unless he has first received approval to make such disclosure or such disclosure is required during the term of this Agreement in order to carry out  EFT’s day-to-day activities in fulfillment of its duties hereunder, and (iii) EFT may not use Confidential Information for any use or purpose other than providing the services hereunder.This paragraph applies to any and all EFT Employees and agents that are providing services to Company under this Agreement.

 

  

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J. For purposes of this Agreement, "Confidential Information" means technical data, trade secrets or know-how, such as research, product plans, products, services, customer lists, vendors and customers (including customers and prospective customers of Company on whom EFT calls or with whom EFT becomes acquainted during the term of this Agreement), markets, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information disclosed to EFT by Company either directly or indirectly in writing, orally or by drawings or observation of parts or equipment. Confidential Information may include items obtained by Company from a third party, but which it is required to keep secret.  Confidential Information does not include any of the foregoing items which have become publicly known and made generally available through no wrongful act of Consultant or of others who were under confidentiality obligations as to the item or items involved.

 

5. Non-Competition; Non-Solicitation.

 

During the term of this Agreement, and the twenty-four (24) months following the termination of this Agreement, the following provisions apply: 

 

A. EFT will not solicit the employment of any person who is then engaged by Company as an employee, consultant or advisor, or who was engaged by Company as an employee, consultant or advisor within the prior 12 month period, on behalf of EFT or any other person(s) or entity(ies).  Failure to comply will result in a penalty equal to the annual salary of the recruited employee and shall be paid to the other party for the loss of such employee’s services.

 

B. EFT and the EFT Employees will not engage in any other employment, occupation, consulting or other business activity directly related to the business, or Technology Field, in which Company is now involved or becomes involved during the term of this Agreement, nor will EFT engage in any other activities that conflict with its obligations to Company. 

 

C. EFT will not engage in any other activity, alone or in concert with any other(s), which serves to solicit, entice, or in any way divert any of the Company’s employees, customers, prospects, business opportunities, investors, or suppliers to do business with any business entity in competition with Company or that could otherwise impair or harm the interests of Company.

 

  

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D. EFT will not engage in any employment, occupation, consulting or other business activity individually or with any third party with whom Company is engaged in a business relationship (whether as customer, subcontractor, supplier, investor, or otherwise). A list of such third parties to whom this subparagraph applies will be prepared by Company and delivered to EFT promptly following termination of this Agreement.

 

6. Term. This Agreement shall commence immediately upon execution of this Agreement.  The Agreement and all rights, duties, and obligations will cease and terminate upon formal notification to the EFT by the Company or a formal 30 day notice to the Company by the EFT or failure of the parties to perform the duties specified under this agreement. If the Company terminates this agreement at any time, the EFT shall be paid for all services and expenses incurred prior to the termination.

 

7. Notice.  Parties have a 30 day right to cure any performance deficiency under this agreement upon written notice provided by the other party. Any notice or communication permitted or required by this Agreement shall be deemed effective when personally delivered or deposited, postage prepaid, in the first class mail of the United States properly addressed to the appropriate party at the address set forth below:

 

A. Notices to EFT:

EMERGING FUELS TECHNOLOGY

Attn: Kenneth L. Agee, President

6024 S. 116th E. Ave.

Tulsa, OK  74146

Phone:   918-286-6802                                           Fax:  918-286-6801

 

B. Notices to the Company:

 

Carbon Sciences Inc.

Attn: Byron H. Elton, President

5511 Ekwill Street Suite C

Santa Barbara, CA  93111

Phone:  805-456-7002                                            Fax:  805-681-1300

  

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8. Miscellaneous.

 

A. Entire Agreement and Amendments.  This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and replaces and supersedes all other agreements or understandings, whether written or oral. No amendment or extension of the Agreement shall be binding unless in writing and signed by both parties.

 

B. Binding Effect, Assignment.  This Agreement shall be binding upon and shall inure to the benefit of EFT and the Company and to the Company's successors and assigns. Nothing in this Agreement shall be construed to permit the assignment by EFT of any of its rights or obligations hereunder, and such assignment is expressly prohibited without the prior written consent of the Company.

 

C. Indemnification.  In the event the EFT and Company, their employees, agents, or subcontractors enter premises occupied by or under the control of the other in performance of this Agreement, each party shall indemnify and hold harmless the other party, its officers and employees from any loss, damage expense, or liability by reason of property damage or personal injury of whatsoever nature or kind arising out of or in connection with such performance occasioned in whole or in part by the actions or omissions of the other its employees, agents or subcontractors.  Without in any way limiting the foregoing undertakings, each party and its subcontractors shall maintain public liability and property damage insurance in reasonable limits covering the obligations set forth above and shall maintain proper workman’s compensation insurance covering all employees performing this agreement.

 

D. Assignment.  Neither party to this Agreement shall assign nor transfer its duties or interest therein without the expressed written authorization by the other party.

 

E. Disputes.

 

F. Arbitration. Except as provided in Section 7.5(B) below, any dispute or controversy arising out of or relating to this Agreement must be resolved by binding contractual arbitration to be held within the County of Los Angeles, State of California, in accordance with the Code of Civil Procedure of the State of California.  The arbitrator may grant injunctions or other relief in any such dispute or controversy.  The decision of the arbitrator shall be final, binding, and non-appealable.  Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.  Company and EFT shall each pay one-half of the costs and expenses of such arbitration. At the conclusion of such arbitration the prevailing party shall be entitled to recover from the other party the reasonable attorney fees (as determined by the arbitrator) and court costs incurred in said arbitration proceeding and in any ensuing enforcement and collection proceedings.

 

  

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G. Equitable Remedies.  With respect to those sections of this Agreement which would be a proper subject of equitable relief under California law, Company will have available, in addition to any other right or remedy available, the right to obtain an injunction from a court of competent jurisdiction restraining such breach or threatened breach and to specific performance of any such provision(s) of this Agreement.  The parties mutually agree that no bond or other security shall be required in obtaining such equitable relief and EFT hereby consents to the issuance of such injunction and to the ordering of specific performance.

 

H.Governing Law, Severability.  This Agreement shall be governed by the laws of the State of California. The invalidity or unenforceability of any provision of the Agreement shall not affect the validity or enforceability of any other provision.

 

I. Survival.  All obligations under Section 4, Section 5 and Section 6 of this Agreement shall continue in effect after termination of this Agreement, and the Company shall be entitled to communicate EFT’s obligations under this Agreement to any future client or potential client of EFT.

 

J. 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.  This Agreement may also be executed and delivered by facsimile signature and 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.

 

 

  

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WHEREFORE, the parties have executed this Agreement as of the date first written above.

 

	Company:     	 	EFT:	 
	 	 	 	 
	

CARBON SCIENCES, INC.

	 	

EMERGING FUELS TECHNOLOGY, INC.

	 
	 	 	 	 	 	 
	By:	
/s/

	 	By:	
/s/ 

	 
	 	
Byron H. Elton, President

	 	 	
Kenneth Agee, President

	 
	 	
 

	 	 	
 

	 
	Date:	 	 	Date:	 	 

                                                                 

 

  

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JWR/opc

3261576_1.DOC

Exhibit A

 Additional Available Services

 

 

Analytical Price List

               

	Method   	Reference	 	Unit Cost	 
	
Alpha Analysis

	
EFT Lab

	 	$	250.00	 
	
High Temp Simulated Distillation

	
ASTM D6352

	 	$	325.00	 
	
Low Temp Simulated Distillation

	

ASTM D2887

	 	$	250.00	 
	
POA by GC

	
EFT Lab

	 	$	175.00	 
	
Alcohols in water

	
EFT Lab

	 	$	150.00	 
	
Ash

	
ASTM D482

	 	$	75.00	 
	
Flash Point (closed cup)

	
ASTM D93

	 	$	50.00	 
	
Acidity

	
ASTM D1067-06

	 	$	25.00	 
	
Iso/normal % Carbon Distribution

	
EFT Lab

	 	$	200.00	 
	
Kinematic Viscosity @40°C

	
ASTM D445

	 	$	75.00	 
	
Chemisorption (duplicate)

	
EFT Lab

	 	$	150.00	 
	
Distillation

	
ASTM D-86

	 	$	125.00	 

 

Engineering and Laboratory Rates

 

	
Research/Engineering Associate

	
$180/hour

	
Senior Process Engineer

	
$155/hour

	
Process Engineer

	
$125/hour

	
Senior Staff Engineer

	
$100/hour

	
Staff Engineer

	
$80/hour

	
Engineering Intern

	
$50/hour

	
Drafting/Technical Drawing

	
$75/hour

	
Senior Chemist

	
$150/hour

	
Staff Chemist

	
$100/hour

	
Lab Technician

	
$100/hour

	
Small Lab Reactor

	
$350/day + gas

	
Trickle Bed Hydroprocessing Reactor

	
$400/day + gasex104.htm

EXHIBIT 10.4

 

CARBON SCIENCES, INC.

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”) made as of the last date set forth on the signature page hereof between Carbon Sciences, Inc., a Nevada corporation (the “Company”), and the undersigned (the “Purchaser”).

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, that number of Shares set forth on the signature page hereof on the terms and conditions hereinafter set forth.

 

WHEREAS, the Company and the Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and/or Regulation D (“Regulation D”), as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act.

 

NOW, THEREFORE, in consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows:

 

	
I.  

	
PURCHASE OF SHARES AND REPRESENTATIONS BY PURCHASER

 

The Purchaser hereby irrevocably agrees to purchase from the Company such number of Shares, and the Company agrees to sell to the Purchaser as is set forth on the signature page hereof, at a per share price equal to $2.00 per Share.  The purchase price is payable by wire transfer of immediately available funds to:

 

Wire instructions:

Name:                     Carbon Sciences, Inc.

Bank:                     Bank of America

5892 Calle Real

Goleta, Ca 93117

Account:                04165-43337

ABA:                      026009593

  

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1.1 The Purchaser recognizes that the purchase of the Shares involves a high degree of risk including, but not limited to, the following: (a) the Company remains a development stage business with limited operating history and requires substantial funds in addition to the proceeds from this purchase; (b) an investment in the Company is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Company and the Shares; (c) the Purchaser may not be able to liquidate its investment; (d) transferability of the Shares is extremely limited; (e) in the event of a disposition, the Purchaser could sustain the loss of its entire investment; (f) the Company has not paid any dividends since its inception and does not anticipate paying any dividends in the foreseeable future; and (g) the Company may issue additional securities in the future which have rights and preferences that are senior to those of the Shares being subscribed to hereunder.

 

1.2 The Purchaser represents that the Purchaser is an “accredited investor” as such term is defined in Rule 501 of Regulation D (“Regulation D”) promulgated under the Securities Act, as indicated by the Purchaser’s responses to the questions contained in Article VII hereof, and that the Purchaser is able to bear the economic risk of an investment in the Shares.

 

1.3 The Purchaser hereby acknowledges and represents that (a) the Purchaser has knowledge and experience in business and financial matters, prior investment experience, including investment in securities that are non-listed, unregistered and/or not traded on a national securities exchange nor on NASDAQ, or the Purchaser has employed the services of a “purchaser representative” (as defined in Rule 501 of Regulation D), attorney and/or accountant to read all of the documents furnished or made available by the Company both to the Purchaser and to all other prospective investors in the Shares to evaluate the merits and risks of such an investment on the Purchaser’s behalf; (b) the Purchaser recognizes the highly speculative nature of this investment; and (c) the Purchaser is able to bear the economic risk that the Purchaser hereby assumes.

 

1.4 The Purchaser hereby acknowledges receipt and careful review of this Agreement, the Company’s filings with the Securities and Exchange Commission (the “Company Filings”), and any documents which may have been made available upon request as reflected therein (collectively referred to as the “Offering Materials”) and hereby represents that the Purchaser has been furnished by the Company during the course of the purchase with all information regarding the Company, the terms and conditions of the purchase and any additional information that the Purchaser has requested or desired to know, and has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the Company and the terms and conditions of the purchase.

 

1.5   (a)           In making the decision to invest in the Shares, the Purchaser has relied solely upon the information provided by the Company in the Offering Materials.  To the extent necessary, the Purchaser has retained, at its own expense, and relied upon appropriate professional advice regarding the investment, tax and legal merits and consequences of this Agreement and the purchase of the Shares hereunder.  The Purchaser disclaims reliance on any statements made or information provided by any person or entity in the course of Purchaser’s consideration of an investment in the Shares other than the Offering Materials.

 

(b)           The Purchaser represents that (i) the Purchaser was contacted regarding the sale of the Shares by the Company (or an authorized agent or representative thereof) with whom the Purchaser had a prior substantial pre-existing relationship and (ii) no Shares were offered or sold to it by means of any form of general solicitation or general advertising, and in connection therewith, the Purchaser did not (A) receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general advertising.

 

  

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1.6 The Purchaser hereby represents that the Purchaser, either by reason of the Purchaser’s business or financial experience or the business or financial experience of the Purchaser’s professional advisors (who are unaffiliated with and not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly), has the capacity to protect the Purchaser’s own interests in connection with the transaction contemplated hereby.

 

1.7 The Purchaser hereby acknowledges that the Agreement has not been reviewed by the United States Securities and Exchange Commission (the “SEC”) nor any state regulatory authority since the purchase is intended to be exempt from the registration requirements of Section 5 of the Securities Act, pursuant to Section 4(2) and/or Regulation D.  The Purchaser understands that the Shares have not been registered under the Securities Act or under any state securities or “blue sky” laws and agrees not to sell, pledge, assign or otherwise transfer or dispose of the Shares unless they are registered under the Securities Act and under any applicable state securities or “blue sky” laws or unless an exemption from such registration is available.

 

1.8 The Purchaser understands that the Shares have not been registered under the Securities Act by reason of a claimed exemption under the provisions of the Securities Act that depends, in part, upon the Purchaser’s investment intention.  In this connection, the Purchaser hereby represents that the Purchaser is purchasing the Shares for the Purchaser’s own account for investment and not with a view toward the resale or distribution to others.  The Purchaser, if an entity, further represents that it was not formed for the purpose of purchasing the Shares.

 

1.9 The Purchaser consents to the placement of a legend on any certificate or other document evidencing the Shares that such Shares have not been registered under the Securities Act or any state securities or “blue sky” laws and setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement.  The Purchaser is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such Shares. The legend to be placed on each certificate shall be in form substantially similar to the following:

 

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended and may not be sold, transferred, pledged, hypothecated or otherwise disposed of in the absence of (i) an effective registration statement for such securities under said act or (ii) an opinion of company counsel that such registration is not required.”

1.10 The Purchaser understands that the Company will review this Agreement and is hereby given authority by the Purchaser to call Purchaser’s bank or place of employment or otherwise review the financial standing of the Purchaser; and it is further agreed that the Company, at its sole discretion, reserves the unrestricted right, without further documentation or agreement on the part of the Purchaser, to reject or limit any purchase, to accept purchases for fractional Shares and to withdraw the offer to the Purchaser at any time and that the Company will issue stop transfer instructions to its transfer agent with respect to such Shares.

 

  

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1.11 The Purchaser hereby represents that the address of the Purchaser furnished by Purchaser on the signature page hereof is the Purchaser’s principal residence if Purchaser is an individual or its principal business address if it is a corporation or other entity.

 

1.12 The Purchaser represents that the Purchaser has full power and authority (corporate, statutory and otherwise) to execute and deliver this Agreement and to purchase the Shares.  This Agreement constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms.

 

1.13 If the Purchaser is a corporation, partnership, limited liability company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it is authorized and qualified to invest in the Company and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so.

 

1.14 The Purchaser acknowledges that if he or she is a Registered Representative of an FINRA member firm, he or she must give such firm the notice required by the FINRA’s Rules of Fair Practice, receipt of which must be acknowledged by such firm in Section 7.4 below.

 

1.15 The Purchaser acknowledges that at such time, if ever, as the Shares are registered pursuant to the Securities Act, sales of the Shares will be subject to state securities laws.

 

1.16 The Purchaser agrees not to issue any public statement with respect to the Purchaser’s investment or proposed investment in the Company or the terms of any agreement or covenant between them and the Company without the Company’s prior written consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation.

 

1.17 The Purchaser agrees to hold the Company and its directors, officers, employees, affiliates, controlling persons and agents and their respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses incurred by them as a result of (a) any sale or distribution of the Shares by the Purchaser in violation of the Securities Act or any applicable state securities or “blue sky” laws; or (b) any false representation or warranty or any breach or failure by the Purchaser to comply with any covenant made by the Purchaser in this Agreement (including the Confidential Investor Questionnaire contained in Article VII herein) or any other document furnished by the Purchaser to any of the foregoing in connection with this transaction.

 

  

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II.  

	
REPRESENTATIONS BY AND COVENANTS OF THE COMPANY

 

The Company hereby represents and warrants to the Purchaser that:

 

2.1 Organization, Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has full corporate power and authority to conduct its business.

 

2.2 Capitalization and Voting Rights.  The authorized capital stock of the Company consists of 12,500,000 shares of common stock of which 9,253,567 shares are issued and outstanding. The shares of issued and outstanding capital stock of the Company have been duly authorized, validly issued, fully paid and are nonassessable.  The Company has granted certain stock options, as described in its public filings with the SEC.  There are no other outstanding agreements, convertible securities, preemptive rights or other rights to subscribe for or to purchase any shares of capital stock of the Company.  Except as otherwise required by law, there are no restrictions upon the voting or transfer of any of the shares of capital stock of the Company pursuant to the Company’s Articles of Incorporation (the “Articles of Incorporation”), Bylaws or other governing documents or any agreement or other instruments to which the Company is a party or by which the Company is bound.

 

2.3 Authorization; Enforceability.  The Company has all corporate right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.  All corporate action on the part of the Company, its directors and stockholders necessary for the (a) authorization execution, delivery and performance of this Agreement by the Company; and (b) authorization, sale, issuance and delivery of the Shares contemplated hereby and the performance of the Company’s obligations hereunder has been taken.  This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy.  The Shares, when issued and fully paid for in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable.  The issuance and sale of the Shares contemplated hereby will not give rise to any preemptive rights or rights of first refusal on behalf of any person which have not been waived in connection with this offering.

2.4 No Conflict; Governmental Consents.

 

(a) The execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby will not result in the violation of any material law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental authority to or by which the Company is bound, or of any provision of the Articles of Incorporation or Bylaws of the Company, and will not conflict with, or result in a material breach or violation of, any of the terms or provisions of, or constitute (with due notice or lapse of time or both) a default under, any lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of the Company.

 

  

5

  

 

(b) No consent, approval, authorization or other order of any governmental authority is required to be obtained by the Company in connection with the authorization, execution and delivery of this Agreement or with the authorization, issue and sale of the Shares, except such filings as may be required to be made with the SEC, FINRA, NASDAQ and with any state or foreign blue sky or securities regulatory authority.

 

2.5 Licenses.  Except as disclosed in the Company Filings, , the Company has sufficient licenses, permits and other governmental authorizations currently required for the conduct of its business or ownership of properties and is in all material respects in compliance therewith.

 

2.6 Litigation.  The Company knows of no pending or threatened legal or governmental proceedings against the Company which could materially adversely affect the business, property, financial condition or operations of the Company or which materially and adversely questions the validity of this Agreement or any agreements related to the transactions contemplated hereby or the right of the Company to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality which could materially adversely affect the business, property, financial condition or operations of the Company. There is no action, suit, proceeding or investigation by the Company currently pending in any court or before any arbitrator or that the Company intends to initiate.

 

2.7 Disclosure.  The information set forth in the Offering Materials as of the date hereof contains no untrue statement of a material fact nor omits to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

 

2.8 Investment Company.  The Company is not an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

 

2.9 Brokers.  Neither the Company nor any of the Company's officers, directors, employees or stockholders has employed or engaged any broker or finder in connection with the transactions contemplated by this Agreement and no fee or other compensation is or will be due and owing to any broker, finder, underwriter, placement agent or similar person in connection with the transactions contemplated by this Agreement.  The Company is not party to any agreement, arrangement or understanding whereby any person has an exclusive right to raise funds and/or place or purchase any debt or equity securities for or on behalf of the Company.

 

	
III.  

	
TERMS OF PURCHASE

 

3.1 All funds paid hereunder shall be deposited with the Company in the account identified in Section 1.1 hereof.

 

  

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3.2 Certificates representing the Common Stock purchased by the Purchaser pursuant to this Agreement will be prepared for delivery to the Purchaser within 15 business days following the closing at which such purchase takes place. The Purchaser hereby authorizes and directs the Company to deliver the certificates representing the Common Stock purchased by the Purchaser pursuant to this Agreement directly to the Purchaser’s residential or business address indicated on the signature page hereto.

 

	
IV.  

	
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS

 

4.1 The Purchaser’s obligation to purchase the Shares at the closing at which such purchase is to be consummated is subject to the fulfillment on or prior to such closing of the following conditions, which conditions may be waived at the option of each Purchaser to the extent permitted by law:

 

(a) Covenants.  All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the date of such closing shall have been performed or complied with in all material respects.

 

(b) No Legal Order Pending.  There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

 

(c) No Law Prohibiting or Restricting Such Sale.  There shall not be in effect any law, rule or regulation prohibiting or restricting such sale or requiring any consent or approval of any person, which shall not have been obtained, to issue the Shares (except as otherwise provided in this Agreement).

	
V.  

	
LOCK-UP AGREEMENT

 

5.1 The Purchaser understands that the Company is offering Shares to Purchaser at a lower price per share than is currently quoted on the Over the Counter Bulletin Board market maintained by the National Association of Securities Dealers, Inc. (the “NASD”).

 

5.2 As an inducement to NASD market makers to continue to make an orderly public market for the Company’s common stock, the Purchaser hereby agrees that for a period of one (1) year after the Purchaser’s purchase of Shares, the Purchaser will not without the prior written consent of the Company, offer, pledge, sell, contract to sell, grant any option for the sale of, or otherwise dispose of, directly or indirectly, the Shares purchased, as may otherwise be permitted by Rule 144 promulgated under the Securities Act and consents to the placement of a legend, with respect to the foregoing, on each certificate representing the Shares subscribed for herein.

 

  

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VI.           MISCELLANEOUS

 

6.1 Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, or delivered by hand against written receipt therefor, addressed as follows:

 

if to the Company, to it at:

Carbon Sciences, Inc.

5511C Ekwill Street

Santa Barbara, CA 93111

Attn:  Byron H. Elton

With a copy to (which shall not constitute notice):

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, NY 10006

Attn:  Marcelle S. Balcombe, Esq.

if to the Purchaser, to the Purchaser’s address indicated on the signature page of this Agreement.

 

Notices shall be deemed to have been given or delivered on the date of mailing, except notices of change of address, which shall be deemed to have been given or delivered when received.

 

6.2 Except as otherwise provided herein, this Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged.

 

6.3 This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns.  This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

 

6.4 Upon the execution and delivery of this Agreement by the Purchaser, this Agreement shall become a binding obligation of the Purchaser with respect to the purchase of Shares as herein provided, subject, however, to the right hereby reserved by the Company to enter into the same agreements with other Purchasers and to add and/or delete other persons as Purchasers.

 

  

8

  

 

6.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW.  IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE COURTS STATE OF CALIFORNIA IN AND FOR THE COUNTY OF LOS ANGELES OR THE FEDERAL COURTS FOR SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.

 

6.6 In order to discourage frivolous claims the parties agree that unless a claimant in any proceeding arising out of this Agreement succeeds in establishing his claim and recovering a judgment against another party (regardless of whether such claimant succeeds against one of the other parties to the action), then the other party shall be entitled to recover from such claimant all of its/their reasonable legal costs and expenses relating to such proceeding and/or incurred in preparation therefor.

 

6.7 The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect.  If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein.

 

6.8 It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party.

 

6.9 The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

 

6.10 This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.

 

6.11 Nothing in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement.

 

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VII.           CONFIDENTIAL INVESTOR QUESTIONNAIRE

 

7.1           The Purchaser represents and warrants that he, she or it comes within one category marked below, and that for any category marked, he, she or it has truthfully set forth, where applicable, the factual basis or reason the Purchaser comes within that category.  ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL.  The undersigned agrees to furnish any additional information which the Company deems necessary in order to verify the answers set forth below.

 

	
Category A  

	
The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000 exclusive of the value of his or her primary or (b) a self-directed retirement account (“Retirement Account”) whose participant’s net worth (or joint net worth with his or her spouse) presently exceeds $1,000,000, exclusive of the value of his or her primary.

	 	
Explanation.  In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities.  Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.

	
Category B  

	
The undersigned is (a) an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year or (b) a Retirement Account and the Retirement Account participant meets the tests in clause (a).

	
Category C  

	
The undersigned is a director or executive officer of the Company which is issuing and selling the Shares.

	
Category D  

	
The undersigned is a bank; a savings and loan association; insurance company; registered investment company; registered business development company; licensed small business investment company (“SBIC”); or employee benefit plan within the meaning of Title 1 of ERISA and (a) the investment decision is made by a plan fiduciary which is either a bank, savings and loan association, insurance company or registered investment advisor, or (b) the plan has total assets in excess of $5,000,000 or (c) is a self directed plan with investment decisions made solely by persons that are accredited investors. (describe entity)

	
Category E  

	
The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advisors Act of 1940. (describe entity)

 

  

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Category F  

	
The undersigned is a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Shares and with total assets in excess of $5,000,000. (describe entity)

 

	
Category G  

	
The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, where the purchase is directed by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii) under the Act.

 

	
Category H  

	
The undersigned is an entity (other than a trust) in which all of the equity owners are “accredited investors” within one or more of the above categories.  If relying upon this Category alone, each equity owner must complete a separate copy of this Agreement.  (describe entity)

 

	
Category I  

	
The undersigned is not within any of the categories above and is therefore not an accredited investor.

 

The undersigned agrees that the undersigned will notify the Company at any time on or prior to the closing in the event that the representations and warranties in this Agreement shall cease to be true, accurate and complete.

 

7.2           SUITABILITY (please answer each question)

 

(a)           For an individual Purchaser, please describe your current employment, including the company by which you are employed and its principal business:

(b)           For an individual Purchaser, please describe any college or graduate degrees held by you:

(c)           For all Purchasers, please list types of prior investments:

  

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(d)           For all Purchasers, please state whether you have participated in other private placements before:

 

YES_______                                           NO_______

(e)           If your answer to question (d) above was “YES”, please indicate frequency of such prior participation in private placements of:

 

	  	
 

Public

Companies

	
 

Private

Companies

	
Public or Private Companies

with no, or insignificant,

assets and operations

 

	
Frequently

	  	  	  
	
Occasionally

	  	  	  
	
Never

	  	  	  

(f)           For individual Purchasers, do you expect your current level of income to significantly decrease in the foreseeable future:

 

YES_______                                           NO_______

(g)           For trust, corporate, partnership and other institutional Purchasers, do you expect your total assets to significantly decrease in the foreseeable future:

 

YES_______                                           NO_______

(h)           For all Purchasers, do you have any other investments or contingent liabilities which you reasonably anticipate could cause you to need sudden cash requirements in excess of cash readily available to you:

 

YES_______                                           NO_______

(i)           For all Purchasers, are you familiar with the risk aspects and the non-liquidity of investments such as the securities for which you seek to subscribe?

 

YES_______                                           NO_______

(j)            For all Purchasers, do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment?

 

YES_______                                           NO_______

7.3           MANNER IN WHICH TITLE IS TO BE HELD.  (circle one)

 

(a)           Individual Ownership

(b)           Community Property

(c)           Joint Tenant with Right of

Survivorship (both parties

must sign)

(d)           Partnership*

(e)           Tenants in Common

(f)            Company*

(g)           Trust*

(h)           Other*

*If Securities are being subscribed for by an entity, the attached Certificate of Signatory must also be completed.

 

  

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7.4           FINRA AFFILIATION.

 

Are you affiliated or associated with a FINRA member firm (please check one):

Yes _________                                           No __________

If Yes, please describe:

_____________________________________________________________________________________

_____________________________________________________________________________________

_____________________________________________________________________________________

*If Purchaser is a Registered Representative with a FINRA member firm, have the following acknowledgment signed by the appropriate party:

 

The undersigned FINRA member firm acknowledges receipt of the notice required by Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

 

_________________________________

Name of FINRA Member Firm

By: ______________________________

Authorized Officer

Date: ____________________________

             7.5                      The undersigned is informed of the significance to the Company of the foregoing representations and answers contained in the Confidential Investor Questionnaire contained in this Article VI and such answers have been provided under the assumption that the Company will rely on them.

 

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13

  

NUMBER OF SHARES ___________ X $2.00 per share = $___________ (the “Purchase Price”) 

	 	 	 	 	 
	
Signature   

	 	 	
Signature (if purchasing jointly)

	 
	 	 	 	 	 
	 	 	 	 	 
	
Name Typed or Printed  

	 	 	
Name Typed or Printed

	 
	 	 	 	 	 
	 	 	 	 	 
	Title (if Purchaser is an Entity) 	 	 	Title (if Purchaser is an Entity)	 
	 	 	 	 	 
	 	 	 	 	 
	Entity Name (if applicable)	 	 	Entity Name (if applicable	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	Address	 	 	Address	 
	 	 	 	 	 
	 	 	 	 	 
	City, State and Zip Code   	 	 	City, State and Zip Code   	 
	 	 	 	 	 
	 	 	 	 	 
	Telephone-Business 	 	 	Telephone-Business 	 
	 	 	 	 	 
	 	 	 	 	 
	Telephone-Residence	 	 	Telephone-Residence	 
	 	 	 	 	 
	 	 	 	 	 
	Facsimile-Business 	 	 	Facsimile-Business 	 
	 	 	 	 	 
	 	 	 	 	 
	Facsimile-Residence	 	 	Facsimile-Residence	 
	 	 	 	 	 
	 	 	 	 	 
	Tax ID # or Social Security #	 	 	Tax ID # or Social Security #	 
	 	 	 	 	 
	 	 	 	 	 

 

	Name in which securities should be issued:   	 	 	 	 
	 	 	 	 	 
	Dated:  	 	 	 	 
	 	 	 	 	 

       This Stock Purchase Agreement is agreed to and accepted as of _______________, 2011.

 

	 	Carbon Sciences, Inc.	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	
Name:  Byron H. Elton

	 
	 	 	Title:  Chief Executive Officer	 
	 	 	 	 

 

  

14

  

CERTIFICATE OF SIGNATORY

(To be completed if Shares are

being subscribed for by an entity)

I, ____________________________, am the ____________________________ of __________________________________________ (the “Entity”).

I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Subscription Agreement and to purchase and hold the Shares, and certify further that the Subscription Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand this ________ day of _________________, 2011

	 	 	 	 
	 	 	

(Signature)

	 

 

 

 

 

 

 

 

 

 

 

 

 

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