[LOGO]
EMPIRE FINANCIAL GROUP, INC.
00 XXXX 00XX XXXXXX, 0XX XXXXX
XX, XX 00000
000-000-0000
November 9, 2005
Xxxxxx Xxxxx
Chief Executive Officer
ZBB Energy Corporation
N93 W 00000 Xxxxxxxxx Xxx
Xxxxxxxxx Xxxxx, XX 00000
Dear Xx. Xxxxx:
This letter (the "AGREEMENT") constitutes the agreement between ZBB Energy
Corporation (the "Company") and Empire Financial Group, Inc. ("EMPIRE") that
Empire shall serve as the placement agent for the Company, in connection with a
proposed offer and private placement (the "Offering") of shares of the Company's
common stock and warrants to purchase additional shares of Company common stock
(the "SECURITIES"). Empire a validly registered and licensed broker-dealer; duly
authorized to act as a private placement agent and it is a member in good
standing of the NASD. It is currently contemplated that the Offering will raise
between $6-$12 million which is predicated on successful completion of the due
diligence investigation by Empire. Prior to the Offering of the Securities,
Empire will seek to obtain in a private placement a Bridge Loan of $1,100,000
for the Company. The contemplated terms and conditions of the Bridge Loan and
Offering of Securities shall be as set forth in the Summary of Proposed Terms
dated Friday, November 4, 2005, among the Company, Empire, Broadway Partners LLC
and Xxxxxxx Equity LLC, a copy of which is annexed hereto as Annex A and made a
part hereof (the "TERM SHEET").
A. FEES AND EXPENSES. In connection with the services described above,
the Company shall pay to Empire the following:
1. PLACEMENT AGENT'S FEE. As compensation for its services in
connection with the Offering and the Bridge Loan described below, the Company
agrees to pay Empire a nonrefundable retainer fee of $12,500 upon execution of
this letter agreement and an additional $12,500 upon completion of the Bridge
Loan referred to below. The Company shall pay to Empire a cash placement fee
equal to (i) $100,000 upon completion of the Bridge Loan described below, and
(ii) ten percent (10%) of the aggregate purchase price paid by each purchaser of
Securities that were placed in the Offering (collectively, the "PLACEMENT
AGENT'S FEE"). The Placement Agent's Fee will be deducted from the gross
proceeds of the Bridge Loan and the Securities sold at the Closing. The amount
of the retainer fee previously paid to Empire will be credited on a dollar for
dollar basis toward the cash portion of the Placement Agent's Fee.
2. EXPENSES. In addition to any fees payable to Empire hereunder
and regardless of whether an Offering is consummated, the Company hereby agrees
to reimburse Empire, within ten (10) days after written request therefor, all
reasonable travel and other actual and accountable out-of-pocket expenses
incurred in connection with Empire's engagement, including the reasonable fees
and expenses of Empire's counsel.
3. WARRANTS: In addition to the Placement Agent's Fee, upon the
closing of the sale of securities in connection with the Offering, the Company
shall issue to the Placement Agent warrants to purchase shares of common stock
of the Company (the "WARRANTS") in an amount equal to 10% of the amount of
Securities issued or issuable by the Company in the Offering. The Warrants shall
be exercisable at 120% of the price of the Offering. The Warrants shall expire
five years from the date of issuance. The Warrants shall be in the same form,
including, without limitation, the same registration rights and anti-dilution
provisions, as the securities sold in the Offering; provided, however, the
Warrants shall include a "net issuance" exercise feature.
B. NO-SHOP. Until the Offering contemplated hereby is completed, but no
later than 120 days from the date hereof (the "NO-SHOP PERIOD"), the Company
agrees that it will not negotiate with any other person relating to a possible
public or private offering or placement of the Company's securities; PROVIDED,
HOWEVER, that the No-Shop Period shall expire on December 15, 2005 and the
Company shall have the right to terminate this Agreement at any time after such
date in the event that the $1,100,000 Bridge Loan financing shall not have been
consummated by December 15, 2005.
C. TERM AND TERMINATION OF ENGAGEMENT. Except as set forth below, the
term (the "TERM") of Empire's engagement will begin on the date hereof and end
on the earlier of the consummation of the Offering of the Securities or 10 days
after receipt by either Party hereto of written notice of termination; provided
that no such notice may be given by the Company during the No Shop Period,
subject to early termination as set forth in Paragraph B above. Notwithstanding
any such expiration or termination, Paragraphs D through N shall survive and
remain in full force and effect and be binding on the parties hereto, in
accordance with their terms.
D. FEE TAIL. Empire shall be entitled to a Placement Agent's Fee,
calculated in the manner provided in Paragraph A, with respect to any securities
purchased in any subsequent offering ("SUBSEQUENT OFFERING") by investors whom
Empire had introduced to the Company during the Term if such Subsequent Offering
is consummated at any time within (i) the 24-month period following the
consummation of this Offering and (ii), if no Offering shall have been
consummated during the Term, the six month period following the expiration or
termination of this Agreement.
E. FUTURE TRANSACTIONS. If, at any time during the Term, or within the
24-month period following consummation of the Offering of the Securities during
the Term, the Company or any of its subsidiaries (i) disposes of or acquires
business units or acquires any of its outstanding equity securities or makes any
exchange or tender offer or enters into a merger, consolidation or other
business combination or any recapitalization, reorganization, restructuring or
other similar transaction, including, without limitation, an extraordinary
dividend or distribution or a spin-off or split-off (each, a "TRANSACTION"), and
the Company decides to retain a financial advisor for such Transaction, Empire
shall have the right to act as one of the Company's financial advisors for any
such Transaction; or (ii) decides to finance or refinance any indebtedness using
a manager or agent, Empire (or any affiliate designated by Empire) shall have
the right to act as a manager, placement agent or lead agent with respect to
such financing or refinancing; or (iii) determines to raise funds by means of a
public offering or a Offering of equity or debt securities using an underwriter
or placement agent, Empire shall have the right to act as an underwriter,
initial purchaser or placement agent for such financing. In each case where
Empire so serves,
ZBB ENERGY CORPORATION 2
Empire shall be entitled to an allocation of such percentage of the total fees
paid in connection with the foregoing Transaction as shall be mutually
acceptable to the Company and the lead manager, agent or underwriter, provided,
that in no event shall Empire's percentage allocation be less than 20% of such
fees, unless otherwise agreed to in writing by it. If Empire or its affiliates
decides to accept any such engagement, the agreement governing such engagement
will contain, among other things, provisions for customary fees for Transactions
of similar size and nature and the provisions of this Agreement, including
indemnification, which are appropriate to such Transaction.
F. USE OF INFORMATION. The Company will furnish Empire such written
information as Empire reasonably requests in connection with the performance of
its services hereunder. The Company understands, acknowledges and agrees that,
in performing its services hereunder, Empire will use and rely entirely upon
such information as well as publicly available information regarding the Company
and other potential parties to an Offering and that Empire does not assume
responsibility for independent verification of the accuracy or completeness of
any information, whether publicly available or otherwise furnished to it,
concerning the Company or otherwise relevant to an Offering, including, without
limitation, any financial information, forecasts or projections considered by
Empire in connection with the provision of its services.
G. CONFIDENTIALITY. In the event of the consummation or public
announcement of any Offering, Empire shall have the right to disclose its
participation in such Offering, including, without limitation, the placement at
its cost of "tombstone" advertisements in financial and other newspapers and
journals. Empire agrees to keep confidential during the Term, and for five years
after the expiration or any termination, of this Agreement, all material
nonpublic information provided to it by the Company, except as required by law,
pursuant to an order of a court of competent jurisdiction or the request of a
regulatory authority having jurisdiction over Empire or its affiliates (a
"REGULATORY REQUEST"), or as contemplated by the terms of this Agreement,
provided Empire shall, if permitted by law, give notice to the Company of the
request or order (other than a Regulatory Request) to furnish the nonpublic
information. Notwithstanding any provision herein to the contrary, Empire may
disclose nonpublic information to its affiliates, agents and advisors whenever
Empire determines that such disclosure is necessary to provide the services
contemplated hereunder, provided that Empire advises such persons of the
obligation to maintain the confidentiality of such information and remains
liable under this Agreement for any breach of confidentiality by such
affiliates, agents and advisors. Notwithstanding any provision herein to the
contrary, this Section G shall not bar disclosure of, and Empire and the Company
and their respective representatives or agents may disclose, without limitation
of any kind, any information with respect to the "tax treatment" and "tax
structure" (in each case, within the meaning of Treasury Regulation Section
1.6011-4) of the Offering and related transactions and all materials of any kind
(including opinions or other tax analyses) that are provided to Empire or the
Company or such representatives or agents relating to such tax treatment and tax
structure, provided that with respect to any document or similar item, this
sentence shall only apply to such portions of the document or similar item that
relate to the tax treatment or tax structure of the Transactions.
H. SECURITIES MATTERS. The Company shall be responsible for any and all
compliance with the securities laws applicable to it, including Regulation D and
the Securities Act of 1933, and Rule 506 promulgated thereunder, and unless
otherwise agreed in writing, all state securities ("blue sky") laws. Empire
agrees to cooperate with counsel to the Company in that regard.
I. INDEMNITY. Empire and the Company agree to the indemnification
provisions as set forth in ANNEX B attached hereto.
ZBB ENERGY CORPORATION 3
J. LIMITATION OF ENGAGEMENT TO THE COMPANY. The Company acknowledges
that Empire has been retained only by the Company, that Empire is providing
services hereunder as an independent contractor (and not in any fiduciary or
agency capacity) and that the Company's engagement of Empire is not deemed to
be on behalf of, and is not intended to confer rights upon, any shareholder,
owner or partner of the Company or any other person not a party hereto as
against Empire or any of its affiliates, or any of its or their respective
officers, directors, controlling persons (within the meaning of Section 15 of
the Act or Section 20 of the Securities Exchange Act of 1934), employees or
agents. Unless otherwise expressly agreed in writing by Empire, no one other
than the Company is authorized to rely upon this Agreement or any other
statements or conduct of Empire, and no one other than the Company is intended
to be a beneficiary of this Agreement. The Company acknowledges that any
recommendation or advice, written or oral, given by Empire to the Company in
connection with Empire's engagement is intended solely for the benefit and use
of the Company's management and directors in considering a possible Offering,
and any such recommendation or advice is not on behalf of, and shall not confer
any rights or remedies upon, any other person or be used or relied upon for any
other purpose. Empire shall not have the authority to make any commitment
binding on the Company. The Company, in its sole discretion, shall have the
right to reject any investor introduced to it by Empire.
K. LIMITATION OF EMPIRE'S LIABILITY TO THE COMPANY. Empire and the
Company further agree that neither Empire nor any of its affiliates or any of
its their respective officers, directors, controlling persons (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act of 1934),
employees or agents shall have any liability to the Company, its security
holders or creditors, or any person asserting claims on behalf of or in the
right of the Company (whether direct or indirect, in contract, tort, for an act
of negligence or otherwise) for any losses, fees, damages, liabilities, costs,
expenses or equitable relief arising out of or relating to this Agreement or the
Services rendered hereunder, except for losses, fees, damages, liabilities,
costs or expenses that arise out of or are based on any action of or failure to
act by Empire and that are finally determined (by a court of competent
jurisdiction and after exhausting all appeals) to have resulted solely from the
gross negligence or willful misconduct of Empire. With respect to alleged
breaches of the Confidentiality provisions herein by Empire, the Company shall
have the right to pursue equitable relief in addition to any other remedy in
equity or law.
L. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any disputes which arise
under this Agreement, even after the termination of this Agreement, will be
heard only in the state or federal courts located in the City of New York, State
of New York. The parties hereto expressly agree to submit themselves to the
jurisdiction of the foregoing courts in the City of New York, State of New York.
The parties hereto expressly waive any rights they may have to contest the
jurisdiction, venue or authority of any court sitting in the City and State of
New York. In the event of the bringing of any action, or suit by a party hereto
against the other party hereto, arising out of or relating to this Agreement,
the party in whose favor the final judgment or award shall be entered shall be
entitled to have and recover from the other party the costs and expenses
incurred in connection therewith, including its reasonable attorneys' fees.
M. NOTICES. All notices hereunder will be in writing and sent by
certified mail, hand delivery, overnight delivery or telefax, if sent to Empire,
to Empire Financial Group, Inc., 0000 Xxxx Xxxxx Xxxx 000 Xxxxx #000 Xxxxxxxx,
XX 00000 Attention Messrs. Xxxxxx X. Xxxxxxxxxx and Xxxxxx Xxxxxxxxx, Xx., with
a copy to Morse, Zelnick, Rose & Lander, LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX
00000, Attention: Xxxxxxx X. Xxxxxxx, Esq. and if sent to the Company, will be
mailed, delivered or telefaxed and confirmed to ZBB Energy Corporation, N93
X00000 Xxxxxxxxx Xxx, Xxxxxxxxx Xxxxx, Wl 53051, with a copy to Xxxxxxx Xxxxxx,
LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxxxx X. Xxxxx, Esq.
Notices sent by certified mail shall be deemed received five days
ZBB ENERGY CORPORATION 4
thereafter, notices sent by hand delivery or overnight delivery shall be deemed
received on the date of the relevant written record of receipt, and notices
delivered by telefax shall be deemed received as of the date and time printed
thereon by the telefax machine.
N. MISCELLANEOUS. This Agreement shall not be modified or amended
except in writing signed by Empire and the Company. This Agreement shall not be
assigned without the prior written consent of Empire and the Company; provided,
however, that in the event of a Offering in which the Company is not the
surviving corporation or entity, the Company's remaining obligations (except
with respect to the Fee Tail and Future Offerings), if any, under this Agreement
shall remain in full force and effect and become obligations of the surviving
corporation or entity. This Agreement constitutes the entire agreement of Empire
and the Company with respect to the subject matter hereof and supersedes any
prior agreements. If any provision of this Agreement is determined to be invalid
or unenforceable in any respect, such determination will not affect such
provision in any other respect, and the remainder of the Agreement shall remain
in full force and effect. This Agreement may be executed in counterparts
(including facsimile counterparts), each of which shall be deemed an original
but all of which together shall constitute one and the same instrument.
In acknowledgment that the foregoing correctly sets forth the
understanding reached by Empire and the Company, please sign in the space
provided below, whereupon this letter shall constitute a binding Agreement as of
the date indicated above,
Very Truly Yours,
EMPIRE FINANCIAL GROUP, INC..
By: /s/ Don Vojnowski
------------------------------
Don Vojnowski
Chief Executive Officer
Confirmed and accepted as of
the 16 November 2005
ZBB ENERGY CORPORATION
By: Xxxxxx Xxxxx
------------------------------
Xxxxxx Xxxxx
Chief Executive Officer
16 November 2005
ZBB ENERGY CORPORATION 5
ANNEX A
SUMMARY OF PROPOSED TERMS
ZBB ENERGY CORPORATION
This Summary of Proposed Terms constitutes an indication of interest for
discussion purposes only and is subject to further due diligence, negotiations
and executed definitive agreements.
PROPOSED TERM SHEET FOR FINANCINGS AND UNITED STATES
COMMON STOCK LISTING
Unless otherwise indicated, all references to "dollars" or
"$" mean United States dollars.
THE BRIDGE LOAN A (U.S.) $1,100,000 loan (the
"BRIDGE LOAN") and 8,800,000 shares of
common stock, $0.001 par value per share
(the "COMMON STOCK") of ZBB Energy
Corporation (the "COMPANY").
The Bridge Loan will be evidenced by the
Company's non-interest bearing
convertible note (the "BRIDGE NOTE") due
and payable (unless converted) on a date
that shall be 18 months from the date of
funding (the "MATURITY DATE"). The Bridge
Note may be converted by the holder(s) at
any time on or before the Maturity Date
at a price per share (the "CONVERSION
PRICE") equal to 50% of the volume
weighted average price per share of the
Company" (described below), as traded on
a U.S. National Securities Exchange
(defined as the New York Stock Exchange,
the American Stock Exchange, the Nasdaq
Stock Market, or the NASD
Over-the-Counter Bulletin Board
("OTC-BB") or (if not then traded on such
National Securities Exchange) on the
over-the-counter pink sheets; in either
case, for the 20 consecutive trading days
immediately prior to the date that notice
of conversion is given; provided,
however, that in no event shall the
Conversion Price be less than $0.50 per
share (the "FLOOR PRICE").
The Bridge Loan will be sold to Investors
in units of securities (the "UNITS");
each Unit consisting of a minimum of
$25,000 of Bridge Notes and 200,000
shares of Company Common Stock
(pre-split). The Bridge Loan subscription
agreement will contain covenants
prohibiting Bridge Note holders or their
affiliates from shorting Company Common
Stock.
INVESTORS Persons and/or institutional investors
investing either individually or through
a limited partnership or other entity
formed for the sole purpose of investing
in the Company.
U.S. REGISTRATION AND LISTING ON A On or before consummation of the Bridge
NATIONAL SECURITIES EXCHANGE Loan, the Company shall cause to be filed
with the United States Securities and
Exchange Commission ("SEC") a Form 10
registration statement in order to
register the publicly traded shares of
Company common stock under The Securities
Exchange Act of 1934, as amended (the
"1934 Act"), In addition, the Company
shall cause to be filed with the National
Association of Securities Dealers, Inc.
("NASD"), a Form 15c-211 to cause the
Company Common stock to be listed for
trading on the
ZBB ENERGY CORPORATION 6
OTC-BB.
The Company shall use its best efforts to
cause the Form 10 registration statement
to be declared effective by the SEC and
to have shares of Company Common Stock
approved for trading on the OTC-BB or
another National Securities Exchange (a
"NATIONAL SECURITIES EXCHANGE LISTING")
as soon as practicable.
WHARTON/BROADWAY The Company shall enter into a business
PARTNERS AGREEMENT development, marketing and financial
consulting agreement (the "BUSINESS
DEVELOPMENT AGREEMENT") with Xxxxxxx
Equity Partners LLC ("WHARTON") and
Broadway Partners LLC ("BROADWAY"). Such
Business Development Agreement shall
provide, inter alia, that Wharton and
Broadway shall undertake for a period of
two years to organize, initiate or
otherwise provide the Company with
potential joint venture partners,
strategic alliances, marketing agreements
and other financial assistance to enable
the Company to develop its energy storage
and related business (the "SERVICES"). It
is contemplated that such Services shall
include, without limitation, arranging
for joint venture or related marketing
agreements with business affiliates or
associates engaged in (i) the
development, engineering, production and
marketing of thin film photovoltaic
energy panels and equipment to
manufacture such energy panels, (ii) the
development of magnesium cell batteries,
(iii) the marketing of the Company's
energy storage systems in India and other
developing countries.
The Business Development Agreement shall
provide that in sole consideration for
such Services, the Company will issue to
Wharton and Broadway in escrow, an
aggregate of 16,000,000 shares of the
Company's Common Stock (the "BUSINESS
DEVELOPMENT STOCK"). Such shares of
Business Development Stock shall provide
that, for a period of 3D days, commencing
12 months from the date of issuance (the
"REDEMPTION PERIOD"), up to 90% of the
shares of Business Development Stock
shall be subject to redemption, for
$0.001 per share, at the sole option of
the Board of Directors of the Company if,
in the exercise of the good faith
discretion of the Board of Directors, the
fair value of all of the Services
actually provided by Wharton and Broadway
to the Company during the 12 consecutive
months following the date of the Business
Development Agreement shall be less than
$1.0 million; provided, however, if
during such 12 month period:
(a) the Company shall (in addition
to the Bridge Financing) have been
successful in completing a National
Securities Exchange listing and one or
more equity or equity type financings of
not less than $6.0 million, all upon such
terms and conditions as shall be
satisfactory to the Board of Directors of
the Company (the "Additional
Financings"), none of the shares of
Business Development Stock shall be
subject to redemption; and
(b) the Company shall have
completed a National Securities Exchange
Listing and shall have been successful in
completing one
ZBB ENERGY CORPORATION 7
or more Additional Financings on terms
satisfactory to the Board of Directors of
the Company of $3.0 million or more, only
a maximum of 50% of the shares of
Business Development Stock shall be
subject to redemption. The Business
Development Agreement shall also provide
that to the extent that shares of
Business Development Stock are issuable
to Wharton, there shall be an appropriate
pro-rata cutback in the number of shares
of Company Common Stock and warrants
issued to the members of Wharton Energy
Partners LLC ("WHARTON ENERGY") in
exchange for the acquisition of 100% of
the members interest of Wharton Energy
(the holder of $2.45 million of Series A
convertible Preferred Stock of Idea One
Inc.) pursuant to the letter of intent
dated October 6, 2005 between the Company
and Wharton Energy (the "IDEA ONE LOI");
provided, however, in no event shall the
members of Wharton Energy receive less
than 40% of the number of shares of
Company Common Stock and warrants
contemplated by Idea One LOI.
Unless otherwise agreed by the Board of
Directors of the Company, the term
"ADDITIONAL FINANCINGS" shall not mean or
include any debt or related "mezzanine"
financing obtained by the Company prior
to March 31, 2006, unless the same shall
consist of or include notes convertible
into shares of Company Common Stock. If
any financings, not constituting an
Additional Financing, are obtained by or
through Wharton, in lieu of the
provisions of an October 6, 2005
consulting agreement between Wharton and
the Company, Wharton shall be entitled to
a finders fee equal to 7% of the amount
of such debt or related "mezzanine"
financing obtained.
THE REVERSE STOCK SPLIT At the time of consummation of the
initial Additional Financing, based upon
an initial Additional Financing at an
assumed minimum per share price of $2.00
per share, the Company shall consummate a
one-for-eight reverse split of its
outstanding common stock (the "REVERSE
STOCK SPLIT"). Pursuant to the Reverse
Stock Split, each outstanding share of
Company Common Stock (including the
Business Development Stock issued to
Broadway and Xxxxxxx) and each share of
Company Common Stock issuable (i) under
any stock option plan, (ii) upon exercise
of outstanding stock options or warrants
to purchase Common Stock, or (iii) upon
conversion into Common Stock of the
Bridge Notes, shall represent 1/8 of a
share of Company Common Stock or the
right to purchase or receive 1/8 of a
share of Company Common Stock; provided,
that fractional shares shall be rounded
to the nearest whole share.
In the event that, for any reason, the
Board of Directors of the Company shall
elect to consummate an Additional
Financing at a minimum per share price of
less than $2.00 per share, then there
shall be an appropriate pro rata
reduction in the amount of the Reverse
Stock Split.
ZBB ENERGY CORPORATION 8
THE ADDITIONAL FINANCING Following completion of the Bridge Loan
and the listing of the Company's Common
Stock for trading on a National
Securities Exchange, the Company will
seek to consummate a private placement of
between 3,000,000 and 6,000,000 shares of
Common Stock (after giving effect to the
1:8 Reverse Stock Split) at an assumed
purchase price of $2.00 per share. Such
Additional Financing may also include
three year warrants to purchase up to 50%
of the number of shaves of Common Stock
sold in connection with the Additional
Financing, at an exercise price of not
less than 120% of the per share offering
price of the Common Stock.
Empire Financial Holding Company or one
or more other investment bankers
acceptable to the board of directors of
the Company shall act as placement agent
in connection with such Additional
Financing. Empire and such other
Placement Agents shall enter into a
customary placement agency agreement with
the Company that shall contain
appropriate indemnification provisions
for the placement agents and shall
provide that such placement agents shall
be entitled to receive customary
compensation not to exceed 10% in cash
and 10% in warrants.
CAPITALIZATION OF COMPANY The Pro Forma Capitalization of the
Company upon completion of the assumed
1:8 Reverse Stock Split and the
Additional Financing shall be as follows:
(a) 10,245,578 shares of Company Common
Stock owned by existing Company
stockholders (based on 81,964,626
currently outstanding shares);
(b) approximately 3,000,000 shares of
Company Common Stock issuable upon
exercise of outstanding stock options
(based on approximately 24,000,000
currently outstanding options at exercise
prices ranging from A$0.25 to US$0.50);
provided, that (i) no outstanding options
contain cashless exercise provisions, and
(ii) except for approximately 6,500,000
pre-split options (812,500 post split),
all of such stock options are at exercise
prices in excess of (U.S.) $0.25 ($2.00
post-split), and approximately 5.4
million (675,000 post split) of such "in
the money" options expire on January 31,
2006);
(c) approximately 653,334 shares of
Company Common Stock and 163,334 shares
of Company Common Stock issuable upon
exercise of warrants issued to acquire
Xxxxxxx Energy under the Idea One LOI,
and up to 653,334 contingent shares
issuable upon commercialization of the
Idea One magnesium cell battery
technology;
(d) a maximum of 2,000,000 shares of
Company Common Stock held by Xxxxxxx and
Broadway as Business Development Stock
under the Business Development Agreement;
(e) 1,000,000 shares of Company Common
Stock held by the
ZBB ENERGY CORPORATION 9
Investors in connection with the Bridge
Loan and 1,000,000 additional shares of
Company Common Stock issuable upon
conversion of the Bridge Notes;
(f) between 3,000,000 and 6,000,000 new
shares of Company Common Stock issued at
an assumed per share price of $2.00 in
connection with the Additional
Financings; and
(g) between 1,500,000 and 3,000,000
shares of Company Common Stock issuable
at an assumed per share price of $2.40
upon exercise of warrants that may be
included in the Additional Financings.
CLOSING DATE OF BRIDGE LOAN On or before November 21, 2005.
ESTIMATED TIMETABLE Filing of Form 10 Registration Statement
with the SEC -November 30,2005;
Application to list Common Stock of
Company on OTC Bulletin Board - November
30, 2005;
Receipt of comments form SEC and NASD --
January 5, 2006;
Approval of Form 10 and Form 15C-211
listing application - January 31, 2006;
Completion of Private Placement
Memorandum - January 31, 2006;
Completion of Additional Financings
-March 31, 2006.
DOCUMENTATION FOR BRIDGE LOAN Subscription Agreement; Bridge Notes;
Business Development Agreement;
and Registration Rights Agreement
All documentation to be in form
acceptable to counsel to the Company
and the Investors.
The foregoing represents the substance of our mutual intention at this time, but
in no way constitutes an agreement or an agreement to agree with respect to the
above contemplated financing. The legal rights and obligations of each of the
Company and the undersigned prospective Investor shall arise only pursuant to
the terms of a duty executed subscription agreement and exhibits thereto, which
shall be in form and substance satisfactory to each of the parties thereto and
their respective legal counsel.
The above term sheet is further subject to the approval of the Board of
Directors of the Company. This proposal shall remain open until the close of
business (5:00 P.M. New York time) on Friday, November 11, 2005; after which it
shall be null and void, unless approved by the Board of Directors of the
Company.
Subject to the foregoing, please indicate below your willingness, in principle,
to proceed with the above transaction.
Very Truly yours,
ZBB ENERGY CORPORATION 10
BROADWAY PARTNERS LLC XXXXXXX EQUITY LLC
By: s/ Xxxxxx X. Xxxxx By: s/ Xxxxx Xxxxxxxxx
------------------------------------- ---------------------------
Xxxxxx X. Xxxxx, Manager Xxxxx Xxxxxxxxx, Manager
EMPIRE FINANCIAL GROUP INC.
By: s/ Xx Xxxxxxx
-------------------------------------
Xx Xxxxxxx, Head of Investment Banking
ACCEPTED AND AGREED TO SUBJECT
TO APPROVAL OF THE BOARD OF DIRECTORS:
DATED: THIS 4TH DAY OF NOVEMBER 2005:
ZBB ENERGY CORPORATION
By: /s/ Xxxxxx Xxxxx
---------------------------------------
Xxxxxx Xxxxx, CEO
ZBB ENERGY CORPORATION 11
ANNEX B
November 9, 2005
Empire Financial Group, Inc.
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
XX, XX 00000
Gentlemen:
In connection with our engagement of Empire Financial Group, Inc.
("Empire") as our placement agent, we hereby agree to indemnify and hold
harmless Empire and its affiliates, and the respective controlling persons,
directors, officers, shareholders, agents and employees of any of the foregoing
(collectively the "Indemnified Persons"), from and against any and all claims,
actions, suits, proceedings (including those of shareholders), damages,
liabilities and expenses incurred by any of them (including the reasonable fees
and expenses of counsel), (collectively a "Claim"), which are (A) related to or
arise out of (i) any actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by the Company, or (ii)
any actions taken or omitted to be taken by any Indemnified Person in connection
with our engagement of Empire, or (B) otherwise relate to or arise out of
Empire's activities on our behalf under Empire's engagement, and we shall
reimburse any Indemnified Person for all out-of-pocket expenses (including the
reasonable fees and expenses of counsel) incurred by such Indemnified Person in
connection with investigating, preparing or defending any such Claim to which
the Indemnified Person is, or is threatened to be made, a party. Notwithstanding
anything to the contrary set forth above, we will not be responsible for any
Claim, or for any reimbursement of any Indemnified Person's expenses in
connection with such Claim, which is finally judicially determined to have
resulted from the gross negligence or willful misconduct of any person seeking
indemnification for such Claim. We further agree that no Indemnified Person
shall have any liability to us for or in connection with our engagement of
Empire except for any Claim incurred by us as a result of such Indemnified
Person's gross negligence or willful misconduct.
We further agree that we will not, without the prior written consent of
Empire, settle, compromise or consent to the entry of any judgment in any
pending or threatened Claim in respect of which indemnification may be sought
hereunder (whether or not any Indemnified Person is an actual or potential party
to such Claim), unless such settlement, compromise or consent includes an
unconditional, irrevocable release of each Indemnified Person hereunder from any
and all liability arising out of such Claim.
Promptly upon receipt by an Indemnified Person of notice of any
complaint or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify
us in writing of such complaint or of such assertion or institution but failure
to so notify us shall not relieve us from any obligation we may have hereunder,
except and only to the extent such failure results in the forfeiture by us of
substantial rights and defenses. If we so elect or are requested by such
Indemnified Person, we will assume the defense of such Claim, including the
employment of counsel reasonably satisfactory to such Indemnified Person and the
payment of the fees and expenses of such counsel. In the event, however, that
legal counsel to such Indemnified Person reasonably determines and provides
written correspondence to us, that having common counsel would
ZBB ENERGY CORPORATION 12
present such counsel with a conflict of interest or if the defendant in, or
target of, any such Claim, includes an Indemnified Person and us, and legal
counsel to such Indemnified Person reasonably concludes that there may be legal
defenses available to such Indemnified Person different from or in addition to
those available to us, then such Indemnified Person may employ its own separate
counsel to represent or defend it in any such Claim and we shall pay the
reasonable fees and expenses of such counsel. Notwithstanding anything herein to
the contrary, if we fail timely or diligently to defend, contest, or otherwise
protect against any Claim, the relevant Indemnified Party shall have the right,
but not the obligation, to defend, contest, compromise, settle, assert
crossclaims, or counterclaims or otherwise protect against the same, and shall
be fully indemnified by us therefor, in accordance with the terms of this
Agreement, including without limitation, for the reasonable fees and expenses of
its counsel and all amounts paid as a result of such Claim or the compromise or
settlement thereof. In addition, with respect to any Claim in which we assume
the defense, the Indemnified Person shall have the right to participate in such
Claim and to retain its own counsel therefor at its own expense.
Empire agrees that it will indemnify and hold harmless the Company and
each of its directors and officers, employees, agents, stockholders and
affiliates against any Loss whatsoever (including, but not limited to, any and
all legal fees and other expenses) to which the Company or any such person or
entity may be subject solely as a result of statements made in the Private
Placement Memorandum based solely upon information supplied by Empire to the
Company in writing or based upon the gross negligence or willful misconduct of
Empire or any of its employees or agents in acting as Placement Agent for the
offering and sale hereunder.
We agree that if any indemnity sought by an Indemnified Person
hereunder is held by a court to be unavailable for any reason then (whether or
not Empire is the Indemnified Person), we and Empire shall contribute to the
Claim for which such indemnity is held unavailable in such proportion as is
appropriate to reflect the relative benefits to us, on the one hand, and Empire
on the other, in connection with Empire's engagement referred to above, subject
to the limitation that in no event shall the amount of Empire's contribution to
such Claim exceed the amount of fees actually received by Empire from us
pursuant to Empire's engagement. We hereby agree that the relative benefits to
us, on the one hand, and Empire on the other, with respect to Empire's
engagement shall be deemed to be in the same proportion as (a) the total value
paid or proposed to be paid or received by us or our stockholders as the case
may be, pursuant to the Offering (whether or not consummated) for which you are
engaged to render services bears to (b) the fee paid or proposed to be paid to
Empire in connection with such engagement.
Our indemnity, reimbursement and contribution obligations under this
Agreement shall be in addition to, and shall in no way limit or otherwise
adversely affect any rights that any Indemnified Party may have at law or at
equity.
The validity and interpretation of this agreement shall be governed by
and construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be fully performed therein (excluding the
conflicts of laws rules). Each of Empire and the Company hereby irrevocably
submits to the jurisdiction of any court of the State of New York, County of New
York or the United States District Court for the Southern District of New York
for the purpose of any suit, action or other proceeding arising out of this
agreement or the Offerings contemplated hereby, which is brought by or against
Empire or the Company and in connection therewith, each of Empire and the
Company (i) hereby irrevocably agrees that all claims in respect of any such
suit, action or proceeding may be heard and determined in any such court, (ii)
to the extent that it has acquired, or hereafter may acquire, any immunity from
jurisdiction of any such court or from any legal process therein, it hereby
waives, to the
ZBB ENERGY CORPORATION 13
fullest extent permitted by law, such immunity and (iii) agrees not to commence
any action, suit or proceeding relating to this agreement other that in any such
court. Each of Empire and the Company hereby waives and agrees not to assert in
any such action, suit or proceeding, to the fullest extent permitted by
applicable law, any claim that (a) it is not personally subject to the
jurisdiction of any such court, (b) it is immune from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to its property of (c) any suit,
action or proceeding is brought in an inconvenient forum.
The provisions of this Agreement shall remain in full force and effect
following the completion or termination of Empire's engagement.
Very Truly Yours,
ZBB Energy Corporation
By:
/s/ Xxxxxx Xxxxx
----------------
Xxxxxx Xxxxx
Chief Executive Officer
16 November 2005
Confirmed and agreed to:
EMPIRE FINANCIAL GROUP, INC.
By:
/s/ Xxx Xxxxxxxxx
-----------------
Xxx Xxxxxxxxx
Chief Executive Officer
Date:
ZBB ENERGY CORPORATION 14
