Exhibit 10.3
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FUNDING AGREEMENT
This Funding Agreement ("Agreement") is dated January 2, 2004 and is
between Arrakis Select, Inc. ("Arrakis") and Xxxxxxxxx Filters, Inc.
("Xxxxxxxxx").
R E C I T A L S
WHEREAS, Arrakis is a private investment group interested in equity
financing of Xxxxxxxxx; and
WHEREAS, Xxxxxxxxx is in need of funding for its working capital needs.
NOW THEREFORE, in consideration of the foregoing recitals, and the
promises contained herein, the parties agree as follows:
Section 1. Funding Requirements. Arrakis agrees to provide all the
monthly funding requirements of Xxxxxxxxx for 90 days from the date of this
Agreement, renewable for 90 additional days at the option of Arrakis. Investment
shall be made in cash (wire or other immediately available funds). As of the
date of this Agreement such requirements are estimated to be $15,000 per month.
This will be an equity investment. In exchange ofr Arrakis' cash investment,
Xxxxxxxxx agrees to issue to Arrakis Xxxxxxxxx common stock at a price per share
equal to the closing bid price of the common stock as of the 15th day of the
month in which each tranche of funding is made, irrespective of the date of the
month the funds are received by Xxxxxxxxx. The shares will be restricted
securities" as definedin Rule 144 of the Securities Act. Share certificates will
be issued in the name of Arrakis' nominee for securities holding, Sheridan
Clearing Corporation.
Section 2. Investor representations. Arrakis represents that it is an
"accredited investor" as defined under Regulation D in that all its equity
owners are accredited investors, and that it is investing for its own account
and not with the view to resale to others. No commission will be paid on the
funding to any person. Arrakis agrees that at no time during the term of this
Agreement will it or any of its associates engage in "short selling" of
Xxxxxxxxx securities.
Section 3. Rule 144. Xxxxxxxxx agrees to permit Arrakis to sell the
securities purchased by Arrakis under and in compliance with Rule 144, and to
pay the costs of any legal opinion for Rule 144 resales, which opinion may be
provided by Xxxxxxxxx counsel. Xxxxxxxxx will process any Rule 144 requests in a
reasonably expeditious manner. Holding periods will be computed on a tranche by
tranche basis; for example, the shares issued in exchange for the funding
provided in January 2004 will have a holding period computed from the date of
receipt of funds in January 2004. Xxxxxxxxx agrees to remove the restrictive
legend on the share certificates after two years from payment for each tranche,
provided Arrakis is not then an affiliate of Xxxxxxxxx.
Section 4. Miscellaneous. No waiver of any breach or default of this
Agreement shall be considered to be a waiver of any other breach or default of
this Agreement. Should any litigation be commenced between Arrakis and Xxxxxxxxx
for any breach, the party prevailing in such litigation shall be entitled, in
addition to such other relief that may be granted, to a reasonable sum as and
for their or his or its attorney's fees and costs in such litigation. Every
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provision of this Agreement is intended to be severable. If any term or
provision hereof is determined to be illegal or invalid for any reason
whatsoever, said illegality or invalidity shall not affect the validity of the
remainder of this Agreement. The interpretation of this Agreement shall be
governed by the local law of the State of New York. This Agreement contains the
entire agreement between the parties hereto with respect to the subject matter
thereof. This Agreement shall inure to the benefit of the parties and their
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ARRAKIS SELECT, INC. XXXXXXXXX FILTERS, INC.
By: By:
Jehu Hand Name:
Managing Director Title:
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