EXHIBIT 10.3
Funding Agreement
-----------------
This FUNDING AGREEMENT is entered into between Technol Funding
Group, a Colorado Joint Venture, c/o its counsel, Xxxxxx X. Xxxxxxx, Esq.
Attorney at Law, Xxxxxx X. Xxxxxxx, P.C., 0000 Xxxxx Xxxx Xxxx, Xxxxx 0X,
Xxxxxxxxxx, XX 00000, or assigns, hereinafter "Group" and Technol Fuel
Conditioners, Inc., f/k/a OTC, Inc., a New Jersey corporation, 0 Xxxx Xxxxxx
Xxxxxxxxx Xxxxxx, #000, Xxxxxxxxx, XX 00000, hereinafter "Technol" and has as
its purpose the expression of the terms of agreement between the parties
whereby Group will conditionally provide expertise and funding to achieve the
objective of the parties; to-wit, taking the steps necessary to achieve a
merger or acquisition with a fully reporting and/or trading public company
and/or registration of the stock of Technol and qualification of same under
"Blue Sky" laws to be traded through Standard & Poors and/or Xxxxx'x; and, the
parties mutually agree as follows:
1. Due Diligence. Group will through its authorized agents conduct
a thorough due diligence investigation; and Technol will cooperate fully with
all such due diligence activities and provide all requested information and
execute such forms and consents as may be reasonably required by Group. Group
may suspend or terminate its performance if there shall be revealed by such
due diligence investigation any on or more facts or circumstances which, in
the opinion of Group, will deter the parties from achieving their primary
objective or significantly increase the cost of or the time necessary to
achieve same.
2. Audit. Technol will at its expense promptly commence and
diligently pursue to completion and audit of its books and records by an
independent auditor whose credentials and professional reputation are
satisfactory to Group. The parameters and scope of the audit shall be as
required by the SEC, NASDAQ, Xxxxx'x and/or Standard & Poors to achieve the
primary objective of the parties.
3. Conditional Initial Funding/Structure. Group shall provide a
closing payment in the amount of $25,000.00 to Technol and at such closing
Group will then receive 30% of the issued and outstanding equity securities of
Technol. In addition, Group shall pay and additional $50,000.00 on or before
30 days after the Closing date. Closing for this purpose shall be defined as
the completion of a merger with a trading, reporting company or signing of
this Agreement on March 30, 2001 whichever is sooner. The 30% ownership
position of Group shall not be dilutable to any lesser percentage of ownership
without the written consent of Group. The 30% ownership shall be based upon a
capital structure which will have not less than $50,000,000 authorized shares
of Technol, of which 11,000,000 shall be issued to existing Technol
shareholders and 6,000,000 shall be issued to Group or their designees with
3,000,000 shares issued into escrow for the benefit of Group or its designees
or assignees pro-rata based on completion of the funding provision specified
in paragraph 5 herein.
4. Registration/Qualification Services. Subsequent to closing,
Group will through its authorized agents, attorneys, accountants and at its
sole cost promptly commence and diligently pursue to completion and take all
steps necessary to merge Technol with a fully reporting and/or trading public
"shell" company or, int eh alternative, at Group's option, prepare a proper
registration of the equity securities of Technol with the United States
Securities and Exchange Commission under an "SB-2" registration and obtain the
proper certification, registration and/or qualification of Technol and its
equity securities via preparation and filing of the 15C-211 documents with OTC
Bulletin Board and with Xxxxx'x and/or Standard & Poors. Technol will
promptly and fully cooperate with all such efforts and Technol will execute
and promptly deliver all documents, certifications and/or consents requested
by Group in such endeavor, including the completion of the year end 2000
audit.
5. Additional Conditional Funding. Provided that Technol is in
full compliance with its obligations as set forth above, Group agrees to
provide additional funding not to exceed a total of US $200,000 as follows:
A. US $66,667 at the conclusion of each 3 months of operations of
the Company, commencing with the end of the first 3 months after the
"closing". The financial reports of Technol's operations shall have been
signed by Technol and received by Group which confirm that Technol has met or
exceeded 75% of the established performance criteria for the first quarter
reporting period after the closing, such established performance criteria to
be as set forth on and within Exhibit A hereto; and
B. US $66,666 within ten days after the financial reports of
Technol's operations have been received by Group which confirm that Technol
has met or exceeded 75% of the established performance criteria for the second
3 month period after the closing; and
C. US $66,667 within ten business days after the financial reports
of Technol's operations have been received by Group which confirm that Technol
has met or exceeded 75% of the established performance criteria for the third
3 month period after the closing.
6. Additional Equity. Upon the payment of each of the conditional
funding amounts described in paragraph 5, Group shall be entitled to an
additional 5% of the equity securities of Technol for each funding traunch
outlined in number 5, above or a total of 15% additional equity if all funding
is completed as specified. The shares issued for such additional equity shall
be delivered from the 3,000,000 escrow shares and shall also be non-dilutable
without the written consent of Group.
7. Guarantee of Obligation. As a further condition of this
transaction, an affiliate of Group, Xxx Xxxxxxxxxxx of Winston-Salem, N.C. has
agreed to act a signature guarantor of the revolving credit line from a
reputable financial institution which guarantee will extend to a loan not
exceed $500,000.00 U.S. dollars. The institutional loan shall be collaterally
secured by all of the assets of Technol, including but not limited to accounts
receivable, inventory, patents, processes, blending secrets, customer lists
and all furniture, fixtures and equipment. Technol will also issue a UCC-1
financing statement and execute a security agreement listing Xxx Xxxxxxxxxxx
as the beneficiary thereof as secondary lien holder behind the lending bank.
Xx. Xxxxxxxxxxx shall not be obligated on such a line of credit for more than
2 calendar years without mutually agreeable additional consideration and in
the event Technol does not meet 50% of its projections at the end of the first
year, then Xx. Xxxxxxxxxxx shall have no obligation to continue with his
guarantee. In the event Xx. Xxxxxxxxxxx is able to negotiate his relcase from
the lending bank, he shall have no further obligation hereunder. In
consideration of the guarantee, Xx. Xxxxxxxxxxx shall be issued 500,000 common
shares of Technol or of the newly merger company if such a merger occurs or
shares of Technol if the merger does not occur and the SB-2 registration is
pursued. In such event the total outstanding number of shares of Technol
shall be 20,500,000. Technol covenants and agrees to pay of the existing line
of credit in the amount of approximately $150,000.00 from the new line of
credit and the existing guarantees will then be released.
8. Failure to meet Performance Objectives. If, at the end of one
year from the closing, Technol has failed to meet the minimum required
performance objective of 75% of the established performance criteria on
Exhibit A, then, without payment of any further funds or any other performance
being due, Group shall have the right and the option to require the transfer
to Group of sufficient additional equity securities of Technol so that, after
such transfer, group will own 55% of all the then issued and outstanding
equity securities of Technol on a fully diluted basis.
9. Failure of Group. If Group is unable to complete the merger,
acquisition or registration under SB-2 or similar such registration process,
the net result of which is to obtain a listing of Technol and the trading of
its shares on the OTC BB with 270 days of the closing of the transaction, then
Technol shall have the exclusive option to re-purchase all of the Group shares
at a purchase price equal to the amount paid or funded by Group to such date,
less the initial $75,000.00 closing and first 30 day money payments, provided
however, that Technol's option to purchase based upon Group's failure shall in
no way, directly or indirectly be caused by the acts, omissions or failures of
Technol to cooperate in the merger or acquisition or registration and
applications for trading Technol shares. If Technol elects to purchase the
Group shares after the 270 period, Technol shall notify Group, in writing,
within 30 after the expiration of Group's obligations hereunder and shall
complete the purchase of Group's shares within an additional 30 day period
after such notice. Provided that the registration process is at least through
two comment stages (if necessary), the time for Group to complete its listing
and trading obligation may extended by Group for an additional period not to
exceed 90 days.
10. Lock-Up, Leak-Out. The Group shareholders will agree to lock-
up, leak-out of their shares over a period of 36 months after the closing of
the transaction provided that such leak out agreement is structured in such a
manner as to comply with all securities laws and further provided that
Technol, for the last 24 months of the leak out term will commit to fund,
either by cash payment or by issuance of shares the public and investor
relations costs in an amounts commensurate with the prior amounts paid by
Group for the benefit of Technol shareholders.
11. Confidentiality. The parties agree that the information to be
provided by Technol and the expertise and methods to be provided by Group are
confidential and they agree not to disclose the same nor to use any of the
same except in furtherance of the purposes and objectives hereof.
12. Mandatory Arbitration. The parties agree that, in the case of
any dispute between them, the prompt and private resolution of those disputes
is in the best interest of both parties and will maximize the privacy and
confidentiality of their affairs. Therefore, if the parities are unable by
themselves to resolve any dispute or issue, then they agree that they shall
participate in good faith in binding arbitration in New Jersey. Each party
shall select one arbitrator and those two arbitrators shall select a third
arbitrator to complete the arbitration process. Regardless of the outcome of
arbitration, the fees of the mediator shall be equally divided between
attorney and client.
IN WITNESS WHEREOF, each of the parties, by their authorized
representative, has entered into this FUNDING AGREEMENT this 22 day of March
2001.
Technol Fuel Conditioners, Inc. Technol Fuel Group
/S/ XXXXXX XXXXXX /S/ XXXXXX XXXXXXX
___________________________________ ___________________________________
By: Xxxxxx Xxxxxx, President By: Xxxxxx Xxxxxxx, Agent of Group
/S/ XXXXXX XXXXXXXX
___________________________________
Secretary
