SUBSCRIPTION ESCROW AGREEMENT
SUBSCRIPTION
ESCROW AGREEMENT
(the
“Agreement”) executed this ___ day of April, 2007, by and among Neah Power
Systems, Inc., a Nevada corporation (the “Issuer”), Empire Financial Group,
Inc., a Florida corporation (the “Depositor”) and Sterling National Bank, a
national banking institution organized and existing under the laws of the United
States of America, as escrow agent (“Escrow Agent”).
WHEREAS,
the
Issuer has filed a registration statement on Form SB-2, File No. 333-140255,
with the Securities and Exchange Commission pursuant to the Securities Act
of
1933, as amended, concerning the subscription and sale of shares of the Issuer’s
common stock, together with common stock purchase warrants (the “Securities”);
and
WHEREAS,
the
Depositor has been named as the underwriter pursuant to the proposed
subscription and sale of the Securities under the terms of the Underwriting
Agreement by and between Issuer and Depositor to be dated the effective date
of
the above registration statement (the “Effective Date”); and
WHEREAS,
the
Issuer and Depositor propose to establish an escrow account to be designated
“Neah Power Systems Subscription Escrow Account” in accordance and compliance
with 17 C.F.R. section 240.15c2-4 to be maintained by the Escrow Agent (the
“Escrow Account”) until the earlier of 90 days from the Effective Date or the
sale of $12,000,000 in Securities (the “Maximum Purchase”) is complete or is
terminated by the Issuer unless extended for up to an additional 90 days in
accordance with the terms of the prospectus.
NOW,
THEREFORE,
in
consideration of the premises and of the mutual covenants contained herein
and
intending to be legally bound, the parties hereto agree as follows:
1. APPOINTMENT
OF ESCROW AGENT.
The
Issuer and the Depositor do hereby appoint the Escrow Agent as escrow agent
for
the purposes described herein.
2. ACCEPTANCE
OF APPOINTMENT BY ESCROW AGENT.
The
Escrow Agent does hereby accept the appointment as escrow agent and agrees
to
act on the terms and conditions described herein.
3. ESCROW
FUNDS.
All
funds received by Depositor and Issuer in connection with the sale of Securities
shall be deposited with the Escrow Agent into the Escrow Account. The Escrow
Agent shall hold, maintain and secure the funds deposited into the Escrow
Account (the “Escrow Funds”), subject to the terms, conditions and restrictions
herein described. Escrow Agent shall release Escrow Funds only in accordance
with the instructions as set forth in Exhibit “A”, or as otherwise expressly set
forth in this Agreement.
4. HOLDING
OF ESCROW FUNDS.
The
Escrow Agent shall hold the Escrow Funds in a non-interest bearing Escrow
Account. During the term of this Agreement the Escrow Agent shall provide the
Depositor and the Issuer with written monthly statements for the Escrow Account
containing the beginning balance of the Escrow Funds, as well as all
transactions for the statement period.
5. LIABILITY
OF ESCROW AGENT.
The
Escrow Agent shall not be held liable for any actions taken in good faith
reliance upon written instructions by Depositor and/or Issuer. The Escrow Agent
shall not be held liable for any action or inaction taken in good faith, except
that it may be held liable for its own gross negligence or willful conduct,
if
so determined by a court of competent jurisdiction. Under no circumstances
shall
the Escrow Agent be held liable for any special, indirect or consequential
damages of any kind, even though the Escrow Agent may have been placed on notice
of the likelihood of such loss.
6. RIGHTS
AND DUTIES OF ESCROW AGENT.
This
Agreement shall represent the entire understanding of the parties hereto, and
the Escrow Agent shall only be required to perform the duties expressly
described herein, and no further duties shall be implied from this Agreement
or
any other written or oral agreement by and between the Escrow Agent, the
Depositor and the Issuer made previous or subsequent to this Agreement, unless
such written amendment to this Agreement is executed by all parties to this
Agreement. The Escrow Agent may rely upon any written instructions believed
in
good faith to be genuine when signed and presented by the requesting party
and
shall not have a duty to inquire or investigate the validity of any such written
instruction. The Escrow Agent shall not be required to solicit funds from either
Depositor or Issuer in connection with this Agreement. The Escrow Agent shall
be
permitted to execute any and all powers under this Agreement directly or through
its agents and/or attorneys, and shall be allowed to seek counsel from any
professional regarding the performance of this Agreement, which professionals
shall be selected at the sole discretion of the Escrow Agent. Should the Escrow
Agent become uncertain as to its duties under this Agreement, it shall be
permitted to immediately abstain from further action until such duties are
expressly defined in writing by the parties hereto, and shall only be required
to protect and keep the Escrow Funds until such time as a written agreement
among the parties is executed or a court of competent jurisdiction shall render
an order directing further action. Upon release of Escrow Funds as set forth
in
Exhibit “A” hereto, Escrow Agent shall be fully released from any and all
further obligations, except for the provision of written notice to the other
parties to this Agreement, setting forth in such notice the date of release
of
the Escrow Funds, the party to whom released, the amount released and a
statement setting forth Escrow Agent’s release from further obligations to any
other party to this Agreement.
7. RESIGNATION
AND SUCCESSION OF ESCROW AGENT.
The
Escrow Agent may resign and be discharged of all duties and obligations under
this Agreement by providing ten days written notice of such resignation to
both
the Depositor and the Issuer. If no successor escrow agent shall have been
named
at the expiration of the ten day notice period, the Escrow Agent shall have
no
further obligations hereunder except to hold the Escrow Funds as a depository.
Upon notification by Depositor and Issuer of the appointment of a successor
escrow agent, the Escrow Agent shall promptly deliver the Escrow Funds and
all
materials and instruments in its possession which relate to the Escrow Funds
to
such successor, and the duties of the resigning Escrow Agent shall terminate
in
all respects, and it shall be released and discharged from all further
obligations herein. The Escrow Agent shall have the right to withhold an amount
equal to any amount due and owing the Escrow Agent, plus any costs and fees
incurred by the Escrow Agent in connection with the termination of this
Agreement. Any merger, consolidation or the purchase of all or substantially
all
of the Escrow Agent’s corporate assets resulting in a new corporate entity shall
not be considered a successor for the purposes of this Agreement, and the Escrow
Funds shall be transferred to such entity without written consent or further
action under this Agreement.
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8. TERMINATION
OF ESCROW AGENT.
The
Escrow Agent may be discharged from its duties under this Agreement upon 30
days
written notice from Depositor and Issuer and upon the payment of any and all
costs and fees due to Escrow Agent. In such event, the Escrow Agent shall be
entitled to rely upon written instructions from Depositor and Issuer as to
the
disposition and delivery of the Escrow Funds. Upon 30 days after receipt of
such
written notice of termination, if no successor has been named, the Escrow Agent
shall immediately cease further action under this Agreement and shall have
no
further obligations hereunder except to hold the Escrow Funds as a
depository.
9. TAXES
AND FEES.
Depositor and Issuer each represent that its Federal Tax Identification Number
listed in Exhibit “A” is true and correct, and that each will notify the Escrow
Agent in writing immediately upon any change to such number. Escrow Agent shall
use Depositor’s Federal Tax Identification Number for the escrow account.
Depositor and Issuer each grant to the Escrow Agent a right of set-off which
may
be exercised to pay any and all taxes, whether federal, state or local, incurred
by the holding of the Escrow Funds. Depositor and Issuer shall, jointly and
severally, indemnify and hold harmless the Escrow Agent against and in respect
to liability for taxes and/or any penalties or interest attributable to the
holding of Escrow Funds by Escrow Agent pursuant to this Agreement. Issuer
and
Depositor jointly and severally agree to pay or reimburse the Escrow Agent
for
all expenses and disbursements, including attorney’s fees, incurred in
connection with the preparation, execution, performance, delivery, modification
or termination of this Agreement.
10. INDEMNIFICATION
OF ESCROW AGENT.
Depositor and Issuer shall jointly and severally indemnify, defend and hold
harmless the Escrow Agent and its directors, officers, agents and employees
from
all loss, liability or expense arising from the execution and/or performance
of
this Agreement or the undertaking of any instructions from Depositor or Issuer,
except for those acts by the Escrow Agent which shall constitute gross
negligence or willful misconduct, and such indemnification shall include
attorney’s fees. The Escrow Agent’s right of indemnification shall survive the
resignation or termination of the Escrow Agent and the termination of the duties
described in this Agreement. The Depositor and Issuer further grant the Escrow
Agent a right of set-off and a security interest against the Escrow Funds for
the payment of any claim for indemnification, expenses or compensation due
hereunder.
11. NOTICES.
All
communications, notices and instructions required herein shall be in writing
and
shall be deemed to have been duly given if delivered by hand or first class,
registered mail, return receipt requested, postage prepaid, and addressed as
follows:
| (a) If to Escrow Agent: |
Sterling National Bank
000
Xxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Telephone:
(212) ________
Facsimile:
(212) _________
Attention:
Xxxxxx Xxxxxx
|
3
| (b) If to Issuer: | Neah Power Systems, Inc.
00000
00xx Xxx XX, Xxxxx 000
Xxxxxxx,
Xxxxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(425) _________
Attention:
Xxxx Xxxxxxxxxx, CEO
|
| (c) If to Depositor: |
Empire Financial Group, Inc.
00
X 00xx Xxxxxx, Xxxxx 000
Xxx
Xxxx, Xxx Xxxx 00000
Telephone:
(212) ________
Facsimile:
(212) _________
Attention:
|
In
the
event the Escrow Agent shall receive such written instructions and shall
determine pursuant to its sole discretion that verification of such instructions
shall be required, then the Escrow Agent shall be permitted to seek confirmation
of such instructions by way of telephone contact to the author of such written
instructions. Verification of the instructions by the purported author of the
instructions called at the telephone number placed on the instructions shall
serve to verify such instructions.
12. ASSIGNMENT.
This
Agreement shall not be assignable absent written consent of the parties hereto.
Any assignment absent written consent shall be deemed void
ab initio,
except
that the merger or acquisition of all or substantially all the assets of the
parties shall not require written consent, but shall require written notice
to
all the parties hereto. Notwithstanding the foregoing, all covenants contained
in this Agreement by or on behalf of the parties hereto shall bind and inure
to
the benefit of such parties and their respective heirs, administrators, legal
representatives, successors and assigns.
13. MODIFICATION
OF AGREEMENT.
This
Agreement shall constitute the complete and entire understanding of the parties
hereto, and shall supersede any and all prior agreements between or among them.
The provisions of this Agreement shall not be waived, modified, amended, altered
or supplemented, in whole or in part, except by a writing signed by all the
parties hereto.
14. CHOICE
OF LAW.
This
Agreement shall be governed and construed in accordance with the laws of the
State of New York. The parties further waive any right to a trial by jury with
respect to any judicial proceeding arising out of occurrences related to this
Agreement.
15. FORCE
MAJEURE.
No party
to this Agreement shall be liable to any other party for losses arising out
of,
or the inability to perform its obligations under the terms of this Agreement,
due to acts of God, which shall include, but shall not be limited to, fire,
floods, strikes, mechanical failure, war, riot, nuclear accident, earthquake,
terrorist attack, computer piracy, cyber-terrorism or other acts beyond the
control of the parties hereto.
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16. EXECUTION.
This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, but such counterparts together shall constitute one and the same
instrument. The effective date of this Agreement shall be the date it is
executed by the last party to do so.
[Signature
page follows]
5
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement as of the date first written
above.
| ESCROW AGENT: | |
| STERLING NATIONAL BANK | |
|
By:
|
|
| Its: | |
| ISSUER: | |
| NEAH POWER SYSTEMS, INC. | |
|
By:
Xxxx Xxxxxxxxxx
|
|
|
Its:
President and CEO
|
|
| DEPOSITOR: | |
| EMPIRE FINANCIAL GROUP, INC. | |
|
By:
|
|
|
Its:
|
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Exhibit
“A”
Escrow
Agent shall pay over to the Issuer from the Escrow Funds, by wire transfer
or
bank draft of immediately available funds to a bank account of the Issuer’s
description, the Escrow Funds upon receipt of written instructions of the Issuer
and Depositor following the occurrence of sales of at least $6,000,000 in
Securities (the “Minimum Purchase”). The Escrow Agent shall deduct all Escrow
Agreement costs.
After
the
initial disbursement of Escrow Funds to Issuer and until the termination of
the
Escrow Account, whether due to reaching the termination date or having closed
on
the Maximum Purchase, Escrow Agent shall pay to Issuer any additional funds
received with respect to the Securities, by wire transfer or bank draft of
immediately available funds, from time-to-time in accordance with and upon
receipt of written instructions of the Issuer and Depositor.
In
the
event the offering of Securities is terminated for any reason prior to the
closing on the Minimum Purchase, upon written instructions from the Issuer
and
Depositor the Escrow Agreement shall return to the respective investors the
funds on deposit without interest thereon or deduction therefrom. The written
instructions shall be in a form reasonably acceptable to Escrow Agent and shall
include the name and address of each investor and the exact amount to be
returned to each investor.
The
Federal Employer Identification Number of the Issuer is 00-0000000.
The
Federal Employer Identification Number of the Depositor is
00-0000000.
