RESERVE EQUITY FINANCING AGREEMENT
Exhibit 10.4
RESERVE EQUITY
FINANCING
AGREEMENT
THIS RESERVE EQUITY FINANCING
AGREEMENT dated as of the 18th day of
January 2010 (this “Agreement”) between
AGS Capital Group, LLC,
a New York limited liability company (the “Investor”), and Neah Power Systems, Inc.. a
corporation organized and existing under the laws of the State of Nevada (the
“Company”).
WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall issue and sell to the Investor, from time to time as provided herein, and
the Investor shall purchase from the Company up to Five Million Dollars
($5,000,000) of the Company’s fully registered and freely tradable common stock,
par value $.0001 per share (the “Common Stock”),;
and
WHEREAS, such investments will
be made in reliance upon the provisions of Regulation D (“Regulation D”)
of the Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the “Securities Act”), and
or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder.
NOW, THEREFORE, the parties hereto
agree as follows:
ARTICLE
I.
Certain
Definitions
Section 1.1.
“Advance” shall
mean the portion of the Commitment Amount requested by the Company in the
Advance Notice.
Section 1.2.
“Advance Date”
shall mean the first Trading Day after expiration of the applicable Pricing
Period for each Advance.
Section 1.3.
“Advance
Notice” shall mean a written notice in the form of Exhibit A attached
hereto to the Investor executed by an officer of the Company and setting forth
the Advance amount that the Company requests from the Investor.
Section 1.4.
“Advance Notice
Date” shall mean each date the Company delivers (in accordance with
Section 2.2(b) of this Agreement) to the Investor an Advance Notice
requiring the Investor to purchase the number of shares of Common Stock
specified in the Advance Notice, subject to the terms of this Agreement. No
Advance Notice Date shall be less than five (5) calendar days after the prior
Advance Notice Date.
Section 1.5.
“Bid Price”
shall mean, on any date, the closing bid price (as reported by Bloomberg L.P. or
other comparable reporting service) of the Common Stock on the Principal Market
or if the Common Stock is not traded on a Principal Market, the highest reported
bid price for the Common Stock, as furnished by the Financial Industry
Regulatory Authority.
Section 1.7.
“Commitment
Amount” shall mean the aggregate amount of up to Five Million Dollars
($5,000,000) which the Investor has agreed to provide to the Company in order to
purchase the Company’s Common Stock pursuant to the terms and conditions of this
Agreement.
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Section 1.8.
“Commitment
Period” shall mean the period commencing on the Effective Date, and
expiring upon the termination of this Agreement in accordance with
Section 10.2.
Section 1.9.
“Common Stock”
shall mean the Company’s common stock, par value $.0001 per share.
Section 1.10.
“Condition
Satisfaction Date” shall have the meaning set forth in
Section 7.2.
Section 1.11.
“Damages” shall
mean any loss, claim, damage, liability, costs and expenses (including, without
limitation, reasonable attorney’s fees and disbursements and costs and expenses
of expert witnesses and investigation).
Section 1.12.
“Effective
Date” shall mean the date on which the SEC first declares effective a
Registration Statement registering the resale of the Registrable Securities as
set forth in Section 7.2(a).
Section 1.13.
Intentionally
Omitted.
Section 1.14.
“Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
Section 1.15.
“Material Adverse
Effect” shall mean any condition, circumstance, or situation that may
result in, or reasonably be expected to result in (i) a material adverse
effect on the legality, validity or enforceability of the Agreement, (ii) a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company, taken as a whole, or
(iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under the
Agreement.
Section 1.16.
“Market Price”
shall mean the VWAP of the Common Stock during the Pricing Period.
Section 1.17.
“Maximum Advance
Amount” shall equal 50% of the average daily trading volume for the 5
days as reported by Bloomberg or comparable financial news service (U.S market
only) (“ADV”) immediately preceding the Advance Notice Date.
Section 1.18.
“FINRA” shall
mean the Financial Industry Regulatory Authority.
Section 1.19.
“Person” shall
mean an individual, a corporation, a partnership, an association, a trust or
other entity or organization, including a government or political subdivision or
an agency or instrumentality thereof.
Section 1.21.
“Principal
Market” shall mean the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market, the American Stock Exchange, the OTC Bulletin
Board, or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.
Section 1.22.
“Purchase
Price” shall mean ninety one percent (91%) of the Market Price during the
Pricing Period.
Section 1.23.
“Registrable
Securities” shall mean the shares of Common Stock to be issued hereunder
(i) in respect of which the Registration Statement has not been declared
effective by the SEC, (ii) which have not been sold under circumstances
meeting all of the applicable conditions of Rule 144 (or any similar
provision then in force) under the Securities Act (“Rule 144”) or
(iii) which have not been otherwise transferred to a holder who may trade
such shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such securities
not bearing a restrictive legend.
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Section 1.24.
“Registration Rights
Agreement” shall mean the Registration Rights Agreement dated the date
hereof, regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the
Investor.
Section 1.25.
“Registration
Statement” shall mean a registration statement on Form S-1 or Form S-3
(if use of such form is then available to the Company pursuant to the rules of
the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate,
and which form shall be available for the resale of the Registrable Securities
to be registered thereunder in accordance with the provisions of this Agreement
and the Registration Rights Agreement, and in accordance with the intended
method of distribution of such securities), for the registration of the resale
by the Investor of the Registrable Securities under the Securities
Act.
Section 1.26.
“Regulation D”
shall have the meaning set forth in the recitals of this Agreement.
Section 1.27.
“SEC” shall
mean the United States Securities and Exchange Commission.
Section 1.28.
“Securities
Act” shall have the meaning set forth in the recitals of this
Agreement.
Section 1.29.
“Trading Day”
shall mean any day during which the New York Stock Exchange shall be open for
business.
Section 1.30.
“VWAP” means,
as of any date, the daily dollar volume-weighted average price for such security
as reported by Bloomberg, LP through its “Historical Price Table Screen (HP)”
with Market: Weighted Ave function selected (or comparable financial news
service (U.S market only)), or, if no dollar volume-weighted average price is
reported for such security by Bloomberg, LP (or comparable financial news
service (U.S market only)), the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC.
ARTICLE
II.
Advances
Section 2.1.
Advances”
Subject
to the terms and conditions of this Agreement (including, without limitation,
the provisions of Article VII hereof), the Company, at its sole and
exclusive option, may issue and sell to the Investor, and the Investor shall
purchase from the Company, shares of the Company’s Common Stock by the delivery,
in the Company’s sole discretion, of Advance Notices. The number of shares of
Common Stock that the Investor shall purchase pursuant to each Advance shall be
determined by dividing the amount of the Advance by the Purchase Price. No
fractional shares shall be issued. Fractional shares shall be rounded to the
next higher whole number of shares. The aggregate maximum amount of all Advances
that the Investor shall be obligated to make under this Agreement shall not
exceed the Commitment Amount.
Section 2.2.
Mechanics.
(a)
Advance Notice. At
any time during the Commitment Period, the Company may require the Investor to
purchase shares of Common Stock by delivering an Advance Notice to the Investor,
subject to the conditions set forth in Section 7.2; provided, however, the
amount for each Advance as designated by the Company in the applicable Advance
Notice shall not be more than the Maximum Advance Amount and the aggregate
amount of the Advances pursuant to this Agreement shall not exceed the
Commitment Amount. The Company acknowledges that the Investor may sell shares of
the Company’s Common Stock corresponding with a particular Advance Notice after
the Advance Notice is received by the Investor. There shall be a minimum of five
(5) trading days between each Advance Notice.
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(b)
Date of Delivery
of Advance Notice. An Advance Notice shall be deemed delivered on
(i) the Trading Day it is received by email (to the address set forth in
Section 11.1 herein) by the Investor if such notice is received prior to 5:00 pm
Eastern Time, or (ii) the immediately succeeding Trading Day if it is
received by email after 5:00 pm Eastern Time on a Trading Day or at any time on
a day which is not a Trading Day. No Advance Notice may be deemed delivered on a
day that is not a Trading Day.
Section 2.3.
Closings.
(a)
On the day of the Advance Notice, the Company
shall deliver to the Investor such number of shares of the Common Stock
registered in the name of the Investor as shall equal the number of shares
specified in the Advance Notice. On the later of the Advance Date or one Trading
Day following receipt of the shares of Common Stock corresponding to the Advance
Notice, the Investor shall deliver to the Company the amount of the Advance by
wire transfer of immediately available funds. On or prior to the Advance Date,
each of the Company and the Investor shall deliver to the other all documents,
instruments and writings required to be delivered by either of them pursuant to
Section 2.3(b) below in order to implement and effect the transactions
contemplated herein. To the extent the Company has not paid the fees, expenses,
and disbursements of the Investor in accordance with Section 12.4, the
amount of such fees, expenses, and disbursements may be deducted by the Investor
(and shall be paid to the relevant party) directly out of the proceeds of the
Advance with no reduction in the amount of shares of the Company’s Common Stock
to be delivered on such Advance Date.
(b) Obligations Upon
Closing. The Investor agrees to advance the amount corresponding to the
Advance Notice to the Company upon completion of each of the following
conditions:
(i) The
Company shall deliver to the Investor the shares of Common Stock applicable to
the Advance in accordance with Section 2.3(a). The certificates evidencing
such shares shall be free of restrictive legends.
(ii) The
Registration Statement filed pursuant to the Registration Rights Agreement shall
be effective and available for the resale of all applicable shares of Common
Stock to be issued in connection with the Advance and certificates evidencing
such shares shall be free of restrictive legends; provided, however, that the
foregoing condition shall apply only to Advance Notices delivered after the
commitment fee of 1,520,000 shares of the Company’s unregistered stock issued to
the Investor upon signing this Agreement has been exhausted by prior purchases
of Common Stock under Section 2.1;
(iii) the
Company shall have obtained all material permits and qualifications required by
any applicable state for the offer and sale of the Registrable Securities, or
shall have the availability of exemptions therefrom. The sale and issuance of
the Registrable Securities shall be legally permitted by all laws and
regulations to which the Company is subject;
(iv) the
Company shall have filed with the SEC all reports, notices and other documents
required of a “reporting company” under the Exchange Act and applicable
Commission regulations;
(v) the
Company shall pay any unpaid fees as set forth in Section 12.4 below or
withhold such amounts as provided in Section 2.3; and
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(vi) the
Company’s transfer agent shall be DWAC eligible.
(vii) the
conditions in Section 7.2.3(a)(i) above and provided the Company is in
compliance with its obligations in Section 2.3, the Investor shall deliver to
the Company the amount of the Advance specified in the Advance Notice by wire
transfer of immediately available funds are satisfied.
Section 2.4.
Intentionally
Omitted.
Section 2.5.
Hardship. In
the event the Investor sells shares of the Company’s Common Stock after receipt
of an Advance Notice and the Company fails to perform its obligations as
mandated in Section 2.3, and specifically the Company fails to deliver to
the Investor on the Advance Date the shares of Common Stock corresponding to the
applicable Advance pursuant to Section 2.3(a)(i), the Company acknowledges
that the Investor shall suffer financial hardship and therefore shall be liable
for any and all losses, commissions, fees, or financial hardship caused to the
Investor.
ARTICLE
III.
Representations
of Investor
Investor
hereby represents and warrants to, and agrees with, the Company that the
following are true and correct as of the date hereof and as of each Advance
Date:
Section 3.1.
Organization and
Authorization. The Investor is duly incorporated or organized and validly
existing in the jurisdiction of its incorporation or organization and has all
requisite power and authority to purchase and hold the securities issuable
hereunder. The decision to invest and the execution and delivery of this
Agreement by such Investor, the performance by such Investor of its obligations
hereunder and the consummation by such Investor of the transactions contemplated
hereby have been duly authorized and requires no other proceedings on the part
of the Investor. The undersigned has the right, power and authority to execute
and deliver this Agreement and all other instruments (including, without
limitations, the Registration Rights Agreement), on behalf of the Investor. This
Agreement has been duly executed and delivered by the Investor and, assuming the
execution and delivery hereof and acceptance thereof by the Company, will
constitute the legal, valid and binding obligations of the Investor, enforceable
against the Investor in accordance with its terms.
Section 3.2.
Evaluation of
Risks. The Investor has such knowledge and experience in financial, tax
and business matters as to be capable of evaluating the merits and risks of, and
bearing the economic risks entailed by, an investment in the Company and of
protecting its interests in connection with this transaction. It recognizes that
its investment in the Company involves a high degree of risk.
Section 3.3.
No Legal Advice From
the Company. The Investor acknowledges that it had the opportunity to
review this Agreement and the transactions contemplated by this Agreement with
his or its own legal counsel and investment and tax advisors. The Investor is
relying solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents for
legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
Section 3.4.
Investment
Purpose. The securities are being purchased by the Investor for its own
account, and for investment purposes. The Investor agrees not to assign or in
any way transfer the Investor’s rights to the securities or any interest therein
and acknowledges that the Company will not recognize any purported assignment or
transfer except in accordance with applicable Federal and state securities laws.
No other person has or will have a direct or indirect beneficial interest in the
securities. The Investor agrees not to sell, hypothecate or otherwise transfer
the Investor’s securities unless the securities are registered under Federal and
applicable state securities laws or unless, in the opinion of counsel
satisfactory to the Company, an exemption from such laws is
available.
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Section 3.5.
Accredited
Investor. The Investor is an “Accredited Investor”
as that term is defined in Rule 501(a) of Regulation D of the
Securities Act.
Section 3.7.
Receipt of
Documents. The Investor and its counsel have received and read in their
entirety: (i) this Agreement and the Exhibits annexed hereto; (ii) all
due diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; (iii) the
Company’s Form 10-Q for the period ended June 30, 2009 and other SEC filings ;
and (iv) answers to all questions the Investor submitted to the Company
regarding an investment in the Company; and the Investor has relied on the
information contained therein and has not been furnished any other documents,
literature, memorandum or prospectus.
Section 3.8.
No General
Solicitation or Advertising. Neither the Company nor, to the
knowledge of the Company, any of its directors or officers (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Securities,
or (ii) made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Securities under the Act or made any “directed selling efforts” as defined in
Rule 902 of Regulation S.
Section 3.9.
Not an
Affiliate. The Investor is not an officer, director or a person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with the Company or any “Affiliate” of the
Company (as that term is defined in Rule 405 of the Securities
Act).
Section 3.10.
Trading
Activities. The Investor’s trading activities with respect to the
Company’s Common Stock shall be in compliance with all applicable federal and
state securities laws, rules and regulations and the rules and regulations of
the Principal Market on which the Company’s Common Stock is listed or
traded. Investor agrees never to sell more than approximately 20% of
the trading volume for each day the Investor sells the Stock.
Representations
and Warranties of the Company
Except as
stated below, on the disclosure schedules attached hereto or in the SEC
Documents (as defined herein), the Company hereby represents and warrants to,
and covenants with, the Investor that the following are true and correct as of
the date hereof:
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Section 4.1.
Organization and
Qualification. Organization and Qualification. Each of the
Company and the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as applicable, with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Neither the Company nor
any Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in a
Material Adverse Effect and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
Section 4.2.
Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this
Agreement and the Registration Rights Agreement and otherwise to carry out its
obligations hereunder or thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company other than the filing of the Certificate of
Designations. Each of the Transaction Documents has been, or upon
delivery will be, duly executed by the Company and, when delivered in accordance
with the terms hereof, will constitute the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors’ rights and remedies. Neither the Company
nor any Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents except where such violation could not, individually or in the
aggregate, constitute a Material Adverse Effect.
Section 4.3.
Capitalization.
The capitalization of the Company is as described in the Company’s most recently
filed SEC Report. The Company has not issued any capital stock since
such filing. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a
result of the purchase and sale of the Securities, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or securities
convertible into or exercisable for shares of Common Stock. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than Investor)
and will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange, or reset price under such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale of the shares of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
Section 4.4.
No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities
and the consummation by the Company of the other transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected, or (iv)
conflict with or violate the terms of any agreement by which the Company or any
Subsidiary is bound or to which any property or asset of the Company or any
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.
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Section 4.5.
SEC Reports; Financial
Statements. The Company has filed all required SEC Reports for
the two years preceding the Effective Date (or such shorter period as the
Company was required by law to file such material) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Act and the Exchange Act and the rules and regulations of
the SEC promulgated thereunder, as applicable, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP, except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.
Section 4.6.
Material
Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or required to be disclosed in filings made with the SEC, (iii) the Company has
not altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company equity
incentive plans. The Company does not have pending before the SEC any
request for confidential treatment of information. The SEC Documents do not
include any untrue statements of material fact, nor do they omit to state any
material fact required to be stated therein necessary to make the statements
made, in light of the circumstances under which they were made, not
misleading.
Section 4.8.
Absence of Events of
Default. Except for matters described in the SEC Documents and/or this
Agreement, no Event of Default, as defined in the respective agreement to which
the Company is a party, and no event which, with the giving of notice or the
passage of time or both, would become an Event of Default (as so defined), has
occurred and is continuing, which would have a Material Adverse Effect on the
Company’s business, properties, prospects, financial condition or results of
operations.
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Section 4.9.
Intellectual Property
Rights. The Company and its subsidiaries own or possess adequate rights
or licenses to use all material trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted. The
Company and its subsidiaries do not have any knowledge of any infringement by
the Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, and, to the
knowledge of the Company, there is no claim, action or proceeding being made or
brought against, or to the Company’s knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.
Section 4.10.
Labor
Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.
Section 4.11.
Environmental
Laws. Except as set forth in the SEC Documents, the Company and its
subsidiaries are (i) in compliance with any and all applicable material
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such
permit, license or approval.
Section 4.13.
Insurance. The
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
Section 4.14.
Regulatory
Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
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Section 4.16.
Material
Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or required to be disclosed in filings made with the SEC, (iii) the Company has
not altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company equity
incentive plans. The Company does not have pending before the SEC any
request for confidential treatment of information.
Section 4.17.
Litigation. There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”), which
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities, or (ii) could, if there were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor to the
knowledge of the Company any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary
duty. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the SEC involving the
Company or any current or former director or officer of the
Company. The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Act.
Section 4.20.
Certain
Transactions. Except as set forth in the SEC Documents none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
10
Section 4.21.
Rights of First
Refusal. The Company is not obligated to offer the securities offered
hereunder on a right of first refusal basis or otherwise to any third parties
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.
Section 4.22.
Issuance of the
Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens. The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Securities at least
equal to the number of Securities which could be issued pursuant to the terms of
the Transaction Documents.
Section 4.23.
Listing and
Maintenance Requirements. The Common Stock is registered
pursuant to Section 12 of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the SEC is contemplating terminating
such registration. The Company has not, in the 12 months preceding
the Effective Date, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.
Section 4.24.
Opinion of
Counsel. Investor shall receive an opinion letter from counsel to the
Company on the date hereof.
Section 4.25.
Opinion of
Counsel. The Company will obtain for the Investor, at the Company’s
expense, any and all opinions of counsel which may be reasonably required in
order to sell the securities issuable hereunder without
restriction.
Section 4.26.
Dilution. The
Company is aware and acknowledges that issuance of shares of the Company’s
Common Stock could cause dilution to existing shareholders and could
significantly increase the outstanding number of shares of Common
Stock.
Section 4.28.
No Legal Advice From
the Investor. The Company acknowledges that it had the opportunity to
review this Agreement and the transactions contemplated by this Agreement with
his or its own legal counsel and investment and tax advisors. The Company is
relying solely on such counsel and advisors and not on any statements or
representations of the Investor or any of its representatives or agents for
legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction. The Company is not relying on any representation except
for the representations of the Investor contained in this
Agreement.
11
Section 4.29.
Foreign Corrupt
Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.
Section 4.30.
Accountants. The
Company’s accountants are set forth in the SEC Reports. To the
Company’s knowledge, such accountants are an independent registered public
accounting firm as required by the Act.
Section 4.31.
No Disagreements with
Accountants and Lawyers. There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the accountants and lawyers formerly or presently employed by the
Company, and the Company is current with respect to any fees owed to its
accountants and lawyers.
ARTICLE
V.
Indemnification
The
Investor and the Company represent to the other the following with respect to
itself:
Section 5.1.
Indemnification.
(a) In
consideration of the Investor’s execution and delivery of this Agreement, and in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Investor, and all
of its officers, directors, partners, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Investor
Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Investor
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by the Investor Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement
or the Registration Rights Agreement or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Investor Indemnitee not arising out of any action
or inaction of an Investor Indemnitee, and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the
Investor Indemnitees. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
12
(c)
The obligations of the parties to indemnify or make contribution under this
Section 5.1 shall survive termination.
Section
5.2 Notification of Claims for
Indemnification. Each party entitled to indemnification under this
Article V (an “Indemnified Party”)
shall, promptly after the receipt of notice of the commencement of any claim
against such Indemnified Party in respect of which indemnity may be sought from
the party obligated to indemnify such Indemnified Party under this Article V
(the “Indemnifying
Party”), notify the Indemnifying Party in writing of the commencement
thereof. Any such notice shall describe the claim in reasonable detail. The
failure of any Indemnified Party to so notify the Indemnifying Party of any such
action shall not relieve the Indemnifying Party from any liability which it may
have to such Indemnified Party (a) other than pursuant to this Article V or
(b) under this Article V unless, and only to the extent that, such failure
results in the Indemnifying Party’s forfeiture of substantive rights or defenses
or the Indemnifying Party is prejudiced by such delay. The procedures listed
below shall govern the procedures for the handling of indemnification
claims.
(a) Any
claim for indemnification for Indemnified Liabilities that do not result from a
Third Party Claim as defined in the following paragraph, shall be asserted by
written notice given by the Indemnified Party to the Indemnifying Party. Such
Indemnifying Party shall have a period of thirty (30) days after the
receipt of such notice within which to respond thereto. If such Indemnifying
Party does not respond within such thirty (30) day period, such
Indemnifying Party shall be deemed to have refused to accept responsibility to
make payment as set forth in Section 5.1. If such Indemnifying Party does
not respond within such thirty (30) day period or rejects such claim in
whole or in part, the Indemnified Party shall be free to pursue such remedies as
specified in this Agreement.
(b) If
an Indemnified Party shall receive notice or otherwise learn of the assertion by
a person or entity not a party to this Agreement of any threatened legal action
or claim (collectively a “Third Party Claim”),
with respect to which an Indemnifying Party may be obligated to provide
indemnification, the Indemnified Party shall give such Indemnifying Party
written notice thereof within twenty (20) days after becoming aware of such
Third Party Claim.
13
(c) An
Indemnifying Party may elect to defend (and, unless the Indemnifying Party has
specified any reservations or exceptions, to seek to settle or compromise) at
such Indemnifying Party’s own expense and by such Indemnifying Party’s own
counsel, any Third Party Claim. Within thirty (30) days after the receipt
of notice from an Indemnified Party (or sooner if the nature of such Third Party
Claim so requires), the Indemnifying Party shall notify the Indemnified Party
whether the Indemnifying Party will assume responsibility for defending such
Third Party Claim, which election shall specify any reservations or exceptions.
If such Indemnifying Party does not respond within such thirty (30) day
period or rejects such claim in whole or in part, the Indemnified Party shall be
free to pursue such remedies as specified in this Agreement. In case any such
Third Party Claim shall be brought against any Indemnified Party, and it shall
notify the Indemnifying Party of the commencement thereof, the Indemnifying
Party shall be entitled to assume the defense thereof at its own expense, with
counsel satisfactory to such Indemnified Party in its reasonable judgment;
provided, however, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense at its own expense.
Notwithstanding the foregoing, in any Third Party Claim in which both the
Indemnifying Party, on the one hand, and an Indemnified Party, on the other
hand, are, or are reasonably likely to become, a party, such Indemnified Party
shall have the right to employ separate counsel and to control its own defense
of such claim if, in the reasonable opinion of counsel to such Indemnified
Party, either (x) one or more significant defenses are available to the
Indemnified Party that are not available to the Indemnifying Party or (y) a
conflict or potential conflict exists between the Indemnifying Party, on the one
hand, and such Indemnified Party, on the other hand, that would make such
separate representation advisable; provided, however, that in such circumstances
the Indemnifying Party (i) shall not be liable for the fees and expenses of
more than one counsel to all Indemnified Parties and (ii) shall reimburse
the Indemnified Parties for such reasonable fees and expenses of such counsel
incurred in any such Third Party Claim, as such expenses are incurred, provided
that the Indemnified Parties agree to repay such amounts if it is ultimately
determined that the Indemnifying Party was not obligated to provide
indemnification under this Article IX. The Indemnifying Party agrees that it
shall not, without the prior written consent of the Indemnified Party, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim relating to the matters contemplated hereby (if any Indemnified Party is a
party thereto or has been actually threatened to be made a party thereto) unless
such settlement, compromise or consent includes an unconditional release of such
Indemnified Party from all liability arising or that may arise out of such
claim. The Indemnifying Party shall not be liable for any settlement of any
claim effected against an Indemnified Party without the Indemnifying Party’s
written consent, which consent shall not be unreasonably withheld, conditioned
or delayed. The rights accorded to an Indemnified Party hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise; provided, however, that notwithstanding the
foregoing or anything to the contrary contained in this Agreement, nothing in
this Article V shall restrict or limit any rights that any Indemnified Party may
have to seek equitable relief.
ARTICLE
VI.
Covenants
of the Company
Section 6.1.
Registration
Rights. The Company shall cause the Registration Rights Agreement to
remain in full force and effect and the Company shall comply in all material
respects with the terms thereof.
Section 6.2.
Quotation of Common
Stock. The Company shall maintain the Common Stock’s authorization for
quotation on the Principal Market.
Section 6.3.
Exchange Act
Registration. The Company will file in a timely manner all reports and
other documents required of it as a reporting company under the Exchange Act and
will not take any action or file any document (whether or not permitted by
Exchange Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under said
Exchange Act.
Section 6.4.
Transfer Agent
Instructions. On the Advance Notice Date, the Company shall deliver
instructions to its transfer agent to issue shares of Common Stock to the
Investor free of restrictive legends on the Advance Notice Date .
Section 6.5.
Corporate
Existence. The Company will take all steps necessary to preserve and
continue the corporate existence of the Company.
14
Section 6.7.
RESERVED.
Section 6.8.
Consolidation;
Merger. The Company shall not, at any time after the delivery of an
Advance Notice and before the Advance Date applicable to such Advance Notice,
effect any merger or consolidation of the Company with or into, or a transfer of
all or substantially all the assets of the Company to another entity (a “Consolidation Event”)
unless the resulting successor or acquiring entity (if not the Company) assumes
by written instrument the obligation to deliver to the Investor such shares of
stock and/or securities as the Investor is entitled to receive pursuant to this
Agreement.
Section 6.9.
Issuance of the
Company’s Common Stock. The sale of the shares of Common Stock shall be
made in accordance with the provisions and requirements of Regulation D and
any applicable state securities law.
Section 6.10.
Review of Public
Disclosures. All SEC filings (including, without limitation, all filings
required under the Exchange Act, which include Forms 10-Q, 10-K, 8-K, etc) and
other public disclosures made by the Company, including, without limitation, all
press releases, investor relations materials, and scripts of analysts meetings
and calls, shall be reviewed and approved for release by the Company’s attorneys
and, if containing financial information, the Company’s independent certified
public accountants.
ARTICLE
VII.
Conditions
for Advance and Conditions to Closing
Section 7.1.
Conditions Precedent
to the Obligations of the Company. The obligation hereunder of the
Company to issue and sell the shares of Common Stock to the Investor incident to
each Closing is subject to the satisfaction, or waiver by the Investor in
writing, at or before each such Closing, of each of the conditions set forth
below.
15
(a) Accuracy of the Investor’s
Representations and Warranties. The representations and warranties of the
Investor shall be true and correct in all material respects.
(b)
Performance by the
Investor. The Investor shall have performed, satisfied and complied in
all respects with all covenants, agreements and conditions required by this
Agreement and the Registration Rights Agreement to be performed, satisfied or
complied with by the Investor at or prior to such Closing.
Section 7.2.
Conditions Precedent
to the Right of the Company to Deliver an Advance Notice. The right of
the Company to deliver an Advance Notice is subject to the fulfillment by the
Company, on such Advance Notice Date (a “Condition Satisfaction
Date”), of each of the following conditions, any of which may be waived
in writing by the Investor:
(a)
Registration of the
Common Stock with the SEC. The Company shall have filed with the SEC a
Registration Statement with respect to the resale of the Registrable Securities
in accordance with and subject to the terms of the Registration Rights
Agreement. As set forth in the Registration Rights Agreement, the Registration
Statement shall have previously become effective and shall remain effective on
each Condition Satisfaction Date and (i) neither the Company nor the
Investor shall have received notice that the SEC has issued or intends to issue
a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC’s concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness
of the Registration Statement or related prospectus shall exist. The
Registration Statement must have been declared effective by the SEC prior to the
first Advance Notice Date.
(b)
Authority. The
Company shall have obtained all permits and qualifications required by any
applicable state in accordance with the Registration Rights Agreement for the
offer and sale of the shares of Common Stock, or shall have the availability of
exemptions therefrom. The sale and issuance of the shares of Common Stock shall
be legally permitted by all laws and regulations to which the Company is
subject.
(d)
Performance by the
Company. The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by this
Agreement and the Registration Rights Agreement to be performed, satisfied or
complied with by the Company at or prior to each Condition Satisfaction
Date.
(e)
No Injunction.
No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits or directly and
adversely affects any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this
Agreement.
(f)
No Suspension of
Trading in or Delisting of Common Stock. The Common Stock is trading on a
Principal Market. The trading of the Common Stock is not suspended by the SEC or
the Principal Market. The issuance of shares of Common Stock with respect to the
applicable Closing will not violate the shareholder approval requirements of the
Principal Market. The Company shall not have received any notice threatening the
continued quotation of the Common Stock on the Principal Market and the Company
shall have no knowledge of any event which would be more likely than not to have
the effect of causing the Common Stock to not be trading or quoted on a
Principal Market.
16
(g)
Maximum Advance
Amount. The amount of an Advance corresponding to the Advance Notice
shall not exceed the Maximum Advance Amount. In addition, the Advance amount
shall be automatically reduced by 50%, unless, if on any day during the Pricing
Period, the VWAP for that day does not meet or exceed the Floor Price. The Floor
Price shall be 85% of the Volume Weighted Average Price of the Common Stock for
the five (5) Trading Days prior to the Advance Notice Date, or any other price
mutually agreed upon by the Company and the Investor in writing. In
addition, in no event shall the number of shares issuable to the Investor
pursuant to an Advance cause the aggregate number of shares of Common Stock
beneficially owned by the Investor and its affiliates to exceed 9.99% of the
then outstanding shares of Common Stock of the Company (“Ownership
Limitation”). Any portion of an Advance that would cause the Investor to
exceed the Ownership Limitation shall automatically be withdrawn. For the
purposes of this section, beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act.
(h)
No Knowledge.
The Company has no knowledge of any event which would be more likely than not to
have the effect of causing such Registration Statement to be suspended or
otherwise ineffective at Closing.
(i)
Executed Advance
Notice. The Investor shall have received the Advance Notice executed by
an officer of the Company and the representations contained in such Advance
Notice shall be true and correct as of each Condition Satisfaction
Date.
ARTICLE
VIII.
Due
Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1.
Non-Disclosure of
Non-Public Information.
(b) Nothing
herein shall require the Company to disclose material, non-public information to
the Investor or its advisors or representatives, and the Company represents that
it does not disseminate material, non-public information to any investors who
purchase stock in the Company in a public offering, to money managers or to
securities analysts in violation of Regulation FD of the Exchange Act, provided,
however, that notwithstanding anything herein to the contrary, the Company will,
as hereinabove provided and subject to compliance with Regulation FD,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting material, non-public information (whether or not requested
of the Company specifically or generally during the course of due diligence by
such persons or entities), which, if not disclosed in the prospectus included in
the Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 8.1 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain material, non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company of their
opinion that based on such due diligence by such persons or entities, that the
Registration Statement contains an untrue statement of material fact or omits a
material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
17
ARTICLE
IX.
Choice
of Law/Jurisdiction
Section 9.1.
Governing Law.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of New York without regard to the principles of conflict of
laws.
Section 9.2.
Arbitration. Any
dispute arising out of or in connection with this Agreement or otherwise
relating to the parties relationship that cannot be settled by the Company and
the Investor after discussion shall be settled solely by arbitration. Any such
arbitration shall be fully and finally resolved in binding arbitration in a
proceeding in the State of New York, City of New York, in accordance with the
rules of the American Arbitration Association before a single arbitrator.
The arbitrator shall not have the authority to modify or change any of the terms
of this Agreement. The arbitrator may award interim relief and grant
specific performance in addition to monetary damages. The Company and
the Investor further agree that no demand for punitive or exemplary damages
shall be made in any arbitration proceeding. Any monetary award shall
be in U.S. dollars. The arbitrator's award shall be final and binding upon
the parties, and judgment upon the award may be entered in any court of
competent jurisdiction in any state of the United States or country or
application may be made to such court for a judicial acceptance of the award and
an enforcement as the law of such jurisdiction may require or
allow.
ARTICLE
X.
Assignment;
Termination
Section 10.1.
Assignment.
Neither this Agreement nor any rights or obligations of the Company or the
Investor hereunder may be assigned to any other Person.
Section 10.2.
Termination.
(b) The
Company may terminate this Agreement effective upon fifteen Trading Days’ prior
written notice to the Investor; provided that (i) there are no Advances
outstanding, and (ii) the Company has paid all amounts owed to the Investor
pursuant to this Agreement. This Agreement may be terminated at any time by the
mutual written consent of the parties, effective as of the date of such mutual
written consent unless otherwise provided in such written consent. In the event
of any termination of this Agreement by the Company hereunder, so long as the
Investor owns any shares of Common Stock issued hereunder, unless all of such
shares of Common Stock may be resold by the Investor without registration and
without any time, volume or manner of sale limitations pursuant to Rule 144, the
Company shall not (i) cancel the common stock issued to Investor or suspend
(except as provided for in the Registration Rights Agreement)
or withdraw the Registration Statement or otherwise cause the
Registration Statement to become ineffective, or voluntarily delist the Common
Stock from, the Principal Market without listing the Common Stock on another
Principal Market.
(c) The
obligation of the Investor to make an Advance to the Company pursuant to this
Agreement shall terminate permanently (including with respect to an Advance Date
that has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement for an
aggregate of fifty (50) Trading Days, during the Commitment Period, or
(ii) the Company shall at any time fail materially to comply with the
requirements of Article VI and such failure is not cured within thirty
(30) days after receipt of written notice from the Investor, provided, however, that this
paragraph (c) shall not apply to any period commencing upon the filing of a
post-effective amendment to such Registration Statement and ending upon the date
on which such post effective amendment is declared effective by the
SEC.
18
(d) Nothing
in this Section 10.2 shall be deemed to release the Company or the Investor
from any liability for any breach under this Agreement, or to impair the rights
of the Company and the Investor to compel specific performance by the other
party of its obligations under this Agreement. The indemnification provisions
contained in Sections 5.1 and 5.2 shall survive termination
hereunder.
ARTICLE
XI.
Notices
Section 11.1.
Notices. Any
notices, consents, waivers, or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (i) upon receipt, when delivered personally;
(ii) three (3) days after being sent by U.S. certified mail, return
receipt requested, (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same or (iv) or upon confirmation of receipt of email by
the recipient emailing back the sender that they are in receipt of the email.
The addresses and emails for such communications shall be:
|
If
to the Company, to:
|
00000
00xx
Xxxxxx XX, Xxxxx 000
Xxxxxxx,
Xxxxxxxxxx 00000
Attention:
Xxxxxx X. X’Xxxxx, President
Email:
xxxxxxx@xxxxxxxxx.xxx
|
|
|
With
a copy to:
|
Seyfarth
Xxxx LLP
000
X Xxxxxx, X.X.
Xxxxxxxxxx,
X.X. 00000
Attention:
Xxxxxx X. Xxxxx, Esq.
Email: xxxxxx@xxxxxxxx.xxx
|
|
|
If
to the Investor:
|
AGS
Capital Group, LLC
|
|
|
0
Xxxxx Xxxxxx, 00xx
Xxxxx
|
||
|
Xxx
Xxxx, Xxx Xxxx
|
||
|
Attention:
Xxxxx Xxxxxxxxxxx
|
||
|
Telephone:
000-000-0000
|
||
|
Email:
xxxxxxxxxxxx@xxxxxxxxxxxxxxx.xxx
|
Each
party shall provide five (5) days’ prior written notice to the other party
of any change in address or email.
19
ARTICLE
XII.
Miscellaneous
Section 12.1.
Counterparts.
This Agreement may be executed in two or more identical counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party.
Section 12.3.
Reporting Entity for
the Common Stock. The reporting entity relied upon for the determination
of the trading price or trading volume of the Common Stock on any given Trading
Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor
thereto. The written mutual consent of the Investor and the Company shall be
required to employ any other reporting entity.
Section 12.4.
Fees, Expenses and
Restricted Shares. Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby, except that the Company shall pay a Due Diligence fee of
Three Thousand Dollars ($3,000) to Investor upon signing this Agreement and
Fifteen Thousand Dollars ($15,000) to Investor upon the first
Advance. 30 days after the signing of the Agreement, the Company
shall pay to Investor 1% of the value of 1,500,000 shares valued at the volume
weighted average price (VWAP), calculated based upon the ratio of the average
value of the common stock of Company traded on the Trading Market to the average
volume of such stock traded on such market for such date (or the nearest
preceding date), for the 10 trading days immediately preceding the Agreement
date. The Company shall also pay a commitment fee of 1,520,000 shares of the
Company’s unregistered stock upon signing this Agreement. 1,500,000 of these
shares shall be used as credit towards shares for the Advance Notices which the
Company shall include in the Registration Statement. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable fees, costs and disbursements
in addition to any other relief to which such party may be
entitled.
Section
12.5 Severability. If any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that, if the severance
of such provision materially changes the economic benefits of this Agreement to
either party as such benefits are anticipated as of the date hereof, then such
party may terminate this Agreement on five (5) business days prior written
notice to the other party.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
20
IN WITNESS WHEREOF, the
parties hereto have caused this Reserve Equity Financing Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
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COMPANY:
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||||
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By:
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/s/
Xxxxxx X. X’Xxxxx
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Name:
Xxxxxx X. X’Xxxxx
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||||
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Title:
President
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INVESTOR:
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ags
capital group, llc
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||||
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By:
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/s/
Xxxxx Xxxxxxxxxxx
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Name:
Xxxxx Xxxxxxxxxxx
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||||
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Title:
Chief Executive
Officer
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||||
21
ADVANCE
NOTICE
The undersigned, ________________ hereby certifies, with
respect to the sale of shares of Common Stock of Neah Power Systems, Inc. Company”) issuable in
connection with this Advance Notice, delivered pursuant to the Reserve Equity
Financing Agreement (the “Agreement”), as
follows:
1. The
undersigned is the duly elected Officer of the Company, its Chief Executive,
President or Chief Financial Officer.
2. There
are no fundamental changes to the information set forth in the Registration
Statement which would require the Company to file a post effective amendment to
the Registration Statement.
3. The
Company has performed in all material respects all covenants and agreements to
be performed by the Company and has complied in all material respects with all
obligations and conditions contained in the Agreement on or prior to the Advance
Notice Date, and shall continue to perform in all material respects all
covenants and agreements to be performed by the Company through the applicable
Advance Date. All conditions to the delivery of this Advance Notice are
satisfied as of the date hereof.
4. The
undersigned hereby represents, warrants and covenants that it has made all
filings (“SEC
Filings”) required to be made by it pursuant to applicable securities
laws (including, without limitation, all filings required under the Securities
Exchange Act of 1934, which include Forms 10-Q or, 10-K or, 8-K, etc.). All SEC
Filings and other public disclosures made by the Company, including, without
limitation, all press releases, analysts meetings and calls, etc. (collectively,
the “Public
Disclosures”), have been reviewed and approved for release by the
Company’s attorneys and, if containing financial information, the Company’s
independent certified public accountants. None of the Company’s Public
Disclosures contain, as of their respective dates, any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
5. The
Advance requested is _____shares .
The
undersigned has executed this Certificate this _____ day of
_____.
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||
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By:
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||
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Name:
|
||
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Title:
|
||
If
Returning This Advance Notice via email Please Send To:
xxxxxxxxxxxx@xxxxxxxxxxxxxxx.xxx
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If
by Mail, via Federal Express To:
|
AGS
Capital Group, LLC, Attention Xxxxx Xxxxxxxxxxx
|
|
|
0
Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx,
00000
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22
