6,000,000 to $12,000,000 Shares of Common Stock and Warrants NEAH POWER SYSTEMS, INC. UNDERWRITING AGREEMENT
$6,000,000
to $12,000,000
Shares
of
Common Stock and Warrants
May
1,
2007
Empire
Financial Group, Inc.
00
X 00xx
Xxxxxx
Xxxxx
000
Xxx
Xxxx,
XX 00000
Ladies
and Gentlemen:
Neah
Power Systems, Inc., a Nevada corporation (the “Company”), confirms its
agreement, subject to the terms and conditions stated herein, with Empire
Financial Group, Inc. (the “Underwriter”), with respect to the engagement of the
Underwriter as agent of the Company, on a best efforts basis, for the offer
and
sale by the Company of a minimum of $6,000,000 and a maximum of $12,000,000
of
shares of common stock and warrants (the “Units”). Each Unit consist of (i) one
share of the Company’s common stock, par value $.001 per share (the “Common
Stock”), (ii) one-fourth of one five-year warrant to purchase one share of
Common Stock at an exercise price of $1.10 (a “Class A Warrant”), (iii)
one-fourth of one five-year warrant to purchase one share of Common Stock at
an
exercise price of $1.60 (a “Class B Warrant”), and (iv) one-fourth of one
five-year warrant to purchase one share of Common Stock at an exercise price
of
$2.00 (a “Class C Warrant,” and such Class C Warrants, collectively together
with the Class A Warrants and the Class B Warrants, the “Unit
Warrants”).
The
Company and the Underwriter, intending to be legally bound, hereby confirm
their
agreement as follows:
1. Representations
and Warranties of the Company.
The
Company represents and warrants to, and agrees with, the Underwriter
that:
(a) A
registration statement on Form SB-2 (File No. 333-140255) (the “Initial
Registration Statement”) in respect of the Units has been filed with the
Securities and Exchange Commission (the “Commission”); the Initial Registration
Statement and any pre-effective amendment or post-effective amendment
post-effective amendment thereto, each in the form heretofore delivered to
the
Underwriter, have been declared effective by the Commission in such form; other
than a registration statement, if any, increasing the size of the offering
(a
“Rule 462(b) Registration Statement”), filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the “Act”), which became effective upon
filing, no other document with respect to the Initial Registration Statement
has
heretofore been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or threatened
by
the Commission (any preliminary prospectus included in the Initial Registration
Statement or filed with the Commission pursuant to Rule 424(a) of the rules
and
regulations of the Commission under the Act is hereinafter called a “Preliminary
Prospectus”; the various parts of the Initial Registration Statement and the
Rule 462(b) Registration Statement, if any, including all exhibits thereto
and
including the information contained in the form of final prospectus filed with
the Commission pursuant to Rule 424(b) under the Act and deemed by virtue of
Rule 430A under the Act to be part of the Initial Registration Statement at
the
time it was declared effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, each as amended at
the
time such part of the Initial Registration Statement became effective, are
hereinafter collectively called the “Registration Statement”; and such final
prospectus, in the form first filed pursuant to Rule 424(b) under the Act,
is
hereinafter called the “Prospectus”);
(b) No
order
preventing or suspending the use of any Preliminary Prospectus has been issued
by the Commission, and each Preliminary Prospectus, at the time of filing
thereof, conformed in all material respects to the requirements of the Act
and
the rules and regulations of the Commission thereunder, and did not contain
an
untrue statement of a material fact or omit to state a 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; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information furnished
in
writing to the Company by the Underwriter expressly for use
therein.
(c) The
Registration Statement conforms, and the Prospectus and any further amendments
or supplements to the Registration Statement or the Prospectus will conform,
in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto, and as of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement of a material
fact
or omit to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made
in reliance upon and in conformity with information furnished in writing to
the
Company by the Underwriter expressly for use therein.
(d) There
are
no legal or governmental proceedings pending or, to the knowledge of the
Company, threatened to which the Company or any of its subsidiaries (as defined
in Rule 405 of the rules and regulations under the Act) is a party or to which
any of the properties of the Company or any of its subsidiaries are subject,
except any such proceedings as would not have a material adverse effect on
the
financial position, results of operations or business of the Company and its
subsidiaries taken as a whole (“Material Adverse Effect”).
(e) The
Company has been duly incorporated and is validly existing as a corporation
in
good standing under the laws of Nevada. Each of the Company’s subsidiaries has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of its state of incorporation or organization. The Company has
full power and authority (corporate and other) to own or lease its properties
and conduct its business as described in the Prospectus. The Company has full
power and authority (corporate and other) to enter into this Agreement and
the
Unit Warrants and to perform its obligations hereunder and thereunder. The
Company is duly qualified to transact business as a foreign corporation under
the laws of each other jurisdiction in which it owns or leases properties,
or
conducts any business, to the extent required under such laws, except where
the
failure to so qualify would not have a Material Adverse Effect.
2
(f) The
Company’s authorized, issued and outstanding capital stock is as disclosed in
the Prospectus. All of the issued shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
conform to the description thereof contained in the Prospectus. None of the
issued shares of capital stock of the Company have been issued or are owned
or
held in violation of any statutory or any other preemptive rights of
shareholders, and no person or entity (including any holder of outstanding
shares of capital stock of the Company) has any statutory or any other
preemptive or other rights to subscribe for any of the Units. None of the
capital stock of the Company has been issued in violation of applicable federal
or state securities laws.
(g) Other
than the equity securities of its subsidiaries disclosed in the Prospectus,
the
Company does not own, directly or indirectly, any capital stock or other equity
securities of any other corporation or any ownership interest in any
partnership, joint venture or other association.
(h) Except
as
disclosed in the Prospectus, there are no outstanding (i) securities or
obligations of the Company convertible into or exchangeable for any capital
stock of the Company, (ii) warrants, rights or options to subscribe for or
purchase from the Company any capital stock of the Company or any such
convertible or exchangeable securities or obligations (other than pursuant
to
the Company’s stock benefit plans) or (iii) obligations of the Company to issue
any shares of capital stock, any such convertible or exchangeable securities
or
obligations, or any such warrants, rights or options.
(i) Since
the
respective dates as of which information is given in the Prospectus or otherwise
disclosed therein, and except as may otherwise be indicated or contemplated
herein or therein, (i) neither the Company nor any of its subsidiaries has
incurred any liabilities or obligations, direct or contingent, or entered into
any transactions, not in the ordinary course of business, that are material
to
the Company, (ii) the Company has not purchased any of its outstanding capital
stock or declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock, (iii) there has not been any material change in
the
capital stock, long-term debt or short-term debt of the Company, and (iv) there
has not been any change, or any development involving a prospective change,
which would have a Material Adverse Effect, in each case other than as disclosed
in or contemplated by the Prospectus.
(j) Neither
the Company nor any of its subsidiaries is, or with notice or the passage of
time or both would be, in violation of its Articles of Incorporation or Bylaws
(or comparable charter documents) or in default under any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or to which any of their
properties or assets are subject.
3
(k) The
Company and its subsidiaries have good and marketable title in fee simple to
all
real property, if any, and good title to all personal property owned by them,
in
each case, free and clear of all liens, security interests, pledges, charges,
encumbrances, mortgages and defects, except such as are disclosed in the
Prospectus or would not have a Material Adverse Effect and, in any case, do
not
interfere with the use made or proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held under
lease by the Company or any of its subsidiaries are held under valid, subsisting
and enforceable leases, with such exceptions as are disclosed in the Prospectus
or are not material and, in any case, do not interfere with the use made or
proposed to be made of such property and buildings by the Company and its
subsidiaries.
(l) The
issue
and sale of the Units and the issue and sale of the Common Stock underlying
the
Unit Warrants when issued and delivered upon exercise of the Unit Warrants
(the
“Unit Warrant Shares”) by the Company and the compliance by the Company with all
of the provisions of this Agreement and the Unit Warrants and the consummation
of the transactions herein and therein contemplated will not conflict with
or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of the
provisions of the Articles of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation of any court or governmental agency
or
body having jurisdiction over the Company or any of its subsidiaries or any
of
their properties; and no filing, consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body is required for the issue and sale of the Units or the Unit Warrant
Shares or the consummation by the Company of the transactions contemplated
by
this Agreement and the Unit Warrants, except the registration under the Act
of
the Units and the Unit Warrant Shares, the approval by the National Association
of Securities Dealers, Inc. (the “NASD”) of the terms of the sale of the Units
and such consents, approvals, authorizations, registrations or qualifications
as
may be required under state securities or blue sky laws in connection with
the
purchase and distribution of the Units by the Underwriter.
(m) Other
than as disclosed in the Prospectus, there is no litigation, arbitration, claim,
proceeding (formal or informal) or investigation (including without limitation,
any Company regulatory proceeding) pending or, to the Company’s knowledge,
threatened in which the Company or any of its subsidiaries is a party or of
which any of their properties or assets are the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually or
in
the aggregate have a Material Adverse Effect. Neither the Company nor any of
its
subsidiaries is in violation of, or in default with respect to, any law,
statute, rule, regulation, order, judgment or decree, except as described in
the
Prospectus or such as do not and will not individually or in the aggregate
have
a Material Adverse Effect, and neither the Company nor any of its subsidiaries
is required to take any action in order to avoid any such violation or
default.
(n) Xxxxxxxx
Xxxxxxxx PLLC, which has certified certain financial statements of the Company
included in the Prospectus, are independent public accountants as required
by
federal law and the rules and regulations of the Commission and are registered
with the Public Company Accounting Oversight Board.
4
(o) The
financial statements and schedules (including the related notes) of the Company
and its subsidiaries included in the Prospectus and/or any Preliminary
Prospectus were prepared in accordance with generally accepted accounting
principles for financial reporting in the United States (“GAAP”), applied on a
consistent basis throughout the periods involved and fairly present the
consolidated financial position and results of operations of the Company and
its
subsidiaries at the dates and for the periods presented. The selected
consolidated financial data and other operating and statistical information
set
forth in the Prospectus fairly present, on the basis stated in the Prospectus,
the information included therein, and have been compiled on a basis consistent
with that of the audited financial statements included in the Prospectus. The
unaudited interim consolidated financial statements included in the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of Rule 10-01 of Regulation S-X under the Securities Act of 1933
(the “Act”).
(p) Each
of
this Agreement and the Unit Warrants has been duly authorized, executed and
delivered by the Company and, assuming due execution of this Agreement by the
Underwriter, constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization and moratorium
laws and other laws relating to or affecting the enforcement of creditors’
rights generally and to general equitable principles and except as the
enforceability of rights to indemnity and contribution under this Agreement
may
be limited under applicable securities laws or the public policy underlying
such
laws.
(q) When
the
Units to be sold by the Company hereunder have been duly delivered against
payment therefor as contemplated by this Agreement, the Units will be validly
issued, fully paid and nonassessable, and the holders thereof will not be
subject to personal liability solely by reason of being such holders. When
the
Unit Warrant Shares to be sold by the Company hereunder have been duly delivered
against payment therefor as contemplated by this Agreement, the Unit Warrant
Shares will be validly issued, fully paid and nonassessable, and the holders
thereof will not be subject to personal liability solely by reason of being
such
holders. The stock certificate representing the Common Stock is in proper legal
form under, and conforms in all respects to the requirements of, the Title 7,
Chapter 78 of the Nevada Revised Statutes.
(r) The
Company has not distributed and will not distribute any offering material in
connection with the offering and sale of the Units other than a Preliminary
Prospectus, the Prospectus and such other material, if any, as has been or
will
be provided to the Underwriter prior to distribution for their review and
consent.
(s) The
operations of the Company and its subsidiaries with respect to any real property
currently leased or owned by them are in compliance in all material respects
with all applicable federal, state, and local laws, ordinances, rules, and
regulations relating to occupational health and safety and the environment
(collectively, “Laws”), and neither the Company nor any of its subsidiaries has
violated any Laws in a way which would have a Material Adverse Effect. Except
as
disclosed in the Prospectus, there is no pending or, to the Company’s knowledge,
threatened claim, litigation or administrative agency proceeding, nor has the
Company or any of its subsidiaries received any written or oral notice from
any
governmental entity or third party, that: (i) alleges a violation of any Laws
by
the Company or any of its subsidiaries or (ii) alleges the Company or any of
its
subsidiaries is a liable party under the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. or any state superfund
law.
5
(t) The
Company and its subsidiaries have sufficient interests in, all patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets
and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, “Intellectual Property”) necessary for
their business as described in the Prospectus, and neither the Company nor
any
of its subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any
Intellectual Property which, singly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(u) The
Company and its subsidiaries make and keep accurate books and records reflecting
their assets and maintain internal accounting controls which provide reasonable
assurance that (i) transactions are executed in accordance with management’s
authorization, (ii) transactions are recorded as necessary to permit preparation
of the Company’s consolidated financial statements in accordance with GAAP and
to maintain accountability for the assets of the Company and its subsidiaries,
(iii) access to the assets of the Company and its subsidiaries is permitted
only
in accordance with management’s authorization, and (iv) the recorded assets of
the Company and its subsidiaries are compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(v) The
Company and its subsidiaries have filed all foreign, federal, state and local
tax returns that are required to be filed by them and has paid all taxes shown
as due on such returns, as well as all other taxes, assessments and governmental
charges that are due and payable; and no material deficiency with respect to
any
such return has been assessed or, to the knowledge of the Company,
proposed.
(w) Except
for such plans as are expressly disclosed in the Prospectus (“Plans”), the
Company and its subsidiaries do not maintain, contribute to or have any material
liability with respect to any employee benefit plan, profit sharing plan,
employee pension benefit plan, employee welfare benefit plan, equity-based
plan
or deferred compensation plan or arrangement that is subject to the provisions
of the Employee Retirement Income Security Act of 1974, as amended, or the
rules
and regulations thereunder (“ERISA”). All Plans are in compliance with all
applicable laws, including but not limited to ERISA and the Internal Revenue
Code of 1986, as amended (the “Code”) and have been operated and administered in
accordance with their terms except for such as would not have a Material Adverse
Effect. No Plan is a multi-employer plan. The Company and its subsidiaries
do
not provide retiree life and/or retiree health benefits or coverage for any
employee or any beneficiary of any employee after such employee’s termination of
employment, except as required by Section 4980B of the Code or under a Plan
which is intended to be “qualified” under Section 401(a) of the Code. No
liability has been, or could be expected to be, incurred under Title IV of
ERISA
or Section 412 of the Code by any entity required to be aggregated with the
Company pursuant to Section 4001(b) of ERISA and/or Section 414(b) or (c) of
the
Code (and the regulations promulgated thereunder) with respect to any “employee
pension benefit plan” which is not a Plan. As used in this subsection, the terms
“defined benefit plan,” “employee benefit plan,” “employee pension benefit
plan,” “employee welfare benefit plan” and “multi-employer plan” shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
6
(x) No
material labor dispute exists with the Company’s employees, and no such labor
dispute is threatened. The Company has no knowledge of any existing or
threatened labor disturbance by the employees of any of its principal agents,
suppliers, contractors or customers that would have a Material Adverse
Effect.
(y) The
Company and its subsidiaries have received all permits, licenses, franchises,
authorizations, registrations, qualifications and approvals (collectively,
“Permits”) of governmental or regulatory authorities (including, without
limitation, state or federal regulatory authorities) as may be required of
them
to own their properties and conduct their business in the manner described
in
the Prospectus, subject to such qualifications as may be set forth in the
Prospectus; and the Company and its subsidiaries have fulfilled and performed
all of its material obligations with respect to such Permits, and no event
has
occurred which allows or, after notice or lapse of time or both, would allow
revocation or termination thereof or result in any other material impairment
of
the rights of the holder of any such Permit, subject in each case to such
qualifications as may be set forth in the Prospectus; and, except as described
in the Prospectus, such Permits contain no restrictions that materially affect
the ability of the Company or its subsidiaries to conduct their
business.
(z) No
relationship, direct or indirect, exists between or among the Company and the
directors, officers, stockholders, creditors, customers or suppliers of the
Company that is required to be described in the Prospectus which is not so
described.
(aa) The
Common Stock is registered pursuant to Section 12(g) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).
(bb) The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability; (iii) access to assets is permitted
only in accordance with management’s general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing assets
at
reasonable intervals and appropriate action is taken with respect to any
differences.
(cc) The
Company has established and maintains disclosure controls and procedures
designed to ensure that material information relating to the Company is made
known to the Company’s Chief Executive Officer and its Chief Financial Officer
by others within the Company; the Company’s auditors and its Board of Directors
will be advised of any significant deficiencies in the design or operation
of
disclosure controls and procedures which could adversely affect the ability
of
the Company to record, process, summarize and report financial
data.
7
(dd) The
Company is not an “investment company” or a company “controlled” by an
investment company as such terms are defined in Sections 3(a) and 2(a)(9),
respectively, of the Investment Company Act of 1940, as amended (the “Investment
Company Act”), and, if the Company conducts its business as set forth in the
Prospectus, it will not become an “investment company” and will not be required
to register under the Investment Company Act.
(ee) The
Company has in place and effective such policies of insurance, with limits
of
liability in such amounts, as are normal and prudent in the ordinary scope
of
business similar to that of the Company in the jurisdictions in which it
conducts business.
2. Sale
of the Units; Delivery of Units; Closing.
(a) On
the
basis of the representations, warranties and covenants, and subject to the
conditions, set forth herein, the Company shall sell and issue a minimum of
$6,000,000 of Units (the “Minimum”) and a maximum of up to $12,000,000 of Units
(the “Maximum”) in the offering. All Units to be offered and sold in the
offering shall be offered for sale through the Underwriter, as an agent of
the
Company, and the Underwriter shall use its best efforts to sell the Units as
agent for the Company, at the price per Unit set forth on the cover page of
the
final Prospectus (the “Public Offering Price”). The Underwriter will commence
the Public Offering as soon after the Registration Statement becomes effective
as the Underwriter deems advisable. The Underwriter may enter into agreements
as
the Underwriter, in its sole discretion, deems advisable with one or more
registered broker-dealers who may act as selected dealers in connection with
the
offering. The Underwriter may reject any offer to purchase the Units made
through the Underwriter or a selected dealer in whole or in part, and any such
rejection shall not be deemed a breach of the Underwriter’s agreements contained
herein. The Underwriter shall not be committed to sell or purchase any of the
Units.
(b) All
subscriptions from the offering of the Units will be deposited into an escrow
account (the “Escrow Account”) with Sterling National Bank, as escrow agent,
pursuant to the Escrow Agreement, dated May 1, 2007 (the “Escrow Agreement”),
not later than 12:00 Noon of the next business day following receipt of each
such subscription by the Underwriter or other broker-dealers, until either
the
Company has sold the Minimum or the offering has terminated. The offering will
terminate 90 days after the Registration Statement referred to below is
effective, unless the Underwriter extends the offering with the Company’s
consent for an additional period of up to 90 days. If the Underwriter has not
sold at least the Minimum and deposited into the Escrow Account gross proceeds
of at least an amount equal to the Minimum multiplied by the Public Offering
Price by such termination of the offering, all proceeds held in escrow shall
be
promptly returned to investors, without interest or deduction. Once the
Underwriter has sold the Minimum, the Underwriter will conduct an initial
closing (the “Initial Closing”) and all proceeds will be released from escrow
pursuant to the Escrow Agreement. The Underwriter may hold further closings
(each, an “Additional Closing,” and either the Initial Closing or an Additional
Closing, a “Closing”) with respect to Units sold in excess of the Minimum until
the offering terminates. Unless the transaction is closed book-entry through
The
Depository Trust Company (“DTC”) and no certificates are requested, in which
case the Underwriter shall comply with the procedures applicable thereto, the
certificates for the Units will be delivered in such denominations and in such
registrations as the Underwriter requests in writing not later than 48 hours
prior to any Closing, and will be made available for inspection by the
Underwriter at least 24 hours prior to any Closing. All such certificates will
be delivered by the Company to its transfer agent, or to DTC, as applicable,
by
12:00 p.m. on the day prior to any Closing, along with addressed labels to
be
used to mail the certificates to the purchasers thereof. Each Closing shall
be
held at the offices of Seyfarth Xxxx LLP, 000 Xxxxxxxxxxx Xxxxxx, X.X., Xxxxx
000, Xxxxxxxxxx, X.X. 00000, at 9:00 a.m. Washington, D.C. time.
8
3. Covenants
of the Company.
The
Company covenants and agrees with the Underwriter that:
(a) The
Company will prepare the Prospectus in a form approved by the Underwriter and
file such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission’s close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act. The Company will make
no
further amendment or any supplement to the Registration Statement or Prospectus
which shall be disapproved by the Underwriter promptly after reasonable notice
thereof.
(b) The
Company will advise the Underwriter promptly after receiving notice of (i)
any
request by the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; (ii) the time when any
amendment to the Registration Statement has been filed or becomes effective
or
any supplement to the Prospectus or any amended Prospectus has been filed and
to
furnish the Underwriter with copies thereof; and (iii) the issuance by the
Commission of any stop order or of any order preventing or suspending the use
of
any Preliminary Prospectus or prospectus, of the suspension of the qualification
of the Units for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose. In the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such
order.
(c) The
Company promptly from time to time will take such action as the Underwriter
may
reasonably request to qualify the Units for offering and sale under the
securities or blue sky laws of such jurisdictions as the Underwriter may request
and will continue such qualifications in effect for as long as may be necessary
to complete the distribution of the Units, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation in any
jurisdiction. The Company will file such statements and reports as may be
required by the laws of each jurisdiction in which the Units have been qualified
as above provided.
(d) The
Company will promptly provide the Underwriter, without charge, as many copies
of
the Prospectus and any amendment or supplement thereto as the Underwriter may
reasonably request.
(e) To
furnish to its stockholders as soon as practicable after the end of each fiscal
year an annual report (including a balance sheet and statements of income,
stockholders’ equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of
the
Registration Statement), to make available to its stockholders consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail.
9
(f) During
the period beginning from the date hereof and continuing to and including the
date 365 days after the date of the Prospectus, the Company will not, and will
use its best efforts to cause each executive officer and director of the Company
and shareholders owning 500,000 or more shares of the outstanding Common Stock
after the Closing Date to deliver to the Underwriter an agreement substantially
in the form attached hereto as Exhibit A (each, a “Lock-Up Agreement”), agreeing
not, without the prior written consent of the Underwriter, directly or
indirectly to (i) offer, sell, contract to sell or otherwise dispose of, any
shares of Common Stock or securities convertible into or exercisable or
exchangeable for shares of Common Stock or (ii) enter into any swap or other
agreement or any transaction that transfers, in whole or in part, the economic
consequences of ownership of shares of Common Stock whether any such swap or
other agreement is to be settled by delivery of shares of Common Stock, other
securities, cash or otherwise; except for the sale of the Units hereunder,
except for the issuance of Common Stock upon the exercise of stock options
or
warrants or the conversion of convertible securities outstanding on the date
of
this Agreement to the extent that such stock options, warrants and convertible
securities are disclosed in the Prospectus and except for the grant to employees
of stock options to purchase Common Stock which are not exercisable within
such
365 days.
(g) During
the period of three years after the date of this Agreement, the Company will
furnish to the Underwriter without charge, (i) copies of all reports or other
communications (financial or other) furnished to shareholders and (ii) as soon
as they are available, copies of any reports and financial statements furnished
to or filed under the Securities Exchange Act of 1934 (the “Exchange
Act”).
(h) Prior
to
the termination of the offering, the Company and its affiliates will not, and
the Company shall cause its officers and directors not to, (i) take, directly
or
indirectly, any action designed to cause or to result in, or that might be
expected to cause or result in, the stabilization or manipulation of the price
of any security of the Company or (ii) sell, bid for, purchase or pay anyone
any
compensation for soliciting purchases of, the Units, the Unit Warrants or the
Common Stock.
(i) In
case
of any event, at any time within the period between the date hereof and the
termination of the offering, as a result of which any Preliminary Prospectus
or
the Prospectus, as then amended or supplemented, would contain an untrue
statement of a material fact, or omit to state any material fact necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, the Company promptly will prepare an amendment
or supplement that will correct such statement or omission and will furnish
to
the Underwriter such number of copies of such amendment(s) or supplement(s)
as
the Underwriter may reasonably request. For purposes of this subsection, the
Company will provide such information to the Underwriter, the Underwriter’s
counsel and counsel to the Company as shall be necessary to enable such persons
to consult with the Company with respect to the need to amend or supplement
any
Preliminary Prospectus or the Prospectus, and shall furnish to the Underwriter
and the Underwriter’s counsel such further information as each may from time to
time reasonably request.
10
(j) [REMOVED
AND RESERVED]
(k) The
Company shall continue to retain as its accountants Xxxxxxxx Xxxxxxxx PLLC
or
another firm of independent public accountants reasonably acceptable to the
Underwriter for 24 months from the termination of the offering.
(l) The
Company shall retain as outside legal counsel Xxxxxx Xxxxx & Xxxxx LLP or
another firm reasonably acceptable to the Underwriter, which shall be expert
in
securities law matters, for 12 months from the termination of the
offering.
(m) The
Company shall accept an individual, selected by the Underwriter, as a non-voting
advisor to the Company’s Board of Directors. Such advisor shall be entitled to
notice and to attend all meetings of the Board of Directors, and shall be
reimbursed for reasonable costs incurred in attending such meetings. To the
extent permitted by law, the Company shall indemnify the Underwriter and such
advisor for such advisor’s actions in his role as an advisor, and the Company
shall, if possible, include the Underwriter and such advisor as insureds under
any directors and officers liability insurance policy maintained by the Company,
if any.
4. Expenses
and Fees.
(a) The
Company will pay all costs and expenses incident to the performance of the
obligations of the Company under this Agreement, whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated pursuant
to
Section 7
hereof,
including, without limitation, all costs and expenses incident to (i) the
printing of and mailing expenses associated with any Preliminary Prospectus
and
the Prospectus and any amendments or supplements thereto, this Agreement, the
Selected Dealer Agreement and related documents (collectively, the “Underwriting
Documents”); (ii) the fees, disbursements and expenses of the Company’s counsel
and accountants in connection with the registration of the Company’s Common
Stock under the Exchange Act and all other expenses in connection with the
preparation and, if applicable, filing of, any Preliminary Prospectus, the
Prospectus and any amendments and supplements thereto and the Underwriting
Documents; (iii) the delivery of copies of the foregoing documents to the
Underwriter; (iv) the filing fees of the National Association of Securities
Dealers, Inc. relating to its approval of the fairness and reasonableness of
the
underwriting terms and arrangements; (v) the preparation, issuance and delivery
to the Underwriter of any certificates evidencing the Units, including transfer
agent’s and registrar’s fees; (vi) any expenses for travel, lodging and meals
incurred by the Underwriter and any of its officers, directors and employees
in
connection with any meetings with prospective investors in the Units; (vii)
any
cost of holding due diligence meetings and drafting sessions; (viii) any cost
for placing a “tombstone” advertisement in the Wall Street Journal; and (ix) all
other costs and expenses reasonably incident to the performance of the Company’s
obligations hereunder that are not otherwise specifically provided for in this
Section 4.
(b) As
compensation for the Underwriter’s efforts under this Agreement, the Company
agrees to pay the Underwriter a commission (the “Selling Commission”) equal to
(i) if the Public Offering Price of all Units sold through the Underwriter
in
the offering including Units sold through selected dealers (the “Gross
Proceeds”) equal at least $6,000,000 and less than $7,200,000, 9.5% of the Gross
Proceeds; or (ii) if the Gross Proceeds equal at least $7,200,000 and less
than
$8,400,000, 9.6% of the Gross Proceeds; or (iii) if the Gross Proceeds equal
at
least $8,400,000 and less than $9,600,000, 9.7% of the Gross Proceeds; or (iv)
if the Gross Proceeds equal at least $9,600,000 and less than $10,800,000,
9.8%
of the Gross Proceeds; or (v) if the Gross Proceeds equal at least $10,800,000
and less than $12,000,000, 9.9% of the Gross Proceeds; or (vi) if the Gross
Proceeds equal $12,000,000, 10.0% of the Gross Proceeds. It shall be the
Underwriter’s responsibility to compensate any selected dealers out of the
Selling Commission that it receives from the Company. On the date of each
Closing, the Company shall direct the Escrow Agent to deliver (i) payment of
the
portion of the Selling Commission due to the Underwriter by wire transfer of
immediately available funds, to the Underwriter on the Closing Date and (ii)
payment of the portion of the Selling Commission due to each selected dealer
by
wire transfer of immediately available funds, to each selected dealer on the
Closing Date.
11
(c) At
the
Initial Closing or upon termination of the offering if there is no Closing,
the
Company shall pay the Underwriter a sum of Five Thousand Dollars ($5,000),
less
any amounts paid prior to the Initial Closing, as a non-accountable expense
allowance. Payment of the non-accountable expense allowance shall be made to
the
Underwriter by wire transfer of immediately available funds. The Underwriter
acknowledges receipt of Fifteen Thousand Dollars ($15,000) as a deposit toward
such sum. In addition, at the Initial Closing or upon termination of the
offering if there is no Closing, the Company shall pay the fees, disbursements
and expenses of the Underwriter’s counsel, which shall not exceed Fifty Thousand
Dollars ($50,000), by wire transfer of immediately available funds to the
account of the Underwriter’s counsel pursuant to written instructions to be
provided prior to the Initial Closing or upon termination of the offering if
there is no Closing.
5. Conditions
of the Underwriter’s Obligations.
The
obligations of the Underwriter hereunder shall be subject, in their discretion,
to the accuracy of the representations and warranties of the Company contained
herein as of the date hereof and as of each Closing, to the accuracy of the
statements of the Company’s officers made pursuant to the provisions hereof, to
the performance by the Company of its covenants and agreements hereunder, and
to
the following additional conditions precedent:
(a) The
Prospectus shall have been filed with the Commission pursuant to Rule 424(b)
within the applicable time period prescribed for such filing by the rules and
regulations under the Act and in accordance with Section 3(a)
hereof; if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have been filed by 10:00 P.M., Washington, D.C.
time, on the date of this Agreement; no stop order suspending the effectiveness
of the Registration Statement or any part thereof shall have been issued and
no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to the Underwriter’s reasonable
satisfaction.
(b) The
Underwriter shall have received a copy of an executed Lock-Up Agreement from
the
Company and each of the Company’s executive officers and directors and
shareholders owning 500,000 or more shares of the outstanding Common Stock
after
the Closing Date.
12
(c) The
Underwriter shall have received an opinion, dated such Time of Delivery, of
Xxxxxx Xxxxx & Xxxxx LLP, special counsel for the Company, in form and
substance satisfactory to the Underwriter and its counsel, to the effect
that:
|
(i)
|
The
Company is validly existing as a corporation in good standing under
the
laws of the State of Nevada and has the corporate power and authority
to
own or lease its properties and conduct its business as described
in the
Prospectus and to enter into this Agreement and the Unit Warrants
and
perform its obligations hereunder and thereunder. The Company is
duly
qualified to transact business as a foreign corporation in each
jurisdiction in which it owns or leases property, or conducts any
business, so as to require such qualification, except where the failure
to
so qualify would not have a Material Adverse
Effect.
|
|
(ii)
|
Each
subsidiary of the Company, based solely on certificates of public
officials of each applicable jurisdiction, has been duly incorporated
and
is validly existing as a corporation in good standing under the laws
of
its jurisdiction of incorporation; and all of the issued shares of
capital
stock of each such subsidiary have been duly and validly authorized
and
issued, are fully paid and non-assessable, and (except for directors’
qualifying shares) are owned directly or indirectly by the Company,
free
and clear of all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect to matters of fact upon
certificates of officers of the Company or its subsidiaries, provided
that
such counsel shall state that they believe that both you and they
are
justified in relying upon such opinions and certificates and provided
that
such counsel shall provide you copies of any such opinions and
certificates).
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|
(iii)
|
All
of the issued shares of capital stock of the Company, including the
Common
Stock underlying the Units to be sold by the Company pursuant hereto
when
delivered against payment therefor as contemplated hereby, have been
duly
authorized and validly issued, are fully paid and nonassessable and
conform to the description of the Common Stock contained in the
Prospectus. The Unit Warrant Shares to be sold upon exercise of the
Unit
Warrants when delivered against payment therefor as contemplated
thereby,
have been duly authorized and will be validly issued, fully paid
and
nonassessable and conform to the description of the Common Stock
contained
in the Prospectus. None of the issued shares of Common Stock of the
Company have been issued or are owned or held in violation of any
statutory or any other preemptive rights of shareholders, and no
person or
entity (including any holder of outstanding shares of Common Stock
of the
Company) has any statutory or any other preemptive or other rights
to
subscribe for any of the Units, the Common Stock underlying the Units,
the
Unit Warrants or the Unit Warrant
Shares.
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13
|
(iv)
|
To
such counsel’s knowledge, except as disclosed in the Prospectus, there are
no outstanding (A) securities or obligations of the Company convertible
into or exchangeable for any capital stock of the Company, (B) warrants,
rights or options to subscribe for or purchase from the Company any
such
capital stock or any such convertible or exchangeable securities
or
obligations, other than pursuant to the Company’s stock benefit plans, or
(C) obligations of the Company to issue any shares of capital stock,
any
such convertible or exchangeable securities or obligations, or any
such
warrants, rights or options.
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|
(v)
|
The
sale of the Units being sold at such Closing, the sale of the Unit
Warrant
Shares upon exercise of the Unit Warrants, and the performance of
this
Agreement and the Unit Warrants and the consummation of the transactions
herein and therein contemplated will not conflict with or violate
any
provision of the Articles of Incorporation or bylaws or comparable
charter
documents of the Company as amended to date or any existing law,
statute,
rule or regulation, or, in any material respect conflict with, or
(with or
without notice or the passage of time or both) result in a breach
or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, lease
or
other agreement or instrument known to such counsel to which the
Company
is a party or to which any of its properties or assets is subject,
or,
conflict with or violate any order, judgment or decree known to such
counsel, of any court or governmental agency or body having jurisdiction
over the Company or any of its properties or
assets.
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|
(vi)
|
No
consent, approval, authorization, order or declaration of or from,
or
registration, qualification or filing with, any court or governmental
agency or body is required for the offer, sale or issuance of the
Units or
the Unit Warrant Shares except the registration under the Act and
the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the
Units and the Unit Warrant Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under
state securities or blue sky laws in connection with the purchase
and
distribution of the Units.
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|
(vii)
|
To
such counsel’s knowledge, other than as disclosed in or contemplated by
the Prospectus, there is no litigation, arbitration, claim, proceeding
(formal or informal) or investigation pending or threatened, in which
the
Company or any of its subsidiaries is a party or of which any of
their
properties or assets is the subject which, if determined adversely
to the
Company or any of its subsidiaries, would individually or in the
aggregate
have a Material Adverse Effect.
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|
(viii)
|
Each
of this Agreement and the Unit Warrants has been duly authorized,
executed
and delivered by the Company and, assuming due execution of this
Agreement
by the Underwriter, constitutes the valid and binding agreement of
the
Company, enforceable against the Company, in accordance with its
terms,
subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws relating to or
affecting
the enforcement of creditors’ rights generally and to general equitable
principles and except as the enforceability of rights to indemnity
and
contribution under this Agreement may be limited under applicable
securities laws or the public policy underlying such
laws.
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14
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(ix)
|
The
Company is not an “investment company” or a company “controlled” by an
investment company as such terms are defined in Sections 3(a) and
2(a)(9),
respectively, of the Investment Company
Act.
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(x)
|
The
Registration Statement and the Prospectus and any further amendments
and
supplements thereto made by the Company prior to such Closing (other
than
the financial statements and related schedules therein, as to which
such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the rules and regulations
thereunder; and they do not know of any amendment to the Registration
Statement required to be filed or of any contracts or other documents
of a
character required to be filed as an exhibit to the Registration
Statement
or required to be described in the Registration Statement or the
Prospectus which are not filed or described as required.
|
Such
counsel shall also state that they have participated in the preparation of
the
Preliminary Prospectus and Prospectus and in conferences with officers and
other
representatives of the Company, representatives of the independent public
accountants for the Company, and representatives of and counsel to the
Underwriter at which the contents of the Preliminary Prospectus and Prospectus
and related matters were discussed and, although such counsel has not passed
upon or assumed any responsibility for the accuracy, completeness or fairness
of
the statements contained in the Preliminary Prospectus or Prospectus, and
although such counsel has not undertaken to verify independently the accuracy
or
completeness of the statements in the Preliminary Prospectus or Prospectus,
no
facts have come to such counsel’s attention to lead them to believe that the
Preliminary Prospectus or Prospectus, or any further amendment or supplement
thereto made prior to such Closing, on its issue date and as of such Closing,
contained or contains any untrue statement of a material fact or omitted or
omits to state any material fact required to be stated therein or necessary
to
make the statements therein not misleading, or that the Preliminary Prospectus
or Prospectus, or any amendment or supplement thereto made prior to such
Closing, as of its issue date and as of such Closing, contained or contains
any
untrue statement of a material fact or omitted or omits to state a material
fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided that such
counsel need express no belief regarding the financial statements, the notes
and
schedules thereto and other financial, statistical or operating information
or
data contained in the Prospectus, or any amendment or supplement
thereto).
In
rendering any such opinion, such counsel may rely, as to matters of fact, to
the
extent such counsel deems proper, on certificates of officers of the Company
and
public officials. Copies of such certificates of officers of the Company and
other certificates and letters shall be furnished to the Underwriter and
furnished to counsel for the Underwriter.
15
(d) Seyfarth
Xxxx LLP, counsel for the Underwriter, shall have furnished to the Underwriter
such opinion or opinions, dated such Closing, with respect to such matters
as
the Underwriter may reasonably request, and the Company shall have furnished
to
such counsel such documents as they request for the purpose of enabling them
to
pass upon such matters.
(e) The
Underwriter shall have received from Xxxxxxxx Xxxxxxxx PLLC, in form and
substance satisfactory to the Underwriter, letters dated as of the date hereof
and the date of such Closing, containing statements and information of the
type
ordinarily included in accountants’ “comfort letters” to the Underwriter with
respect to the financial statements and certain financial information contained
in the Prospectus; provided that the letter dated as of each Closing shall
use a
“cut-off date” not earlier than the date hereof.
(f) Since
the
date of the latest audited financial statements included in the Prospectus,
neither the Company nor any of its subsidiaries shall not have sustained any
change or any development involving a prospective change (including, without
limitation, a change in management or control of the Company) reasonably likely
to have a Material Adverse Effect, otherwise than as disclosed in or
contemplated by the Prospectus, the effect of which, in either such case, in
the
Underwriter’s reasonable judgment makes it impracticable or inadvisable to
proceed with the purchase, sale and delivery of the Units.
(g) Subsequent
to the date hereof, there shall not have occurred any of the following: (i)
any
suspension or limitation in trading in securities generally on any national
securities exchange or any setting of minimum prices for trading on any national
securities exchange, or in the Common Stock of the Company by the Commission;
(ii) a moratorium on commercial banking activities declared by either federal
or
state authorities; or (iii) any outbreak or escalation of hostilities involving
the United States, declaration by the United States of a national emergency
or
war or any other national or international calamity or emergency if the effect
of any such event specified in this clause (g) in the Underwriter’s reasonable
judgment makes it impracticable or inadvisable to proceed with the purchase,
sale and delivery of the Units.
(h) The
Company shall have furnished to the Underwriter at such Closing certificates
of
the chief executive officer or an executive vice president and the chief
financial officer of the Company satisfactory to the Underwriter, as to the
accuracy of the representations and warranties of the Company herein at and
as
of such Closing with the same effect as if made at such Closing, as to the
performance by the Company of all of its obligations hereunder to be performed
at or prior to such Closing, and as to such other matters as the Underwriter
may
reasonably request, and the Company shall have furnished or caused to be
furnished certificates of such officers as to such matters as the Underwriter
may reasonably request.
(i) The
representations and warranties of the Company in this Agreement and in the
certificates delivered by the Company pursuant to this Agreement shall be true
and correct in all material respects when made and on and as of each Closing
as
if made at such time, and the Company shall have performed in all material
respects all covenants and agreements and satisfied all conditions contained
in
this Agreement required to be performed or satisfied by the Company at or before
such Closing.
16
6. Indemnification
and Contribution.
(a) The
Company agrees to indemnify and hold harmless the Underwriter against any
losses, claims, damages or liabilities, joint or several, to which the
Underwriter may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
(i)
any untrue statement or alleged untrue statement made by the Company in Section
1 of this Agreement; (ii) any untrue statement or alleged untrue statement
of
any material fact contained in (A) any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or (B) any application or other
document, or amendment or supplement thereto, executed by the Company or based
upon written information furnished by or on behalf of the Company filed in
any
jurisdiction in order to qualify the Units under the securities or blue sky
laws
thereof or filed with any securities association or securities exchange (each
an
“Application”); or (iii) the omission of or alleged omission to state in any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or any Application of a material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse the
Underwriter for any legal or other expenses reasonably incurred by the
Underwriter in connection with investigating, defending against or appearing
as
a third-party witness in connection with any such loss, claim, damage, liability
or action; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto or any Application in reliance upon
and
in conformity with written information furnished to the Company by any
Underwriter through the Underwriter expressly for use therein. The Company
will
not, without the prior written consent of the Underwriter, which shall not
be
unreasonably withheld, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding (or
related cause of action or portion thereof) in respect of which indemnification
may be sought hereunder (whether or not any Underwriter is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of the Underwriter from all liability
arising out of such claim, action, suit or proceeding (or related cause of
action or portion thereof).
(b) The
Underwriter agrees to indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any
untrue statement or alleged untrue statement of any material fact contained
in
any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto, or any Application or arise out of or are based upon the omission
or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to
the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
expressly for use therein; and will reimburse the Company for any legal or
other
expenses reasonably incurred by the Company in connection with investigating
or
defending any such loss, claim, damage, liability or action.
17
(c) Promptly
after receipt by an indemnified party under subsection (a) or (b) above of
notice of the commencement of any action, such indemnified party shall, if
a
claim in respect thereof is to be made against the indemnifying party under
such
subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
the indemnifying party from any liability which it may have to any indemnified
party otherwise than under such subsection (a) or (b). In case any such action
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 participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party); provided, however, that if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be one or more legal defenses
available to it or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such action on behalf of
such
indemnified party and such indemnified party shall have the right to select
separate counsel to defend such action on behalf of such indemnified party.
After such notice from the indemnifying party to such indemnified party of
its
election so to assume the defense thereof and approval by such indemnified
party
of counsel appointed to defend such action, the indemnifying party will not
be
liable to such indemnified party under this Section 6
for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof. Nothing in this Section 6(c)
shall
preclude an indemnified party from participating at its own expense in the
defense of any such action so assumed by the indemnifying party.
(d) If
the
indemnification provided for in this Section 6
is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or
actions in respect thereof) in such proportion as is appropriate to reflect
the
relative benefits received by the Company on the one hand and the Underwriter
on
the other hand from the offering of the Units. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriter on the other hand
in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as
any
other relevant equitable considerations. The relative benefits received by
the
Company on the one hand and the Underwriter on the other hand shall be deemed
to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriter. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state
a material fact relates to information supplied by the Company on the one hand
or the Underwriter on the other hand and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriter agree that it would
not
be just and equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in
this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal
or
other expenses reasonably incurred by such indemnified party in connection
with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Units underwritten by it and distributed to the public were offered to
the
public exceeds the amount of any damages which the Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
18
(e) The
obligations of the Company under this Section 6
shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director and
employee of the Underwriter and to each person, if any, who controls the
Underwriter within the meaning of the Act or the Exchange Act; and the
obligations of the Underwriter under this Section 6
shall be
in addition to any liability which the Underwriter may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of
the
Company and to each person, if any, who controls the Company within the meaning
of the Act or the Exchange Act.
7. Termination.
This
Agreement may be terminated in the sole discretion of the Underwriter by notice
to the Company given prior to the Initial Closing or any Additional Closing,
respectively, in the event that (i) any condition to the obligations of the
Underwriter set forth in Section 5
hereof
has not been satisfied, or (ii) the Company shall have failed, refused or been
unable to deliver the Units or the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to
be
performed or satisfied hereunder at or prior to such Closing, in either case
other than by reason of a default by the Underwriter. If this Agreement is
terminated pursuant to this Section 7,
the
Company will reimburse the Underwriter upon demand for all reasonable
out-of-pocket expenses (including counsel fees and disbursements) that shall
have been incurred by them in connection with the proposed sale of the Units.
Any termination pursuant to this Section 7
shall be
without liability on the part of the Underwriter to the Company or on the part
of the Company to the Underwriter, except for expenses to be paid by the Company
pursuant to Section 4
hereof
or reimbursed by the Company pursuant to this Section 7
and
except as to indemnification and contribution to the extent provided in Section
6
hereof.
8. Survival.
The
respective indemnities, agreements, representations, warranties and other
statements of the Company, its officers and the Underwriter, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of the Underwriter or any controlling person referred to in Section 6(f)
or
the Company, or any officer or director or controlling person of the Company
referred to in Section 6(f),
and
shall survive delivery of and payment for the Units. The respective agreements,
covenants, indemnities and other statements set forth in Sections 4
and
6
hereof
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
9. Notices.
All
communications hereunder shall be in writing and, if sent to the Underwriter,
shall be sufficient in all respects if mailed, delivered or telecopied and
confirmed in writing to Empire Financial Group, Inc., 00 X 00xx Xxxxxx, Xxxxx
000, Xxx Xxxx, XX 00000 (Fax No. (000) 000-0000), Attention: Xx Xxxxxxx, Head
of
Investment Banking (with a copy to Seyfarth Xxxx LLP, 000 Xxxxxxxxxxx Xxxxxx,
X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000 (Fax No. (000) 000-0000), Attention:
Xxxxxx X. Xxxxx, Esq.); if to the Company, shall be sufficient in all respects
if mailed, delivered or telecopied and confirmed in writing to Neah Power
Systems, Inc., 00000 00xx Xxxxxx XX, Xxxxx 000, Xxxxxxx, XX 00000 (Fax No.
(000)
000-0000), Attention: Xxxx Xxxxxxxxxx, President and Chief Executive Officer
(with a copy to Xxxxxx Xxxxx & Xxxxx LLP, The Winter Garden 1620 26th
Street, 0xx Xxxxx Xxxxx Xxxxx, Xxxxx Xxxxxx, XX 00000 (Fax No. (000) 000-0000),
Attention: Xxxx X. Xxxxxxxx, Esq.).
10. Binding
Effect.
This
Agreement shall be binding upon, and inure solely to the benefit of, the
Underwriter, the Company and, to the extent provided in Sections 6
and
8
hereof,
the officers, directors and employees and controlling persons referred to
therein and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No purchaser of any of the Units shall be deemed a successor
or assign by reason merely of such purchase.
19
11. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without giving effect to any provisions regarding conflicts
of
laws.
12. Counterparts.
This
Agreement may be executed by any one or more of the parties hereto in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
[SIGNATURES
APPEAR ON THE FOLLOWING PAGE]
20
If
the
foregoing is in accordance with your understanding of our agreement, please
sign
and return to us one of the counterparts hereof, and upon the acceptance hereof
by the Underwriter, this letter will constitute a binding agreement between
the
Underwriter and the Company.
|
Very
truly yours,
|
||
| |
|
|
| By: | ||
|
Name: Xxxx Xxxxxxxxxx |
||
| Title: President | ||
The
foregoing Agreement is hereby
confirmed
and accepted as of the
date
first written above.
EMPIRE
FINANCIAL GROUP, INC.
By:
_______________________________________
Name:
Xxx
Xxxxxxxxx
Title:
Chief Executive Officer
21
EXHIBIT
A
FORM
OF LOCK-UP AGREEMENT
LOCK-UP
AGREEMENT
___________,
2006
Empire
Financial Group, Inc.
00
X 00xx
Xxxxxx
Xxxxx
000
Xxx
Xxxx,
XX 00000
Ladies
and Gentlemen:
The
undersigned understands that you propose to enter into an underwriting agreement
(the “Underwriting Agreement”) with Neah Power Systems, Inc. (the “Company”)
providing for the public offering (the “Public Offering”) by the you, as
Underwriter and agents of the Company, on a best efforts basis, for the offer
and sale by the Company of Units consisting of Common Stock and Unit
Warrants.
In
consideration of the Underwriter’s agreement to make the public offering of the
Units, and for other good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned hereby agrees, for a period of 365 days after
the
Initial Closing, as such term is defined in the Underwriting Agreement (the
“Lock-Up Period”), not to sell, offer to sell, solicit an offer to buy, contract
to sell, encumber, distribute, pledge, grant any option for the sale of, or
otherwise transfer or dispose of, directly or indirectly, in one or a series
of
transactions (collectively, a “Disposition”), any shares of Common Stock or any
securities convertible or exercisable into or exchangeable for shares of Common
Stock (collectively, “Securities”), now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has acquired or hereafter
acquires the power of disposition, without the prior written consent of the
Underwriter. Prior to the expiration of the Lock-Up Period, the undersigned
agrees that it will not publicly announce or disclose any intention to take
any
action after the expiration of such period which the undersigned is prohibited,
as provided in the preceding sentence, from taking during the Lock-Up
Period.
The
undersigned acknowledges and agrees that the restrictions above are expressly
agreed to preclude the holder of the Securities from engaging in any hedging
or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities (or the economic equivalent thereof)
during the Lock-Up Period even if such Securities would be disposed of by
someone other than the undersigned. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or
not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Securities.
The
undersigned hereby also agrees and consents to the entry of stop transfer
instructions with the Company’s transfer agent against the transfer of the
Securities held by the undersigned except in compliance with the Lock-Up
Agreement.
It
is
understood that, if the Underwriting Agreement is not executed, or if the
Underwriting Agreement shall terminate or be terminated prior to delivery of
the
Units the subject thereof, this Lock-Up Agreement shall automatically terminate
and be of no further force or effect.
This
Lock-Up Agreement shall be governed by and construed in accordance with the
laws
of the State of New York (without giving effect to its conflict of laws
provisions).
| Very truly yours, | |
| Name: |
