Document:

Exhibit
10.4

 

NEITHER THESE SECURITIES NOR THE SECURITIES
FOR WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

 

 

ARENA
PHARMACEUTICALS, INC.

 

UNIT WARRANT

 

	
  Warrant No. U-     

  	
  Dated:  December 24, 2003

  

 

Arena Pharmaceuticals, Inc., a Delaware corporation (the “Company”),
hereby certifies that, for value received,
                          
or its registered assigns (the “Holder”), is entitled to purchase from the
Company at any time on one occasion from and after the date hereof and through
and including the earlier of (i) the twelve month anniversary of the Trigger
Date and (ii) the date that is 20 days after receipt of notice by Holder from
the Company of the bona fide exercise, in whole or in part, of any Unit Warrant
(the “Expiration Date”) and
subject to the following terms and conditions, up to a total of
           Additional Units
(as adjusted for any stock dividend, stock split, stock combination or other
similar event) at an exercise price equal to $10,000 per Additional Unit (as
adjusted for any stock dividend, stock split, stock combination or other
similar event) (the “Exercise Price”).  Each “Additional Unit” entitles the Holder to (a)
one share of Series B-2 Convertible Preferred Stock, $0.0001 par value per
share (the “Series B-2 Preferred Stock”), of the Company (the sum of all
such shares, the “Additional Shares”), and (b) a warrant in
the form attached as Exhibit C in the Purchase Agreement (all such
warrants, the “Additional Warrants”),
exercisable for 391.304 shares of Common Stock (the sum of all such shares, the
“Additional Warrant Shares”), with
an exercise price per share calculated as set forth in Section 4(b) of
this Unit Warrant.  This Unit Warrant
(this “Unit Warrant”) is one of a
series of similar unit warrants issued pursuant to that certain Securities
Purchase Agreement, dated as of December 24, 2003, and among the Company
and the Purchasers identified therein (the “Purchase Agreement”).  All such unit warrants are referred to
herein, collectively, as the “Unit Warrants.”

 

1.                                       Definitions.  In addition to the terms defined elsewhere
in this Unit Warrant, capitalized terms that are not otherwise defined herein
have the meanings given to such terms in the Purchase Agreement.

 

 

2.                                       Registration
of Unit Warrant.  The Company shall
register this Unit Warrant, upon records to be maintained by the Company for
that purpose (the “Unit Warrant Register”), in the name of the
record Holder hereof from time to time. 
The Company may deem and treat the registered Holder of this Unit
Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.

 

3.                                       Registration
of Transfers.  The Company shall
register the transfer of any portion of this Unit Warrant in the Unit Warrant
Register, upon surrender of this Unit Warrant, with the Form of Assignment
attached hereto duly completed and signed, to the Transfer Agent or to the
Company at its address specified herein. 
Upon any such registration or transfer, a new unit warrant to purchase
the Additional Units, in substantially the form of this Unit Warrant (any such
new unit warrant, a “New Unit Warrant”),
evidencing the portion of this Unit Warrant so transferred shall be issued to
the transferee and a New Unit Warrant evidencing the remaining portion of this
Unit Warrant not so transferred, if any, shall be issued to the transferring
Holder.  The acceptance of the New Unit
Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a Unit Warrant.

 

4.                                       Exercise and
Duration of Unit Warrant.

 

(a)                                  This Unit Warrant
shall be exercisable by the registered Holder at any time on or after the date
hereof to and including the Expiration Date. 
At 6:30 p.m., New York City time on the Expiration Date, the portion of
this Unit Warrant not exercised prior thereto shall be and become void and of
no value.

 

(b)                                 A Holder may exercise
this Unit Warrant by delivering to the Company (i) an exercise notice, in the
form attached hereto (the “Exercise Notice”), appropriately completed
and duly signed, and (ii) payment of the Exercise Price for the number of
Additional Units as to which this Unit Warrant is being exercised, and the date
such items are delivered to the Company (as determined in accordance with the
notice provisions hereof) is an “Exercise Date.”  The exercise price per Additional Warrant Share for the
Additional Warrants shall be equal to $10 (as adjusted for any stock dividend,
stock split, stock combination or other similar event).  The number of Additional Shares shall be
equal to the number of Additional Units and the conversion price for such
Series B-2 Preferred Stock shall be equal to 110% of the arithmetic average of
Volume Weighted Average Price for the 15 consecutive Trading Days immediately
prior to the Exercise Date, but in no event greater than $10 or lower than $7
(in each case, as adjusted for any stock dividend, stock split, stock
combination or other similar event). The Holder shall not be required to
deliver the original Unit Warrant in order to effect an exercise
hereunder.  Execution and delivery of
the Exercise Notice shall have the same effect as cancellation of the original
Unit Warrant and issuance of a New Unit Warrant evidencing the right to
purchase the remaining number of Additional Units.

 

5.                                       Delivery of
Additional Shares and Additional Warrant.

 

(a)                                  Upon exercise of this
Unit Warrant, the Company shall promptly (but in no event later than three
Trading Days after the Exercise Date) issue or cause to be issued and cause to
be delivered to or upon the written order of the Holder and in such name or
names as the 

 

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Holder may designate, (i) a certificate for the Additional Shares
issuable upon such exercise, free of restrictive legends unless a registration
statement covering the resale of the Additional Shares and naming the Holder as
a selling stockholder thereunder is not then effective and the Additional
Shares are not freely transferable without volume restrictions pursuant to Rule
144 under the Securities Act, (ii) Additional Warrants exercisable for the
appropriate number of Additional Warrant Shares as calculated pursuant to
Section 4(b) hereof, (iii) the legal opinions of Company Counsel,
substantially in the form of Exhibits E-1 and E-2 to the Purchase
Agreement, executed by such counsel and delivered to the Holders, and (iv) to
the extent that such exercise is triggered pursuant to Section 11, a
certificate from an officer of the Company that each of the representations and
warranties of the Company set forth in Section 3.1 of the Purchase
Agreement are true and correct as of the date when made and as of the Exercise
Date as though made on and as of such date, and each of the other conditions
set forth in Section 5.1 of the Purchase Agreement have been satisfied as
of the Exercise Date.  The Holder, or
any Person so designated by the Holder to receive Additional Shares and the
Additional Warrants, shall be deemed to have become holder of record of such
Additional Shares and Additional Warrants as of the Exercise Date.

 

(b)                                 This Unit Warrant is
exercisable, either in its entirety or for a portion of the number of
Additional Units.  Upon surrender of
this Unit Warrant following one or more partial exercises, the Company shall
issue or cause to be issued, at its expense, a New Unit Warrant evidencing the
right to purchase the remaining number of Additional Units.

 

(c)                                  In addition to any
other rights available to a Holder, if the Company fails to deliver to the
Holder a certificate representing Additional Shares or Additional Warrants by
the third Trading Day after the date on which delivery of such certificate is
required by this Unit Warrant and the Holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
the Holder of the Additional Shares or Additional Warrants that the Holder
anticipated receiving from the Company (a “Buy-In”),
then in the Holder’s sole discretion, the Company shall, within three Trading
Days after the Holder’s request, either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver such certificate (and to issue such Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay
cash to the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common Stock, times (B)
the Closing Price on the date of the event giving rise to the Company’s
obligation to deliver such certificate.

 

(d)                                 The Company’s
obligations to issue and deliver Additional Shares and the Additional Warrants
in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or
any violation or alleged violation of law by the Holder or any other Person,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Additional Shares and the Additional

 

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Warrants.  Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver the Additional Warrants or Additional Shares upon exercise of
this Unit Warrant as required pursuant to the terms hereof.

 

6                                          Charges,
Taxes and Expenses.   Issuance and
delivery of certificates for shares of Additional Shares and the Additional
Warrants upon exercise of this Unit Warrant shall be made without charge to the
Holder for any issue or transfer tax, withholding tax, transfer agent fee or
other incidental tax or expense in respect of the issuance of such certificates
and the Additional Warrants, all of which taxes and expenses shall be paid by
the Company; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the registration of any certificates for Additional Shares or the
Additional Warrants in a name other than that of the Holder.  The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring this
Unit Warrant or receiving Additional Shares or the Additional Warrants upon
exercise hereof.

 

7.                                       Replacement
of Unit Warrant.  If this Unit
Warrant is mutilated, lost, stolen or destroyed, or a Holder fails to deliver
such certificate as may otherwise be provided herein, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
hereof, or in lieu of and substitution for this Unit Warrant, a New Unit
Warrant, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction (in such case) and, in each case,
and customary and reasonable indemnity, if requested.  Applicants for a New Unit Warrant under such circumstances shall
also comply with such other reasonable regulations and procedures and pay such
other reasonable third-party costs as the Company may prescribe.

 

8.                                       Reservation
of Additional Shares and Additional Warrant Shares. The Company covenants
that it will at all times reserve and keep available out of the aggregate of
its authorized but unissued and otherwise unreserved Common Stock, solely for
the purpose of enabling it, upon exercise of the Unit Warrants, to issue Common
Stock upon the conversion of the Additional Shares and to issue Additional
Warrant Shares upon the exercise of the Additional Warrants, the number of
shares of Common Stock (as adjusted for any stock dividend, stock split, stock
combination or other similar event) which are then issuable and deliverable
upon the exercise of this entire Unit Warrant, free from preemptive rights or
any other contingent purchase rights of persons other than the Holder (taking
into account the adjustments and restrictions of Section 9).  The Company covenants that all Additional
Shares so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.  The Company will take all such action as may
be necessary to assure that such shares of Common Stock may be issued as
provided herein without violation of any applicable law or regulation, or of
any requirements of any securities exchange or automated quotation system upon
which the Common Stock may be listed.

 

9.                                       Certain
Adjustments.

 

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(a)                                  The (i) exercise
price per Additional Warrant Share and the conversion price per Additional
Share and (ii) the number of Additional Warrant Shares issuable upon exercise
of the Additional Warrants, shall be adjusted for any stock dividend, stock
split, stock combination or other similar event in accordance with
Section 9 of the Additional Warrant and Section 15 of the Certificate
of Designation, respectively.

 

(b)                                 Simultaneously with
any adjustment pursuant to this Section 9, the number of Additional
Warrant Shares that may be purchased upon exercise of the Additional Warrants
shall be increased or decreased proportionately, so that after such adjustment
the aggregate exercise price payable thereunder for the increased or decreased
number of Additional Warrant Shares shall be the same as the aggregate exercise
price in effect immediately prior to such adjustment.

 

(c)                                  All calculations under
this Section 9 shall be made to the nearest cent or the nearest
1/100th of a share, as applicable.  The
number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common Stock.

 

(d)                                 Upon the occurrence of
each adjustment pursuant to this Section 9, the Company at its
expense will promptly compute such adjustment in accordance with the terms of
this Unit Warrant and prepare a certificate setting forth such adjustment,
including a statement of the adjusted exercise price per Additional Warrant
Share and the number of Additional Warrant Shares issuable upon exercise of the
Additional Warrant, describing the transactions giving rise to such adjustments
and showing in detail the facts upon which such adjustment is based.

 

10.                                 Payment of Exercise
Price.  The Holder shall pay the
Exercise Price in cash by delivering to the Company immediately available funds
equal to the Exercise Price.

 

11.                                 Call Right.

 

(a)                                  Subject to the
provisions of this Section 11, if at any time after the Effective
Date, the Closing Price of the Common Stock on the NASDAQ National Market is
equal to or greater than $10 per share (as adjusted for any stock splits, stock
combinations, stock dividends and other similar events) (the “Threshold
Price”) for each of any thirty (30) consecutive Trading Days, then
the Company shall have the right, but not the obligation (the “Call Right”), on ten (10) Trading Days
prior written notice to the Holder, to require that the Holder exercise any
unexercised portion of this Unit Warrant for which an Exercise Notice has not
yet been delivered (the “Call Amount”).

 

(b)                                 To exercise this Call
Right, the Company shall deliver to the Holder an irrevocable written notice (a
“Call
Notice”), indicating the Call Amount.  The date that the Company delivers the Call Notice to the Holder
shall be referred to as the “Call Date.”  Within 10 Trading Days of receipt of the Call Notice, and
provided that the Holder is permitted to exercise this Unit Warrant pursuant to
Section 4(a) above, the Holder shall exercise this Warrant to the extent
of the Call Amount in accordance with Section 4(b) above.  Any unexercised portion of this Unit Warrant
to which the Call Notice does not pertain (the “Remaining 

 

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Portion”)
will be unaffected by such Call Notice. 
The Company covenants and agrees that it will honor any Exercise Notice
with respect to the Call Amount that is tendered to the Company from the time
of delivery of the Call Notice through and including 6:30 p.m. (New York City
time) on the 10th Trading Day following the Call Notice.

 

(c)                                  Notwithstanding
anything to the contrary set forth in this Unit Warrant, the Company may not
deliver a Call Notice (and any Call Notice will be void), unless from the
beginning of the thirty (30) consecutive Trading Days used to determine whether
the Common Stock has achieved the Threshold Price through the date on which the
Holder exercises the Call Amount (the “Call
Period”) (i) the Company shall have honored in accordance with the
terms of this Unit Warrant any Exercise Notice delivered by 6:30 p.m. (New York
City time) on the Call Date and (ii) the Registration Statement shall be
effective as to all Underlying Shares and the prospectus thereunder available
for use by the Holder for the resale all such Underlying Shares.

 

12.                                 Fractional Shares.  The Company shall not be required to issue
or cause to be issued fractional Additional Shares.  If any fraction of an Additional Share would, except for the
provisions of this Section, be issuable upon exercise of this Unit Warrant, the
number of Additional Shares to be issued will be rounded up to the nearest
whole share.

 

13.                                 Notices.  Any and all notices or other communications
or deliveries hereunder (including without limitation any Exercise Notice)
shall be in writing and shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 6:30
p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that
is not a Trading Day or later than 6:30 p.m. (New York City time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.  The address for such notices or
communications shall be as set forth in the Purchase Agreement.

 

14.                                 Unit Warrant Agent.  The Company shall serve as unit warrant
agent under this Unit Warrant.  Upon 30
days’ notice to the Holder, the Company may appoint a new unit warrant
agent.  Any corporation into which the
Company or any new unit warrant agent may be merged or any corporation
resulting from any consolidation to which the Company or any new unit warrant
agent shall be a party or any corporation to which the Company or any new unit
warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor unit warrant agent under
this Unit Warrant without any further act. 
Any such successor unit warrant agent shall promptly cause notice of its
succession as unit warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder’s last address as shown on the Unit
Warrant Register.

 

15.                                 No Rights as
Stockholder until Exercise.  Subject
to Section 9 of this Unit Warrant and the provisions of any other
Transaction Documents, prior to the exercise of this Unit Warrant as provided
herein, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Additional Shares or Additional Warrants or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose, nor shall

 

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anything contained herein be construed to confer upon the Holder, as
such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to the stockholders
at any meeting thereof, or to give or withhold consent to any corporate action
or to receive notice of meetings, or to receive dividend or subscription
rights.

 

16.                                 Miscellaneous.

 

(a)                                  Subject to the
restrictions on transfer set forth on the first page hereof and in the Purchase
Agreement, this Unit Warrant may be assigned by the Holder.  This Unit Warrant may not be assigned by the
Company.  This Unit Warrant shall be
binding on and inure to the benefit of the parties hereto and their respective
successors and assigns.  Subject to the
preceding sentence, nothing in this Unit Warrant shall be construed to give to
any Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Unit Warrant.  This Unit Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.

 

(b)                                 The Company will not,
by amendment of its governing documents 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 Unit Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Holder against impairment. 
Without limiting the generality of the foregoing, the Company (i) will
not increase the par value of any Additional Shares or Additional Warrants
above the amount payable therefor on such exercise, (ii) will take all such
action as may be reasonably necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable Additional Units on
the exercise of this Unit Warrant, and (iii) will not close its shareholder
books or records in any manner which interferes with the timely exercise of
this Unit Warrant.

 

(c)                                  GOVERNING LAW;
VENUE; WAIVER OF JURY TRIAL.  ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS UNIT WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER.  EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR
CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY
AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS UNIT WARRANT AND AGREES
THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND
NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY
ANY RIGHT TO SERVE

 

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PROCESS IN ANY MANNER PERMITTED BY LAW.  THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

 

(d)                                 The headings herein
are for convenience only, do not constitute a part of this Unit Warrant and
shall not be deemed to limit or affect any of the provisions hereof.

 

(e)                                  In case any one or
more of the provisions of this Unit Warrant shall be invalid or unenforceable
in any respect, the validity and enforceability of the remaining terms and
provisions of this Unit Warrant shall not in any way be affected or impaired
thereby and the parties will attempt in good faith to agree upon a valid and
enforceable provision which shall be a commercially reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in this Unit
Warrant.

 

[REMAINDER OF
PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has caused
this Unit Warrant to be duly executed by its authorized officer as of the date
first indicated above.

 

	
   

  	
  ARENA PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
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  Name:

  
	
   

  	
   

  	
  Title:

  

 

9

 

FORM OF EXERCISE NOTICE

 

[To be executed by the Holder to exercise the
right to purchase Additional Units under the foregoing Unit Warrant]

 

To:  Arena Pharmaceuticals, Inc.

 

The undersigned is the Holder of Unit Warrant
No.           (the “Unit Warrant”) issued by Arena
Pharmaceuticals, Inc., a Delaware corporation (the “Company”).  Capitalized terms used herein and not
otherwise defined have the respective meanings set forth in the Unit Warrant.

 

1.                                       The
Unit Warrant is currently exercisable to purchase a total of
               
Additional Units entitling the Holder to
               
Additional Shares and Additional Warrants exercisable to purchase a total of
               
Additional Warrant Shares.

 

2.                                       The
undersigned Holder hereby exercises its right to purchase
                    
Additional Units pursuant to the Unit Warrant.

 

3.                                       The
Holder shall pay the sum of
$               
to the Company in accordance with the terms of the Unit Warrant.

 

4.                                       Pursuant
to this exercise, the Company shall deliver to the Holder
               Additional
Shares and Additional Warrants exercisable to purchase a total of
               
Additional Warrant Shares in accordance with the terms of the Unit Warrant.

 

5.                                       Following
this exercise, the Unit Warrant shall be exercisable to purchase a total of
                    
Additional Units.

 

	
  Dated:               ,       

  	
  Name of Holder:

  
	
   

  	
   

  
	
   

  	
  (Print)

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature must conform in all respects to name of holder as
  specified on the face of the Unit Warrant)PURCHASE AND SUPPLY AGREEMENT

THIS PURCHASE AND SUPPLY AGREEMENT (this "Agreement") is made this 4th day of
DECEMBER, 2003, by and between ALKHALIFA Petroleum Corp.., whose business
address is 4121 SW 47th Avenue, Suite 1301, Davie, Florida 33342, with a copy to
Bahrain Tower, 17th floor, Al-Khalifa Road, Manama, Bahrain, P.O Box 20257,
Manama, Bahrain, a Florida for profit corporation ("ALKHALIFA") the ("Supplier")
having a place of business at 4121 SW 47th Avenue, Suite 1301, Davie, Florida
33342 and FuelNation Inc. a Florida for profit corporation (the "Seller").

                                WITNESSETH THAT:

WHEREAS, Supplier and Seller desire to set forth their agreement regarding the
sale and purchase of certain gasolines and diesel fuels (the "Supplies") which
Supplier acquires from time to time pursuant to its agreement with The Oil
Companies.

 NOW THEREFORE, in consideration of the mutual covenants and agreements herein,
Supplier and Seller agree as follows:

1.   TERM AND PREMISES.

     a)   The term of this Agreement shall be for a period of TEN (10) year(s)
          beginning on December 4, 2003, and ending on December 4, 2013. During
          the term hereof, Supplier shall supply and Seller shall purchase all
          of the ALKHALIFA Supplies. For purpose of this Agreement, ALKHALIFA
          Supplies shall mean those products manufactured or distributed by or
          through the ALKHALIFA Petroleum Corp. SELLER agrees to pay, in the
          manner hereinafter provided in Paragraph 2(e) below, for all motor
          oils, lubricants, fluids, antifreeze, and miscellaneous related items
          and tires, batteries and filters, if any ("related products"),
          purchased by SELLER pursuant to SUPPLIER's Dealer Price Schedule in
          effect on the date of shipment for the particular related product
          delivered to the Premises. SUPPLIER reserves the right at any time to
          change the price for any product or related product or to substitute a
          new pricing system without notice to SELLER. The prices referred to
          herein are exclusive of taxes, license fees, and inspection fees.

     b)   The premises for delivery supply will be designated from time to time
          by Seller (the "Premises"). The Supplier acknowledges that Seller
          intends to market and deliver fuel to multiple locations operated by
          independent dealers, and Seller shall be responsible to furnish any
          and all Premises with all equipment necessary for the operation of
          petroleum dispensing and or diesel fueling.

     c)   In addition to the premises above, Supplier acknowledges the need to
          supply a continuous supply of gasoline and fuel to the Travel Center
          located in Davie, Florida. Site opening is intended to be in 2004.

2.   DELIVERIES AND PAYMENT.

     (a)  SUPPLIER shall not be required or obligated to deliver any products to
          the Premises other than during its normal business hours or in any
          quantity less than the maximum load permitted by applicable statute,
          rule or regulation. Subject to change and at SUPPLIER's option, all
          deliveries shall be made to the Premises. The title to and the risk of
          loss for the products shall pass from SUPLIER to SELLER when such
          products are delivered to SELLER's tanks or otherwise delivered to the
          Premises. SELLER shall permit the unloading of SUPPLIER's transport
          trucks or common carriers engaged by SUPPLIER to make deliveries at
          the Premises without delay.

     (b) Any claims for defect or variance in quality or shortage in quantity of
         any product delivered to the Premises, shall be made by SELLER within
         twenty four (24) hours of delivery and SUPPLIER shall be given the
         opportunity to inspect the same. Otherwise, SELLER waives any and all
         claims against SUPPLIER for such defects, variances, or shortages, and
         SELLER agrees to indemnify, release and hold SUPPLIER harmless pursuant
         to Paragraph 20, below.
<PAGE>

     c)   Deliveries shall be made (except at Supplier's option) in full bulk
          transport quantities and with reasonable notice at the Premises in
          Supplier's customary manner using equipment selected by Supplier.
          Transportation costs are determined by published common carrier rates
          applicable to Seller's site. Costs are subject to change without
          notice.

<TABLE>
<CAPTION>

                  PRODUCT                   MINIMUM                             MAXIMUM

<S>                                 <C>                                 <C>
          (i)      Gasoline          20,000,000 gallons annually         80,000,000 gallons annually

          (ii)     Diesel Fuels      60,000,000 gallons annually        150,000,000 gallons annually

</TABLE>

     d)   The prices which Seller shall pay to Supplier for the Supplies shall
          be:

          egular Unleaded "87" octane;               .02 cents   Per Gallon

          lus Unleaded "89 octane;                   .02 cents   Per Gallon

          remium Unleaded "93" octane;               .02 cents   Per Gallon

          iesel Fuel;                                .02 cents   Per Gallon

          (rounded to the highest whole number) over the posted ALKHALIFA Jobber
          Rack Price for the particular item of Supplies. The terms of payment
          shall be as set forth on each invoice for the Supplies from Supplier
          to Seller, provided however that said invoices shall provide, among
          other things, that payment is due as follows:

          (i)  Seller has agreed to place with Supplier upon the execution of
               this Agreement, the sum of $8,000,000 in cash and/or irrevocable
               documentary letter of credit as security deposit on all future
               supply deliveries. Supplier, in its sole discretion, may have the
               option to apply said deposit to any and all outstanding balances
               due from Seller. Seller shall not be entitled to receive the
               interest, if any, accrued on the security deposit. Supplier upon
               the execution of this Agreement, hereby subscribes for and agrees
               to purchase 8,000 (eight thousand) Shares of Series A Convertible
               Preferred Stock (the "Shares") as defined in the Summary of Terms
               ("Term Sheet") of FUELNATION INC., a Florida corporation (the
               "Corporation"), in the amount of $1,000.00 per Share on the terms
               and conditions described therein relating to the offering.
               DISCLOSURE. Because this Series A Convertible Preferred Stock
               offering is limited to accredited investors in reliance upon
               exemptions contained in the Securities Act of 1933 ("Securities
               Act") and Rule 506 promulgated there under and applicable state
               securities laws, the Shares are being sold without registration
               under the Securities Act. Accordingly, the Corporation is
               offering the Shares utilizing the Term Sheet and the Subscription
               Agreement. Supplier acknowledges receipt of the Term Sheet and
               Subscription Agreement and has reviewed or had reasonable access
               to all exhibits listed therein for Supplier's inspection.

          (ii) At all times, the term "Gallon" as used in this Agreement, shall
               be construed to mean "Net Gallons" as determined by standard
               temperature adjustment.

     e)   Method and Terms of Payments: Payment for all shipments of Supplies
          shall be due and payable in full within (10) days of the date of
          delivery of said shipment. Seller shall pay Supplier via Supplier's
          Electronic Fund Transfer (EFT) System in accordance with Supplier's
          terms in effect on the date of delivery. If Supplier, in its sole
          discretion, does not approve Seller's payment via EFT, Seller shall
          pay Supplier by bank cashier's check at time of delivery, or at such
          time and place or method as Supplier, in its sole discretion, may
          designate from time to time. If a legal holiday shall precede a
          payment due date or shipment date, the payment shall be presented to
          the Supplier on the normal workday preceding the holiday.

          (i)  Supplier reserves the right to make changes in such payment,
               terms and conditions for products sold and Seller agrees to
               conform to all such terms and conditions.

          The Seller shall not be entitled to any discount for early payment and
          shall also pay to the Supplier all taxes, all other fees or charges
          imposed on the supplies or the delivery thereof by the Supplier, and
          all appropriate freight and delivery charges.
<PAGE>

3.   DEFAULT IN PAYMENT.

     (a)  Default in payment shall include, ie; a check not paid.

          (i)  Failure to make any payment required hereunder; or

          (ii) Issuing a worthless check, ie; a check not paid when presented to
               Seller bank.

     (b)  Upon Seller default in payment, Supplier reserves the following
          rights, without notice, among other remedies:

          (i)  To terminate this Agreement.

          (ii) To suspend further deliveries.

          (iii) To enter upon Seller's premises to inspect Inventory and compute
               and obtain receipts to apply on account.

          (iv) To enter upon Seller's premises and take possession of and remove
               all or any part of the products, without liability therefor,
               using all reasonable means to effect such entry and removal, and
               without liability for damage done in the course thereof: Seller
               shall be liable for and shall pay Supplier for any products not
               removed by Supplier; and/or;

          (v)  To exercise any of Suppliers rights arising out of or in
               connection with Suppliers security interest in the products.

          (vi) None of these rights shall be exclusive of any other rights held
               by Supplier

4.   EQUIPMENT.

     (a)  The Supplier has agreed to furnish to the Seller certain services
          and/or equipment which are more particularly described in Exhibit "B"
          attached hereto, which is made a part hereof. The said services and/or
          equipment shall be furnished at the time described in Exhibit "B".
          Upon the completion of the furnishing of such services and/or
          equipment, the Supplier will notify the Seller as to the value of such
          services and/or equipment. The Seller agrees to pay to the Supplier
          the full value for said services and/or equipment and hereby agrees to
          evidence said promise to pay therefor by the execution of a promissory
          note or other instrument (the "Note") which is in a form acceptable to
          Supplier. Supplier and Seller agree that the Note shall provide that
          Seller shall receive a credit on the obligation owed by Seller for
          such services and/or equipment at the rate of (.005) one-half cent for
          each gallon of Supplies which are fully paid for by the Seller until
          the full value of such services and/or equipment is fully paid.
          Notwithstanding the full payment by Seller of its obligation to pay
          for such services and equipment, the price which Seller will pay for
          the Supplies will continue during the term hereof to be as stated in
          Paragraph 2(e) hereof. Additionally the Note shall also provide that
          the Seller shall be responsible to pay for the services and/or
          equipment referred to in Exhibit "B" even if Seller terminates its
          rights hereunder; in such event, the Seller shall be obligated to pay
          the Note in full at the time it terminates this Agreement.

     (b)  All equipment and signs which bear the ALKHALIFA Petroleum Corp
          emblem's shall remain the sole property of ALKHALIFA Petroleum Corp.
          The Seller shall not encumber, sublet or sell the equipment or any
          part thereof, nor remove the equipment or any part thereof from any
          premises, nor deliver possession thereof to any other person, firm or
          corporation, nor permit any other person, firm or corporation to use
          the equipment. The Seller shall not do anything whereby said equipment
          may be destroyed, damaged or by which the title of the Suppler or
          right of severance or removal by the Supplier may in any way be
          affected or prejudiced. The Seller hereby grants to Supplier a First
          and Continuing Security Interest under the Article 9 of Florida
          Uniform Commercial Code in all of its assets described in Exhibit "B"
          attached hereto, together with the proceeds and products thereof, to
          secure the promise of Seller to repay the loan according to the terms
          and conditions of the note. Seller agrees to execute a UCC 1 Form.

     (c)  The Supplier will furnish to and install for the Seller one or more
          electronic card terminals and 34 credit card imprinters. The Seller
          will pay to the Supplier the sum of $3000.00 per month for the use of
          said credit card machines, for materials therefor and for maintenance
          thereon. Said credit card machines will remain the property of
          ALKHALIFA Petroleum Corp. The Seller shall pay all personal property
          or other taxes assessed on the equipment and shall comply with all
          laws, rules, regulations and requirements of all governmental agencies
          or authorities having jurisdiction thereof.
<PAGE>

The following three (3) subparagraphs (d), (e), and (f) shall be applicable only
in the event that SELLER and SUPPLIER have executed an Improvement Agreement
which has not expired or been terminated and is of a duration which extends
beyond the term of this Agreement.

     (d)  Due to the existence of a certain Improvement Agreement between them
          and subject to the conditions set out below, SUPPLIER will continue to
          supply motor fuel to SELLER and to maintain a "franchise relationship"
          , if branded, with SELLER within the meaning of the Petroleum
          Marketing Practices Act, 15 USC ss.2801 et. seq. for the duration of
          said Improvement Agreement, unless SELLER shall determine that SELLER
          no longer wishes to purchase motor fuel from, and to maintain a
          franchise relationship with, SUPPLIER. In such case, SELLER may
          terminate the relationship created by the Seller Agreement (or similar
          agreement then in force) in the manner provided therein or by
          declining to enter into a new Seller Agreement (or similar agreement,
          howsoever denominated) with SUPPLIER.

     (e)  At the end of the term of the Seller Agreement currently in force
          between the Parties, and of any succeeding, similar, agreements
          between the Parties, should SELLER desire the franchise relationship
          to continue for the duration of the Improvement Agreement, through
          December 4, 2013, then, unless SUPPLIER shall exercise its rights
          preserved by sub-paragraph (f) of this paragraph 4, SELLER and
          SUPPLIER will continue the relationship by executing new agreements
          containing such terms and conditions as may be contained in those
          Seller Agreements (or in those agreements of a similar type if no
          longer denominated "Seller Agreement" by SUPPLIER) in then current use
          for general application by SUPPLIER.

     (f)  Nothing herein contained in this paragraph 4 shall be construed to
          limit the right of SUPPLIER to terminate or to not renew the franchise
          relationship or franchise between SUPPLIER and SELLER for such causes
          as may be provided for in this Seller Agreement (or in similar
          agreements between SELLER and SUPPLIER) and in the Petroleum Marketing
          Practices Act.

5.   TRADEMARKS AND TRADENAMES: EXCLUSIVE USE OF ALKHALIFA PRODUCTS.

     (a)  Seller agrees, during the term of this Agreement, to sell only
          ALKHALIFA Petroleum Corp. Supplied brand gasoline and to purchase all
          such products only from Supplier and from no other jobber or person
          who deals in ALKHALIFA products, except in the circumstances described
          in Paragraph 8 hereof.

     (b)  Seller shall not sell any of the Supplies until ALKHALIFA has given
          its written approval therefor. At all times during the term hereof,
          Seller shall also comply with the requirements of ALKHALIFA for acting
          as a Seller and seller of ALKHALIFA products.

6.   PRODUCT INTEGRITY.

     (a)  Seller shall not mix ALKHALIFA brand products one with another or mix
          or adulterate ALKHALIFA brand products with petroleum products of
          others or with any other chemical or other material whatsoever.

     (b)  Seller warrants and agrees that Seller will not mix or allow Lead-Free
          ALKHALIFA Gasoline to be mixed with any gasoline in or through any
          containers, tank, pump, pipe or other element of its gasoline storage
          or distribution system unless such facilities comply with all federal,
          state and local government requirements for dispensing unleaded
          gasoline.

     (c)  Seller further warrants and agrees that Seller, its employees and
          agents will not introduce, cause or allow the introduction of leaded
          gasoline into any motor vehicle which is labeled "UNLEADED GASOLINE
          ONLY" or which is equipped with a gasoline tank filler inlet which is
          designed for the introduction of unleaded gasoline.

     (d)  Seller will allow Supplier, its employees or agents to enter Seller's
          place or places of business at any time to obtain such samples or
          conduct such tests as may, in Supplier's judgement, be reasonably
          required to confirm that Seller is complying with the aforesaid
          obligations and will cooperate with Supplier in any investigation of
          any alleged violations of such obligations.
<PAGE>

7.   COMPLIANCE WITH ENVIRONMENTAL AND OTHER APPLICABLE LAWS.

     (a)  Seller acknowledges that the petroleum products which are the subject
          of this Agreement, by their nature, require special handling and that
          Sellers, its employees and agents are fully informed as to all
          governmental regulations and rules and approved procedures relating
          thereto. Seller is solely responsible for compliance with all laws,
          ruled, regulations and orders relative to the receiving, storing,
          pricing, selling and distributing the Supplies. Seller is also solely
          responsible for the proper disposal of all waste materials generated
          by the Seller's activities.

     (b)  Seller represents that He/She is currently in compliance with all
          Federal, state and local environmental laws and regulations and with
          all other applicable Federal, state and local laws and regulations of
          every kind and nature. Seller represents that He/She will remain in
          compliance with all said applicable laws and regulations.

     (c)  Seller represents that all of the underground storage tanks into which
          the Supplies will be delivered are, on the date hereof, in compliance
          with all said laws and regulations. Seller represents that it is the
          properly registered owner, agent or leasee of all the underground
          storage tanks located on the Premises. Seller agrees that it will
          properly upgrade all underground storage tanks in accordance with all
          applicable laws and regulation.

8.   PREVENTION OF PERFORMANCE: FORCE MAJEURE.

     If either party hereto is hindered, delayed or prevented by "force majeure"
     in the performance of this Agreement, the obligation of the party so
     affected shall be suspended and proportionally abated during the
     continuance of the force majeure condition and the party so affected shall
     not be liable in damages or otherwise for its failure to perform. The term
     "force majeure" as used herein shall mean any cause whatsoever beyond the
     control of either party hereto, including, but not limited to (a) act of
     God, flood, fire, explosion, war, riot, strike and other labor disturbance;
     and (b) failure in, or inability to obtain, on reasonable terms, Supplies
     by reason of any whole or partial failure or inability of ALKHALIFA to sell
     to or supply Supplier under the ALKHALIFA Contract.

     If by reason of any force majeure condition Supplier shall be unable to
     supply the requirements of Seller regarding any product covered by this
     Agreement, Supplier's obligation while such condition exists shall, at its
     option, be reduced to the extent necessary in its sole judgement and
     discretion to apportion fairly and reasonable among Supplier's customers
     the amount of product which it is able to supply. Such allocation shall be
     made by Supplier among all of its customers including, but not limited to,
     Seller and any and all stores or stations owned by ALKHALIFA PETROLEUM
     CORP. or related companies. Supplier shall not be responsible in any manner
     for any losses or damages which Seller may claim or suffer as a result of
     any such apportionment. Supplier shall not be required to make up any
     deficiency in any product not delivered as a result of any such
     apportionment.

     If Supplier is prevented by any force majeure condition from supplying any
     of the Supplies to Seller, then, in such event but only during the period
     of time that such force majeure condition is in effect, Seller may purchase
     ALKHALIFA gasoline, diesel or products from another supplier or jobber who
     deals in ALKHALIFA gasoline's, diesel or products. As soon as the force
     majeure condition has terminated, then Seller agrees to purchase all of its
     requirements for gasoline and diesel from Supplier.

     EXCUSED NONPERFORMANCE. SELLER shall be excused from the obligation to take
     deliveries of the products as required by Paragraph 2 to the extent and for
     the period that the operation of SELLER's business is limited or impaired
     because of governmental orders and regulation, judicial decree, fire,
     flood, war, civil disturbance, any labor disputes, blockade, embargo or any
     other causes beyond SELLER's control. SUPPLIER shall be excused from the
     performance of its obligations herein to the extent and for such time that
     its performance is delayed or prevented by any cause reasonably beyond
     SUPPLIER's control, including, but not limited to, those causes or
     conditions set out above excusing SELLER's obligation as well as the
     cancellation or non renewal of product exchange agreements with third
     parties or the failure of third parties to deliver product for whatever
     reason. Should SUPPLIER's supply of any product be insufficient at any time
     and for any reason to enable SUPPLIER to supply the demand of all customers
     normally receiving such product(s), SUPPLIER may, without incurring any
     liability to SELLER, discontinue deliveries of such product(s) hereunder
     for the duration of the shortage or apportion deliveries thereof among
     SELLER and such other customers, including SUPPLIER's own requirements, as
     SUPPLIER, in its sole discretion, may determine. In all instances, SUPPLIER
     shall not be required to conclude product purchase or exchange agreements
     which it deems to be uneconomic nor shall SUPPLIER be required to operate
     any refining or other facility if the same is deemed by SUPPLIER to be
     physically or economically undesirable.
<PAGE>

9.   MARKET WITHDRAWALS.

     In the event Supplier elects to withdraw from the marketing of automotive
     gasolines for resale in the area supplied by the ALKHALIFA supply point
     supplying Seller, Supplier may terminate this Agreement at any time without
     further liability on 100 days' written notice. Upon receipt of the
     aforesaid notice of termination, Seller may at any time thereafter
     terminate this Agreement prior to the expiration of said 100-day period
     upon delivery of written notice of termination to Supplier.

10.  CHANGE OF SUPPLIERS.

     Should Supplier discontinue selling ALKHALIFA brand products, it shall have
     the right to substitute any other brand of petroleum products and this
     Agreement shall remain in full force and effect.

11.  SALE OR LEASE OF PREMISES.

     If, during the term of this Agreement, Seller receives a bona fide offer
     (hereinafter called an "Outside Offer") for the sale or lease of the
     Premises, which Seller intends to accept, Seller shall give notice to
     Supplier of such offer and of such intention, the name and address of the
     proposed purchaser or lessee, a true and correct copy of the offer or
     agreement and, if no written offer or agreement exists, the terms of the
     proposed transaction and such other information as Supplier may reasonable
     require, and shall offer to sell or lease the Premises to Supplier or its
     designee, corporate or otherwise, on the same terms and conditions as
     contained in such Outside Offer. Within Thirty (30) days after receipt of
     such notice, Supplier may elect, by notice to Seller, to purchase or lease
     the Premises, as applicable, on the same terms and conditions as contained
     in the Outside Offer. In the event the Supplier elects to purchase or lease
     the Premises, closing shall occur at the office of the attorneys for the
     Supplier in accordance with the terms of the offer but not greater than
     ninety (90) days after the giving of notice by the Supplier of its election
     to accept such offer. Any purported sale or lease of the Premises in
     violation of this section shall be voidable at the election of the
     Supplier.

12.  LABELING: UNLEADING GASOLINES.

     (a)  Seller shall comply at all times with the programs and procedures
          established by Supplier and by ALKHALIFA for controlling the quality
          of the lead-free products which are sold to Seller as part of the
          Supplies. Seller shall indemnify Supplier against any penalty, loss or
          liability of any nature whatsoever resulting from failure of Seller to
          maintain lead-free specifications of ALKHALIFA's lead-free products.

     (b)  Seller's indemnity obligation under Subsection 8 (b) of this Agreement
          shall include, but not be limited to, any and all expense (including
          trial and appellate attorney's fees), liability, claims, fines, civil
          penalties or demands which may arise or be assessed as a result of any
          act or omission of Seller or Seller's agents or employees in handling
          unleaded gasolines hereunder, or a result of failure by any of them to
          follow Supplier's and ALKHALIFA's programs and procedures for handling
          unleaded gasolines.

     (c)  Seller agrees to inject into the Supplies any additives as requested
          by ALKHALIFA or Supplier.

13.  WARRANTIES.

          Supplier warrants that it has good title to the Supplies supplied,
     free of liens. THE FOREGOING WARRANTY IS EXCLUSIVE AND IS IN LIEU OF ALL
     OTHER WARRANTIES, WHETHER WRITTEN, ORAL OR IMPLIED. THE WARRANTY OF
     MERCHANTABILITY, IN ALL OTHER RESPECTS, OTHER THAN EXPRESSLY SET FORTH
     HEREIN AND RESPECTS, OTHER THAN EXPRESSLY SET FORTH HEREIN, ARE EXPRESSLY
     EXCLUDED AND DISCLAIMED.

<PAGE>

14.  CLAIMS.

          Any claim for defect or variance in quality or product furnished
     hereunder shall be made in writing directed to Supplier, with a copy to
     ALKHALIFA, within three (3) days, excluding weekends and holidays, after
     discovery of the defect or variance. Supplier and ALKHALIFA shall be
     furnished samples adequate to test the products claimed to be defective and
     both Supplier and ALKHALIFA shall be afforded the opportunity to take their
     own samples. Any and all claims not made within the time and in the manner
     herein provided shall be deemed, waived and released by the Seller.

15.  CREDIT CARDS.

          Seller may grant credit to holders of credit cards which may be issued
     by ALKHALIFA and/or issued by other companies listed in ALKHALIFA's then
     current credit card regulations, a copy of which has been provided to
     Seller. It is specifically understood that the granting of credit shall be
     pursuant to the terms and conditions set forth in such credit card
     regulations including that such credit extension shall be only in
     conjunction with the sale of ALKHALIFA products and that ALKHALIFA shall
     have the right, in its sole discretion, to amend or terminate such
     regulations and discontinue this credit card program at any time. Seller
     may also grant credit to such ALKHALIFA credit card holders for other items
     of merchandise sold by Seller at the Premises which are not ALKHALIFA
     products, but only if Seller has been given specific written permission by
     ALKHALIFA to extend such credit. Seller agrees that all credit card
     invoices which it may transmit and assign to ALKHALIFA shall be in
     conformity with ALKHALIFA's credit card regulations and that ALKHALIFA may
     reject or charge back any credit card invoices not conforming to said
     instructions. Seller further agrees that, upon such rejection or charge
     back, the value of the credit card invoices which were rejected or charged
     back shall become immediately due and owing from Seller to ALKHALIFA and
     may be deducted from subsequent checks for payment of credit card invoices.
     All credit card invoices shall be forwarded by registered mail or other
     means authorized by ALKHALIFA to such place(s) and at such time intervals
     as ALKHALIFA my designate from time to time.

16.  MARKETING AND ADVERTISING ALLOWANCE

     Seller is hereby granting exclusive marketing and advertising rights to
     Supplier (exclusive to petroleum and related advertising products or
     vendors), and Supplier herewith is accepting from Seller the exclusive
     marketing and advertising rights and agrees to pay a monthly allowance, to
     Seller, for these rights for a period of 10 years, commencing with the term
     of the fuel supply agreement. The exclusive marketing and advertising right
     will be granted at each location that Supplier supplies petroleum products
     and that Marketing and Advertising rights are available, (i.e. Billboards,
     canopies, banners, road signs, roof tops, buildings, walls, pumps, marquee
     boards, trucks, cars, radio, television, etc.)

     Supplier agrees to issue a marketing and advertising allowance credit to
     Seller in the amount of one and one-half (1 1/2) cents per gallon on all
     purchases of petroleum products monthly. This exclusive marketing and
     advertising rights allowance will be paid monthly to Seller, or may be
     applied against outstanding invoices, at Suppliers sole discretion.

     It is further agreed that Supplier is be being granted the exclusive
     marketing and advertising rights on the entire Travel Center site to be
     built in Davie, Florida. In addition to the marketing and advertising
     allowance credit to Seller in the amount of one and one-half (1 1/2) cents
     per gallon on all purchases of petroleum products monthly Supplier hereby
     agrees to pay Seller an additional fixed payment of $200,000 per month for
     a total of $2,400,000 annually for a period of 10 years. The total
     advertising budget for 10 years will be $24,000,000. The advertising
     dollars will be used to market and advertise brand awareness and related
     products. The Travel Center rights will not be restricted to petroleum and
     vendor advertising only; these rights will be granted to allow Supplier to
     sub-lease space to third party advertisers that do not compete with Seller
     or the location. This lease will commence January 2004 through January
     2014.
<PAGE>

17.  CARE AND HANDLING OF PRODUCT.

     SUPPLIER agrees that all ALKHALIFA gasoline (for purposes of this
     paragraph, the "product") sold hereunder, shall comply with all applicable
     federal, state and local rules and regulations in effect at the time and
     place of delivery to SELLER. SELLER agrees:

     (a)  To abide by all laws, ordinances and regulations regarding the
          storage, transportation, dispensing and sale of the product;

     (b)  To protect the product from contamination or from commingling with
          other gasoline, blend products, or otherwise and to do nothing during
          the transportation, storage, dispensing or sale of the product which
          may result in contamination of any sort or result in a product which
          does not comply with applicable Reid Vapor Pressure, oxygenated
          gasoline, and/or reformulated gasoline standards;

     (c)  To periodically train SELLER's employees in the handling, sampling,
          and oversight for Reid Vapor Pressure, oxygenated gasoline, and/or
          reformulated gasoline standards

     (d)  To use equipment (such as pumps, nozzles, tanks, hoses, and Stage II
          Vapor Recovery equipment, where applicable) designed and intended for
          the storage, dispensing and sale of the products and to keep such
          equipment clean and in good working condition at all times;

     (e)  To permit SUPPLIER, its agents and employees to inspect and/or copy
          the daily inventory control records and reconciliations and to sample
          the products at all reasonable times and to annually certify to
          SUPPLIER compliance with the Federal Occupational Safety and Health
          Administration (OSHA) Service Station Regulation 1910.106(g), and 40
          CFR Part 280 which require SELLER to maintain and reconcile accurate
          daily physical and book inventory records of underground storage tanks
          on the Premises;

     (f)  To regularly inspect and sample, and to permit SUPPLIER, its agents
          and employees to inspect and sample, the product in SELLER's
          possession at all reasonable times and to fully cooperate to cure and
          correct any contamination and take immediate corrective action if any
          contamination, adulteration, or misbranding, regardless of source, is
          discovered whether by SELLER or by SUPPLIER. If discovered by SELLER,
          SUPPLIER shall be immediately notified thereof. In any case, SUPPLIER
          may thereafter refuse to make further deliveries of products into such
          tank(s) pending proper correction of any such contamination;

     (g)  To protect, indemnify and hold SUPPLIER harmless from any and all
          losses, claims, damages, penalties, suits or costs which may arise or
          grow out of any violation or alleged violation of this Paragraph 19.

18.  LIQUIDATED DAMAGES.

          It is understood that the Supplier is relying on sales to Seller of
     the minimum product quantities set forth in Article 2, Paragraph (b) and
     that any repudiation of this Agreement and failure to purchase those
     minimum product quantities by Seller will result in serious losses to
     Supplier. Seller and Supplier acknowledge that the amount of those losses
     is and will be difficult to determine. It is agreed, therefore, that upon
     any repudiation of this Agreement by Seller, Seller shall pay to Supplier,
     as liquidated damages to compensate for such losses, two cents per gallon
     multiplied by the minimum number of gallons set forth in Article 2,
     Paragraph (b) measured from time of repudiation to the end of the term of
     this Agreement and any extensions thereof. The damages here liquidated are
     confined to losses resulting from Seller's repudiation of this Agreement
     and shall not affect such other rights and remedies as Supplier may have
     under this Agreement and under applicable law including, but not limited
     to, the PMPA and the Uniform Commercial Code.

19.  INDEMNITY.

     (a)  Seller hereby releases and agrees to indemnify and hold Supplier, its
          agents, servants, employees, successors and assigns (the "Indemnified
          Parties"), harmless from and against any and all claims, suits,
          losses, obligations, liabilities, injuries and damages, including
          attorney's fees, trial and appellate, and costs of litigation for
          death, personal injury, property damage or other claim arising out of
          any failure by Seller to perform, fulfill or observe any obligation or
          liability of Seller set forth herein or any negligent act or omission
          by Seller or any cause or condition of any kind directly or indirectly
          arising in connection with the use, occupancy, maintenance, upkeep,
          repair, replacement or operation of any place of business, service
          station or marketing premises (including, but not limited to, adjacent
          sidewalks, drives, curbs, signs, poles and all other fixtures and
          equipment located thereon) which place of business, service station or
          marketing premises is or was either directly or indirectly owned,
          leased, operated, supplied, franchised or licensed by or through
          Seller.

     (b)  Seller hereby releases and agrees to indemnify and hold the
          Indemnified Parties harmless from and against any and all claims,
          suits, losses, injuries, liabilities and damages, including attorney's
          fees, trial and appellate, and costs of litigation for death, personal
          injury, property damage or other claim arising out of or resulting
          from delivery, use, storage, handling and sale of petroleum products
          including, but not limited to, the seepage, leakage or release of any
          petroleum products and fire or explosion at any place of business,
          service station or marketing premises including, but not limited to,
          the storage tanks, piping and pump located thereon which place of
          business, service station or marketing premises is or was either
          directly or indirectly owned, leased, operated, supplied, franchised
          or licensed by or through Seller; unless such damages are caused by
          the sole negligence of Supplier or its agents.
<PAGE>

     (c)  Seller shall defend, indemnify and hold the Indemnified Parties
          harmless from and against any fines, penalties, taxes, judgements,
          charges or expenses (including attorney's fees, trial and appellate
          and cost of litigation) for violations of any law, ordinance or
          regulation caused by any act of omission, whether negligent or
          otherwise, of Seller or its agents, servants, employees, contractors,
          Sellers, franchises or licensees.

     (d)  Notwithstanding the foregoing provisions, Seller will not be
          responsible for violations of any law, ordinance or regulation by
          Supplier, nor for any acts or omissions arising from the sole
          negligence of Supplier, its agents or employees.

20.  INSURANCE.

     Without limiting in any way the scope of any obligations and/or liabilities
     assumed hereunder by SELLER, SELLER shall procure and maintain at its
     expense for the duration of the Term hereof, the insurance policies
     described below:

     (a)  Workmen's Compensation and Occupational Disease Insurance, including
          Employers' Liability Insurance in compliance with the state laws in
          which the SELLER and the Premises are located;

     (b)  Comprehensive General Liability Insurance covering bodily injury,
          including death, and property damage and endorsed to include premises
          and operations, complete operations, products liability, and
          contractual liability, with a combined single limit of not less than
          $500,000;

     (c)  Insurance for SELLER's Garage Keeper's legal liability for property
          under SELLER's care, custody and control, where SELLER operates Repair
          and Lubrication Bays, on the Premises, including coverage for fire,
          theft, or collision of automobiles, including vandalism and malicious
          mischief with limits of not less than $25,000; and

     (d)  Automobile Liability Insurance covering bodily injury, including
          death, and property damage for the operation of owned, hired, or
          otherwise operated non-owned automotive equipment used in performance
          of the business of SELLER, with a single limit of not less than
          $500,000.

     SELLER's insurance shall be endorsed to include SUPPLIER as an additional
     insured under Paragraphs 20 (b), (c), and (d) above.

     SELLER shall provide SUPPLIER with a Certificate of Insurance. The
     Certificate of Insurance shall provide that SUPPLIER be given at least
     thirty (30) days' prior notice prior to cancellation or any material change
     in the coverages provided above.

21.      GENERAL PROVISIONS.

     (a) This Agreement is personal to Seller, but Seller may assign this
         Agreement to such other person or entity as Supplier, in its sole and
         absolute discretion, specifically approves in writing.

     (b) This Agreement shall bind the executors, administrators, personal
         representatives, assigns and successors of the respective parties.

     (c) The right of either party to require strict performance by the other
         party hereunder shall not be affected by any previous waiver,
         forbearance or course of dealing.

     (d) All notices hereunder shall be deemed to have been sufficiently given
         if and when presented or mailed by certified mail to the parties at the
         addresses above and such other addresses as may be furnished to the
         other in writing by certified mail.

     (e) All understandings and agreements related to the subject matter hereof,
         either verbal or written, except insofar as incorporated in this
         Agreement, are hereby cancelled and withdrawn.
<PAGE>

     (f)  This Agreement constitutes the entire Agreement of the parties with
          respect to the subject matter hereof and may be altered only by
          writing. signed by the parties hereto.

     (g)  This Agreement shall be governed by the laws of the State of Florida.

     (h)  Seller hereby grants to the Supplier the right to inspect and audit
          Seller's books, records, property and all storage tanks located on the
          Premises during normal business hours upon a two (2) hour notice.

     (i)  Exhibit "A: Promissory Note and UCC1 Form is made a part of this
          Agreement.

     (j)  Exhibit "B" Equipment Agreement is made a part of this Agreement.

Signed, sealed and                           Supplier:

delivered in the                             ALKHALIFA Petroleum Corp.

presence of:

_______________________________             By:_______________________________

_______________________________             Its:______________________________

                                             Seller: FuelNation Inc.

_______________________________             By:_______________________________

_______________________________             Its:______________________________

<PAGE>

                                  UNCONDITIONAL
                                    GUARANTY

In consideration of ALKHALIFA Petroleum Corp. (hereinafter referred to as
ALKHALIFA) extending credit to FuelNation Inc. (hereinafter referred to as ("the
Company") in which the undersigned are stockholders, directors, members,
officers or employees, the undersigned do hereby guarantee to ALKHALIFA the
payment of any and all debts and financial obligations of the Company to
ALKHALIFA, incurred pursuant to Purchase and Supply Agreement, Equipment
Agreement and Promissory Note of even date herewith.

Each of the undersigned as a primary obligor jointly and severally and
unconditionally guarantees to ALKHALIFA that the Company will fully, promptly
and faithfully perform, pay and discharge all its present and future obligations
to ALKHALIFA Oil and each agrees, without ALKHALIFA first having to proceed
against the Company or to liquidate any security of the Company which may be
held by ALKHALIFA or to otherwise pursue or exhaust its remedies against the
Company or against any other security ALKHALIFA may have to pay on demand all
sums due and to become due to ALKHALIFA from the Company together with all
losses, costs, attorney's fees, trial and appellate, or expenses which may be
suffered or incurred by ALKHALIFA by reason of the Company's default or default
of any of the undersigned. Each of the undersigned waives notice of nonpayment,
protest and notice of protest with respect to the indebtedness covered by this
guaranty.

This Guaranty shall be binding upon the heirs, administrators, successors and
assigns of the undersigned and shall inure to the benefit of ALKHALIFA, its
successors and assigns.

IN WITNESS WHEREOF, the undersigned have executed this Guaranty on the 4th day
of December 2003 in Broward County Florida.

------------------------------           --------------------------------
Witness                                  FuelNation Inc.

------------------------------           --------------------------------
Witness

<PAGE>

                            ALKHALIFA PETROLEUM CORP.
                               Equipment Agreement

                                   "EXHIBIT B"

<TABLE>
<CAPTION>

<S>                     <C>                               <C>                  <C>

SELLER:                FuelNation Inc.                        SUPPLIER:         ALKHALIFA PETROLEUM Corp.
Invoice Address:       4121 SW 47th avenue, Suite 1301                          4121 SW 47th avenue, Suite 1301
                       Davie, Florida 33314                                     Davie, Florida 33314

</TABLE>

with a copy to:

Bahrain Tower, 17th floor, Al-Khalifa Road, Manama, Bahrain, P.O Box 20257,
Manama, Bahrain

                    Provisions Relating To Loan Of Equipment

1.   The Seller agrees to use the Equipment, as defined below, only for the
     purposes of distributing, handling or storing petroleum or other products
     purchased from the Supplier by the Seller.

2.   The Equipment shall at all times be and remain the property of the
     Supplier, and the Seller shall at all times keep and maintain the Equipment
     in good order, condition and repair. It is the Seller's obligation to keep
     the Equipment in a clean and attractive appearance. If, at the discretion
     of the Supplier, the Equipment is found to need cleaning and polishing, the
     Supplier may clean and polish the equipment and then the Seller shall
     reimburse the Supplier for any expenses incurred. The Seller shall, at all
     times, keep and maintain on said Equipment the trade mark, insignia or any
     identification marks of the Supplier. Any expenses incurred for the repair,
     maintenance or removal of such equipment shall be paid by the Seller. Upon
     the termination of the Purchase and Supply Agreement, the Seller shall be
     obligated to return all of the equipment described herein in the same
     condition as at the commencement of this agreement, reasonable wear and
     tear excepted.

                                    Equipment

The Supplier will furnish and loan to the Seller, installed at the Seller's
delivery address, the following items of Equipment ("the Equipment"):

Number            Description                                  Agreed Value

34       Card  Readers for Gilbarco dispensers                  30,000.00

                                  Total                         $30,000.00

Seller ______________________________     Witness _____________________________
            FuelNation Inc.

                                          Witness  ____________________________

<PAGE>

                                 PROMISSORY NOTE

                                   EXHIBIT "A"

 $ 30,000                                  Davie, Florida December 04, 2003

 FOR VALUE RECEIVED the undersigned, jointly and severally, promise to PAY TO
 THE ORDER OF ALKHALIFA Petroleum Corp.. the principal sum of thirty Thousand
 and 00/100 Dollars ($30,000.00) together with the interest from 12/4/03 at the
 rate of (8%) percent per annum until maturity, all payable in lawful money of
 the United States of America, as follows: This note sets forth the agreed value
 under the Purchase and Supply Agreement by and between "ALKHALIFA" (Supplier)
 and the Maker (Seller) for all the services and/or equipment in Exhibit "B" of
 that Agreement. Supplier shall issue credit to Seller of one-half (1/2) cents
 per gallon on all purchases of petroleum products monthly. The amount credited
 shall be applied against the value of this note. The total term of this note
 shall be Sixty (60) months. Any unpaid balance shall become due and payable on
 Demand. In the event of Seller default, the entire unpaid balance shall become
 due and payable immediately.

 All payments shall apply first to accrued interest, and the remainder, if any,
 to reduction of principal. If any installment of principal or interest is not
 paid when due, or upon any default in the performance of any of the covenants
 or agreements of this note, or of any instrument now or hereafter evidencing or
 accruing this note or the obligation represented hereby, the whole indebtedness
 (including principal and interest) remaining unpaid, shall, at the option of
 the holder, become immediately due, payable and collectible, and during such
 period, this note and deferred interest shall bear interest at the rate of
 eighteen (18%) percent per annum. Each maker and endorser severally waives
 demand, protest and notice of maturity, non-payment or protest and all
 requirements necessary to hold each of them liable as makers and endorsers.
 Each maker and endorser further agrees, jointly and severally, to pay all costs
 of collection, including reasonable attorney fees in case the principal of this
 note or any payment on the principal or any interest thereon is not paid at the
 respective maturity thereof, or in case it becomes necessary to protect any
 security hereof, whether suit be brought or not, said costs shall include
 reasonable attorney's fees for any appeal should an appeal be taken

Payable at 4121 SW 47th avenue, Suite 1301, Davie, Florida 33314

                                 ___________________________(Seal)
                                 FuelNation Inc.,

                                 or such other place as shall be designated by
                                 the holder of this note in writing.

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