MEMORANDUM OF UNDERSTANDING
The following represents an understanding regarding the terms of an
agreement ("Agreement") between RubyCat Technology ("RCT") and its subsidiaries,
and direct and indirect affiliates and the EnerTeck Chemical Corporation and its
subsidiaries, and direct and indirect affiliates ("EnerTeck"). (RCT and
EnerTeck, each a "Party", and collectively referred to herein as "Parties") for
the sale by RCT and purchase and marketing by EnerTeck of RCT's diesel fuel
additive products for the diesel fuel market (such products from RCT will
hereinafter be referred to as "EnerBurn"). Such marketing of RCT's diesel fuel
additive products will be supported by RCT with its associated application
services and technology. Also presented herein are the basic terms of agreement
for a purchase option for EnerTeck to acquire RCT's EnerBurn products and
related Technology as more fully discussed in Section 2, below.
The Parties shall each give best effort to cause this endeavor to reach
fruition and will not engage in any activity or representation that would
circumvent, impede, conflict or compete with this Agreement.
RCT and EnerTeck agree as follows:
1. SUPPLY AND MARKETING AGREEMENT The Parties agree that the term "mutual
exclusivity" for the purposes of this agreement means that EnerTeck will
collaborate with and purchase EnerBurn products and services exclusively
from RCT and RCT will collaborate with and sell EnerBurn Diesel products
and services exclusively to EnerTeck as outlined herein and neither party
will have third party relationships that would compete with or impede the
Agreement herein. This mutual exclusivity in Diesel fuel markets
specifically excludes Diesel aftertreatment hardware and technology. The
Parties agree to mutual exclusivity for developing substantial sales of
RCT's EnerBurn products and application services in Diesel fuel markets as
follows:
(a) EnerTeck and RCT are currently collaborating in the development of
Diesel transportation and various industrial sales of EnerBurn in
Diesel applications in the USA, South America, and Europe for highway,
rail, marine, mining, power generation, and other related Diesel
applications. Collaboration for marketing EnerBurn in other geographic
regions is contemplated. The Parties herein agree to collaborate on a
Global basis (excluding China) with mutual exclusivity to develop
Diesel market sales and new markets for a period of eleven months from
the effective date of this agreement and evergreen year to year
thereafter so long as EnerTeck's purchases of EnerBurn from RCT have
met the following minimums (as specified in the pre-existing Exclusive
Market Segment Development Agreement) in the preceding year:
Year One ending December 31, 2003 180,000 Gallons
Year Two ending December 31, 2004 270,000 Gallons
Year Three ending December 31, 2005 400,000 Gallons
And Each Year thereafter 500,000 Gallons
(b) In consideration of a payment of $100,000 by EnerTeck to RCT, the
Parties agree to a temporary extension of, and expansion to, the scope
of the Exclusive Market Segment Development Agreement already existing
between the Parties for the Diesel fuel market which would expand the
exclusive marketing rights granted to EnerTeck. The consideration is
to be paid no later than February 3, 2003, and the term of which shall
continue until the option of Section 2 below is exercised or December
31, 2003, whichever occurs first.
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Should EnerTeck's purchases of EnerBurn fail to meet the minimum
volume requirements for any annual period, RCT will protect EnerTeck's
relationship with its existing customers and distributors and will
sell EnerBurn to EnerTeck for any and all of said customers but
EnerTeck will forfeit Global exclusivity as described herein.
(c) The Parties reserve the right to review cost/price quarterly. If this
review reveals that a price adjustment is necessary, the Parties will
meet and negotiate a price adjustment to be agreed by the Parties.
Parties agree to negotiate in good faith on all/any such negotiations.
This agreement does not replace, but only temporarily (through extension of the
option period expiring December 31, 2003) compliments the Exclusive Market
Segment Development Agreement between RCT and EnerTeck dated July 3, 2001 and
September 7, 2001. Additionally, this Agreement does not modify, alter or
supercede any prior confidentiality agreements between the Parties, and/or their
affiliates that relate to proprietary data, know-how and/or computer modeling
(the Technology); or proprietary customer and distributor information. Each
Party will use the same care and prudence with the other Party's confidential
information as it would reasonably expect the other Party to use with its own
confidential information.
2. PURCHASE OPTION AGREEMENT
(a) The Parties agree to the granting of an option to EnerTeck to purchase
from RCT the EnerBurn technology, which technology is specifically
limited to the elements listed in Attachment I.
RCT grants to EnerTeck a unilateral one-year option to purchase the
technology, including the information specified in Attachment 1 relating to
the use of the principal EnerBurn chemical in all Diesel fuel applications
(excluding diesel aftertreatment). The option purchase price ranges as
follows:
If exercised in January, 2003 - $6,000,000
If exercised in February, 2003 - $6,055,000
If exercised in March, 2003 - $6,110,000
If exercised in April, 2003 - $6,165,000
If exercised in May, 2003 - $6,220,000
If exercised in June, 2003- $6,275,000
If exercised in July, 2003- $6,330,000
If exercised in August, 2003 - $6,385,000
If exercised in September, 2003 - $6,440,000
If exercised in October, 2003 - $6,495,000
If exercised in November, 2003 - $6,550,000
If exercised in December, 2003 - $6,600,000
(b) This option expires on December 31, 2003 if not exercised by funds
transfer by ▇▇▇▇▇▇▇▇ to RCT prior to that date. Payment will be made
in full to RCT in readily available funds without deduction or set off
at the time of closing on or prior to December 31, 2003.
The Parties agree, in good faith, to enter into a definitive purchase agreement
for the Technology as outlined in this Section 2. Subsequent to EnerTeck's
payment in full for RCT's Technology, i.e. the exercise of the aforementioned
option, EnerTeck shall expressly and permanently own all rights and royalties to
the Diesel fuel portion of RCT's Technology; and RCT, its subsidiaries,
shareholders, officers, and beneficiaries will protect the confidentiality of
the purchased Technology and will not engage in competition with EnerTeck or
transfer said Technology to an active or potential Diesel competitor of
EnerTeck. Furthermore, subsequent to EnerTeck's fulfillment of the purchase
option, RCT's President, will enter into an agreement with EnerTeck to provide
to EnerTeck consulting, data analysis and training, for a minimum period of two
years,
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the actual term and reimbursement rate for this agreement to be negotiated
between the Parties. The Parties will, in good faith, negotiate the terms of the
consulting agreement prior to executing the option to purchase RCT's Technology
unless mutually agreed otherwise.
The Parties recognize that EnerTeck is attempting to secure sufficient outside
funding to enable it to complete the acquisition of RCT's Technology for diesel
applications as provided for in Section 2 herein and that demonstrable EnerBurn
sales metrics must be met to secure said funds to exercise the option. In the
event that EnerTeck does not exercise the option referred to in Section 2,
above, for any reason whatsoever, this memorandum of understanding as it relates
to the Supply and Marketing Agreement (Section 1, above) reverts to the still
valid, binding and primary terms and conditions of the Exclusive Market Segment
Agreement dated July 3, 2001 and September 7, 2001, as simply extended by the
$100,000 fee payment.
The laws of the State of Colorado shall govern this Agreement. The
effective date of this Agreement is February 1, 2003.
In witness whereof, the Parties have caused this Agreement to be signed
by their duly authorized representatives:
For RubyCat Technology:
s/s Date: 2-07-03
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By: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
President, RubyCat Technology
For EnerTeck Chemical Corporation.
s/s Date: 2-04-03
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By: ▇▇▇▇▇▇ ▇▇▇▇▇
Chairman Of The Board, EnerTeck Chemical Corporation, Inc.
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ATTACHMENT 1
The elements and components of the EnerBurn diesel technology covered
by this eleven-month option are specifically limited to the following
items.
RCT TECHNOLOGY
1. Formula for diesel EnerBurn.
2. The analytical protocols required to analyze Key Chemicals to qualify
them for safe and effective use in Diesel engine applications.
3. Transfer exclusively to EnerTeck all (RCT will continue to own and use
these protocols in non-diesel and diesel aftertreatment applications)
rights to the proof of performance statistical analysis procedures for
Diesel engine applications.
4. The rights to test documentation and test reports of performance of
Enerburn in Diesel equipment.
5. Authorization to use RCT's EPA Diesel Fuel Product Registration to the
full extent permitted by EPA regulations and policies. Any transfer
short of out right sale of the permits will be exclusive to EnerTeck.
6. Transfer of all rights and responsibilities of the Exclusive Market
Segment Development Agreement dated July 31, 2001 and September 7,
2001.
7. Proprietary RCT Technology to produce the Key Chemicals in the
EnerBurn Formulation for EnerTeck's use exclusively in formulating and
marketing EnerBurn or EnerBurn related Products in diesel fuels
markets. Any sale to third parties of Key Chemicals produced using
RCT's Proprietary Technology will require the prior written consent of
RCT.
RCT SUPPLY AGREEMENT
A guaranteed, full requirements supply contract for Proprietary Key Chemicals
from RCT to EnerTeck Corporation for uses in formulating and marketing Diesel
EnerBurn Products. The full requirement commitment for each Key Chemical from
RCT is contingent on EnerTeck purchasing, during a contract year, a minimum of
80% of Key Chemicals requirements from RCT for Diesel EnerBurn Products. RCT
will be given the option to meet any competitive offer for supply of a Key
Chemical to EnerTeck prior to EnerTeck purchasing the Key Chemical from another
source.
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