STOCK PURCHASEAGREEMENT

 

This Stock Purchase Agreement (“Agreement”) is entered into and effective as of January 18, 2010 (“Effective Date”), by and among Neah Power Systems, Inc., a Nevada corporation (“Company”), and First Equity Trust, Inc., a New York corporation (including its designees, successors and assigns, “Investor”).

 

 

A.           The parties desire that, upon the terms and subject to the conditions contained herein, Company shall issue to Investor, and Investor shall purchase from the Company, from time to time as provided herein, up to $5,000,000.00 of shares of its Common Stock; and

 

B.           The offer and sale of the Securities provided for herein are being made without registration under the Act, in reliance upon the provisions of Section 4(2) of the Act, Regulation D promulgated under the Act, and such other exemptions from the registration requirements of the Act as may be available with respect to any or all of the purchases of Securities to be made hereunder.

 

 

In consideration of the premises, the mutual provisions of this Agreement, and other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, Company and Investor agree as follows:

 

1.  DEFINITIONS

 

1.1           Definitions.  In addition to the terms defined elsewhere in this Agreement:  (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Certificate of Designations, and (b) the following terms have the meanings indicated in this Section 1.1.

 

“Act” means the Securities Act of 1933, as amended.

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Act.  With respect to Investor, without limitation, any Person owning, owned by, or under common ownership with Investor, and any investment fund or managed account that is managed on a discretionary basis by the same investment manager as Investor will be deemed to be an Affiliate.

 

“Agreement” means this Stock Purchase Agreement.

 

“Automatic Termination” has the meaning set forth in Section 3.1.

 

“Change in Control” has the meaning set forth within the definition of Fundamental Transaction, below.

 

“Closing” means any one of (i) the Commitment Closing and (ii) each Tranche Closing.

 

“Commitment Closing” has the meaning set forth in Section 2.2(a).

 

“Financing Fee” means a fee equal to 20% of the Tranche Amount to be paid in shares of Common Stock at a price based upon the closing bid price of such Common Stock on the business day immediately preceding the Tranche Notice.

 

“Common Shares” means shares of Common Stock issued pursuant to a Tranche Notice.

 

“Common Stock” means the common stock, par value $0.001 per share, of the Company, and any replacement or substitute thereof, or any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

 

“Company Termination” has the meaning set forth in Section 3.2.

 

“Delisting Event” means any time during the term of this Agreement, that the Common Stock is not listed for and actively trading on a Trading Market, or is suspended or delisted with respect to the trading of shares of Common Stock on a Trading Market.

 

“Disclosure Schedules” means the disclosure schedules of the Company delivered concurrently herewith and attached hereto and all disclosures contained in the SEC Reports.

 

“DTC” means The Depository Trust Company, or any successor performing substantially the same function for Company.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Fundamental Transaction” means and shall be deemed to have occurred at such time upon any of the following events:

 

(i)          a consolidation, merger or other business combination or event or transaction following which the holders of Common Stock immediately preceding such consolidation, merger, combination or event either (i) no longer hold a majority of the shares of Common Stock or (ii) no longer have the ability to elect a majority the board of directors of the Company (a “Change in Control”);

 

(ii)         the sale or transfer of all or substantially all of the Company’s assets, other than in the ordinary course of business; or

 

(iii)        a purchase, tender or exchange offer made to the holders of the outstanding shares of Common Stock.

 

“GAAP” means United States generally accepted accounting principles applied on a consistent basis during the periods involved.

 

 

“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $100,000 due under leases required to be capitalized in accordance with GAAP.

 

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material Adverse Effect” includes any material adverse effect on (i) the legality, validity or enforceability of any Transaction Document, (ii) the results of operations, assets, business, prospects or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document.

 

“Material Agreement” includes any loan agreement, financing agreement, equity investment agreement or securities instrument to which Company is a party, any agreement or instrument to which Company and Investor or any Affiliate of Investor is a party, and any other material agreement listed, or required to be listed, on any of Company’s reports filed or required to be filed with the SEC, including without limitation Forms 10-K, 10-Q or 8-K.

 

“Maximum Placement” means $5,000,000.00.

 

“Maximum Tranche Amount” means, subject to any other applicable limitations set forth in this Agreement, the Maximum Placement less the amount of any previously noticed and funded Tranches.

 

“Officer’s Closing Certificate” means a certificate in customary form reasonably acceptable to the Investor, executed by an authorized officer of the Company.

 

“Opinion” means an opinion from Company’s independent legal counsel, in the form attached as Exhibit A, to be delivered in connection with the Commitment Closing.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Prospectus” includes each prospectus (within the meaning of the Act) related to the sale or offering of any Common Shares.

 

“Regulation D” means Regulation D promulgated under the Act.

 

“Required Approval” means any approval of the Trading Market or the Company’s stockholders required to be obtained by Company prior to issuing the Securities pursuant to any applicable rules of the Trading Market.

 

 

“Required Tranche Documents” has the meaning set forth in Section 2.3(e).

 

“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect.

 

“SEC” means the United States Securities and Exchange Commission.

 

“SEC Reports” includes all reports required to be filed by the Company under the Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the Effective Date (or such shorter period as the Company was required by law to file such material).

 

“Securities” includes the Common Stock issuable pursuant to this Agreement.

 

“Subsidiary” means any Person the Company owns or controls, or in which the Company, directly or indirectly, owns a majority of the capital stock or similar interest that would be disclosable pursuant to Regulation S-K, Item 601(b)(21).

 

“Success Fee” means a fee payable by the Company to Investor at each Tranche Closing equal to 2% of the net Tranche Amount.

 

“Termination Date” means the earlier of (i) the date that is one year after the Effective Date, or (ii) the Tranche Closing Date on which the sum of the aggregate Tranche Purchase Price for all Tranche Shares equals the Maximum Placement.

 

“Termination Notice” has the meaning as set forth in Section 3.2.

 

“Trading Day” means any day on which the Common Stock is traded on the Trading Market; provided that it shall not include any day on which the Common Stock is (a) scheduled to trade for less than 5 hours, or (b) suspended from trading.

 

“Trading Market” means the OTC Bulletin Board, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the NYSE Amex, or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock, but does not include the Pink Sheets inter-dealer electronic quotation and trading system.

 

“Tranche” has the meaning set forth in Section 2.3.

 

“Tranche Amount” means the amount of any individual put purchase, as specified by the Company, and shall not exceed the Maximum Tranche Amount.

 

“Tranche Closing” has the meaning set forth in Section 2.3(e).

 

“Tranche Closing Date” has the meaning set forth in Section 2.3(e).

 

“Tranche Notice” has the meaning set forth in Section 2.3(b).

 

 

“Tranche Notice Date” has the meaning set forth in Section 2.3(b).

 

“Tranche Purchase Price” means shares equal in dollar amount to 100% of the Tranche Amount at a price equal to the closing bid price of the Company’s Common Stock on the date immediately preceding the Tranche Notice Date.

 

“Tranche Shares” means the shares of Common Stock that are purchased by Investor pursuant to a Tranche.

 

“Transaction Documents” include this Agreement and the Exhibits hereto and thereto.

 

“Transfer Agent” means Corporate Stock Transfer, Inc., or any successor transfer agent for the Common Stock.

 

2.  PURCHASE AND SALE

 

2.1          Agreement to Purchase.  Subject to the terms and conditions herein and the satisfaction of the conditions to closing set forth in this ARTICLE 2:

 

(a)           Investor hereby agrees to purchase such amounts of shares of Common Stock as the Company may, in its sole and absolute discretion, from time to time elect to issue and sell to Investor according to one or more Tranches pursuant to Section 2.3 below; and

 

(b)           The Company agrees to issue the Financing Fee to Investor as provided below.

 

 

(a)           Investment Commitment. The closing of this Agreement (the “Commitment Closing”) shall be deemed to occur when this Agreement has been duly executed by both Investor and the Company, and the other Conditions to the Commitment Closing set forth in Section 2.2.(b) have been met.

 

(b)           Conditions to Investment Commitment. As a condition precedent to the Commitment Closing, all of the following (the “Conditions to Commitment Closing”) shall have been satisfied prior to or concurrently with the Company’s execution and delivery of this Agreement:

 

(i)           the following documents shall have been delivered to Investor:  (A) this Agreement, executed by the Company; (B) a Secretary’s Certificate as to (x) the resolutions of the Company’s board of directors authorizing this Agreement and the Transaction Documents, and the transactions contemplated hereby and thereby, (y) a copy of the Company’s current Articles of Incorporation, and (z) a copy of the Company’s current Bylaws; (C) the Opinion; and (D) a copy of the press release announcing the transactions contemplated by this Agreement and Current Report on Form 8-K describing the transaction contemplated by, and attaching a complete copy of, the Transaction Documents;

 

 

(ii)           other than for losses incurred in the ordinary course of business, there have been no material adverse changes in the Company’s business prospects or financial condition since the date of the last SEC Report filed by the Company, including but not limited to incurring material liabilities;

 

(iii)          the representations and warranties of the Company in this Agreement shall be true and correct in all material respects and the Company shall have delivered an Officer’s Closing Certificate to such effect to Investor, signed by an officer of the Company;

 

(iv)          any Required Approval has been obtained.

 

(c)           Investor’s Obligation to Purchase. Subject to the prior satisfaction of all conditions set forth in this Agreement, following the Investor’s receipt of a validly delivered Tranche Notice, the Investor shall be required to purchase from the Company a number of Tranche Shares equal to the permitted Tranche Share Amount, in the manner described below.

 

 

(a)           Procedure to Elect a Tranche. Subject to the Maximum Tranche Amount, the Maximum Placement and the other conditions and limitations set forth in this Agreement, at any time beginning on the Effective Date, the Company may, in its sole and absolute discretion, elect to exercise one or more tranches of puts (each a “Tranche”) according to the following procedure, provided that each subsequent Tranche Notice Date (defined below) after the first Tranche Notice Date shall be no sooner than 5 Trading Days following the preceding Tranche Notice Date.

 

(b)           Delivery of Tranche Notice.  The Company shall deliver an irrevocable written notice (the “Tranche Notice”), the form of which is attached hereto as Exhibit B, to Investor stating that the Company shall exercise a Tranche and stating the number of Common Shares which the Company will sell to Investor at the Tranche Purchase Price, and the aggregate purchase price for such Tranche.  A Tranche Notice must be delivered by the Company to Investor by 4:30 p.m. New York Time on any Trading Day via facsimile or electronic mail, with confirming copy by overnight carrier, and shall be deemed delivered on the next Trading Day (the “Tranche Notice Date”).

 

(c)           Conditions Precedent to Right to Deliver a Tranche Notice.  The right of the Company to deliver a Tranche Notice is subject to the satisfaction, on the date of delivery of such Tranche Notice, of each of the following conditions:

 

(i)           the Common Stock shall be listed for and actively trading on the Trading Market, and to the Company’s knowledge there is no notice of any suspension or delisting with respect the trading of the shares of Common Stock on such market or exchange;

 

(ii)          the representations and warranties of the Company set forth in this Agreement are true and correct in all material respects as if made on such date (provided, however, that any information disclosed by the Company in a filing with the SEC after the Effective Date but prior to the date of the Tranche Notice shall be deemed to update the Disclosure Schedules), and no default shall have occurred under this Agreement, or any other agreement with Investor, any Affiliate of Investor, or any other Material Agreement, and the Company shall deliver an Officer’s Closing Certificate to such effect to Investor, signed by an officer of the Company;

 

(iii)         other than losses incurred in the ordinary course of business, there have been no material adverse changes in the Company’s business prospects or financial condition since the Commitment Closing, including but not limited to incurring material liabilities;

 

(iv)         the Company is not, and will not be as a result of the applicable Tranche, in default of any Material Agreement;

 

(v)         there is not then in effect any law, rule or regulation prohibiting or restricting the transactions contemplated by any of the Transaction Documents, or requiring any consent or approval which shall not have been obtained, nor is there any pending or threatened proceeding or investigation which may have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement; no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits the transactions contemplated by this Agreement, and no actions, suits or proceedings shall be in progress, pending or, to the Company’s knowledge threatened, by any person (other than Investor or any Affiliate of Investor), that seek to enjoin or prohibit the transactions contemplated by this Agreement;

 

(vi)         Company is in compliance with all requirements to maintain listing on the Trading Market; and

 

(vii)        Company has a sufficient number of duly authorized shares of Common Stock reserved for issuance in such amount as may be required to fulfill its obligations pursuant to the Transaction Documents and any outstanding agreements with Investor and any Affiliate of Investor;

 

(d)           Documents to be Delivered at Tranche Closing. The Closing of any Tranche and Investor’s obligations hereunder shall additionally be conditioned upon the delivery to Investor of each of the following (the “Required Tranche Documents”) on or before the applicable Tranche Closing Date:

 

(i)           the Financing Fee;

 

(ii)          the Success Fee:

 

 (iii)        all documents, instruments and other writings required to be delivered by the Company to Investor on or before the Tranche Closing Date pursuant to any provision of this Agreement or in order to implement and effect the transactions contemplated herein; and

 

 

(iv)         payment of a non-refundable administrative fee to Investor’s counsel of not more than $2,000.00, , for the first Tranche closing only, by offset against the Tranche Amount, or wire transfer of immediately available funds.

 

(e)           Mechanics of Tranche Closing.  Each of the Company and Investor shall deliver all documents, instruments and writings required to be delivered by either of them pursuant to Section 2.3(e) of this Agreement at or prior to each Tranche Closing. Subject to such delivery and the satisfaction of the conditions set forth in Section 2.3(d) as of the Tranche Closing Date, the closing of the purchase by Investor of shares of Common Stock shall occur by 5:00 p.m. Eastern time, on the date which is 10 Trading Days following the Tranche Notice Date (each a “Tranche Closing Date”) at the offices of Investor.  On or before each Tranche Closing Date, Investor shall deliver to the Company the Tranche Purchase Price to be paid for such Tranche Shares.  The closing (each a “Tranche Closing”) for each Tranche shall occur on the date that both (i) the Company has delivered to Investor all Required Tranche Documents, and (ii) Investor has delivered to the Company the Tranche Purchase Price.

 

2.4           Maximum Placement.  Investor shall not be obligated to purchase any additional Tranche Shares once the aggregate Tranche Purchase Price paid by Investor equals the Maximum Placement.  In the event that the closing price of the Company’s common stock during the nine business day after the Tranche Notice Date falls below 75% of the closing bid price on the day prior to the Tranche Notice Date, Investor will have the option of not proceeding with the funding for that Tranche.

 

2.5           Bridge Financing.  Nothwithstanding any of the other provisions of this Agreement, to provide some initial capital to the Company the Investor agrees to wire to the Company $250,000 by January 26, 2010 in return for which the Company shall issue 250,000 shares of Common Stock to the Investor at a price of $1.00 per share. The Company agrees to authorize the issuance of such shares of Common Stock within 24 hours of receipt of the $250,000 equity investment.

 

3.  TERMINATION

 

3.1          Automatic Termination.  This Agreement and the Company’s right to initiate subsequent Tranches to Investor under this Agreement shall terminate permanently (each, an “Automatic Termination”) upon the occurrence of any of the following:

 

(a)           if, at any time, either the Company or any director or executive officer of the Company has engaged in a transaction or conduct related to the Company that has resulted in (i) a SEC enforcement action, or (ii) a civil judgment or criminal conviction for fraud or misrepresentation, or for any other offense that, if prosecuted criminally, would constitute a felony under applicable law;

 

(b)           on any date after a Delisting Event that lasts for an aggregate of 20 Trading Days during any calendar year;

 

(c)           if at any time the Company has filed for and/or is subject to any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Company or any subsidiary of the Company;

 

 

(d)          the Company is in breach or default of any Material Agreement, which default could have a Material Adverse Effect;

 

(e)          the Company is in breach or default of this Agreement, any Transaction Document, or any agreement with Investor or any Affiliate of Investor;

 

(f)           upon the occurrence of a Fundamental Transaction; and

 

(g)          on the Termination Date.

 

3.2          Company Termination.  The Company may at any time in its sole discretion terminate (a “Company Termination”) this Agreement and its right to initiate future Tranches by providing 30 days advanced written notice (“Termination Notice”) to Investor.

 

3.3          Effect of Termination.  The termination of this Agreement will have no effect on any Common Shares previously issued, delivered or credited, or on any rights of any holder thereof.  Notwithstanding any other provision, all fees paid to Investor or its counsel are non-refundable.

 

4.  REPRESENTATIONS AND WARRANTIES

 

4.1          Representations and Warranties of the Company.  Except as set forth under the corresponding section of the Disclosure Schedules, which shall be deemed a part hereof, the Company hereby represents and warrants to, and as applicable covenants with, Investor as of each Closing:

 

(a)           Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth on Schedule 4.1(a).  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary, and all of such directly or indirectly owned capital tock or other equity interests are owned free and clear of any Liens.  All the issued and outstanding shares of capital stock of each Subsidiary are duly authorized, validly issued, fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, then references in the Transaction Documents to the Subsidiaries will be disregarded.

 

(b)           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.

 

 

(c)           Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents 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.

 

(d)           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.

 

(e)           Filings, Consents and Approvals.  Neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the filing of the Certificate of Designations and required federal and state securities filings, each of which has been, or (if not yet required to be filed) shall be, timely filed.

 

 

5.8           Indemnification of Investor.  Subject to the provisions of this section, the Company will indemnify and hold Investor, its Affiliates and attorneys, and its directors, officers, shareholders, partners, employees, agents, and any person who controls Investor within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (collectively, the “Investor Parties” and each an “Investor Party”), harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (collectively, “Losses”) that any Investor Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents, (b) any action instituted against any Investor Party, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of an Investor Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of Investor’s representation, warranties or covenants under the Transaction Documents or any agreements or understandings Investor may have with any such stockholder or any violations by Investor of state or federal securities laws or any conduct by Investor which constitutes fraud, gross negligence, willful misconduct or malfeasance), (c)  any untrue statement or alleged untrue statement of a material fact contained in a registration statement (or in a registration statement as amended by any post-effective amendment thereof by the Company) or arising out of or based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and/or (d) any untrue statement or alleged untrue statement of a material fact included in any Prospectus ( or any amendments or supplements to any Prospectus ), in any free writing prospectus, in any “issuer information” (as defined in Rule 433 under the Act) of the Company, or in any Prospectus together with any combination of one or more of the  free writing prospectuses, if any, or arising out of or based upon any omission or alleged omission 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.

 

If any action shall be brought against an Investor Party in respect of which indemnity may be sought pursuant to this Agreement, such Investor Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing.  The Investor Parties shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Investor Parties except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict with respect to the dispute in question on any material issue between the position of the Company and the position of the Investor Parties such that it would be inappropriate for one counsel to represent the Company and the Investor Parties.  The Company will not be liable to the Investor Parties under this Agreement (i) for any settlement by an Investor Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a loss, claim, damage or liability is either attributable to Investor’s breach of any of the representations, warranties, covenants or agreements made by Investor in this Agreement or in the other Transaction Documents.

 

Reservation of Securities.  The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents.

 

 

5.9           Required Approval.  No transactions contemplated under this Agreement or the Transaction Documents shall be consummated for an amount that would require approval by any Trading Market or Company stockholders under any approval provisions, rules or regulations of any Trading Market applicable to the Company, unless and until such approval is obtained.  Company shall use best efforts to obtain any required approval as soon as possible.

 

6.  MISCELLANEOUS

 

6.1           Fees and Expenses.  A non-refundable document preparation fee shall be paid by the Company to counsel for Investor, in the amount at the time of the first Tranche Closing Date of not more than $2,000.00 in cash or by wire transfer to an account designated by such counsel.  Except for the non-refundable document preparation fee payable to counsel for Investor at the initial Tranche closing, or as may be otherwise provided in this Agreement, each party shall pay the fees and expenses of its own advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents.  The Company shall pay all stamp and other taxes and duties levied in connection with the sale of the Securities, if any.

 

6.2           Notices.  Unless a different time of day or method of delivery is set forth in the Transaction Documents, any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date after the day of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the signature page hereto prior to 5:30 p.m. (New York City time on a Trading Day and an electronic confirmation of delivery is received by the sender, (b) two Trading Days after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section 6.2 on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) three Trading Days following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.  The addresses for such notices and communications are those set forth following the signature page hereof, or such other address as may be designated in writing hereafter, in the same manner, by such Person.

 

6.3           Amendments; Waivers.  No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and Investor or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

 

6.4           Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of Investor.  Investor may assign any or all of its rights under this Agreement to any Affiliate or to any Person to whom Investor assigns or transfers any Securities.

 

6.5           No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 5.8.

 

6.6           Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  The parties hereby waive all rights to a trial by jury.  If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses reasonably incurred in connection with the investigation, preparation and prosecution of such action or proceeding.

 

6.7           Survival.  The representations and warranties contained herein shall survive the Closing and the delivery, exercise and/or conversion of the Securities, as applicable.

 

6.8           Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together 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, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

 

 

6.9           Severability.  If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

6.10           Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested.  The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.

 

6.11           Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Investor and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

6.12           Payment Set Aside.  To the extent that the Company makes a payment or payments to Investor pursuant to any Transaction Document or Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

6.13           Liquidated Damages.  The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

6.14           Time of the Essence.  Time is of the essence with respect to all provisions of this Agreement that specify a time for performance.

 

6.15           Construction.  The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

 

6.16           Entire Agreement.  This Agreement, together with the exhibits hereto, contains the entire agreement and understanding of the parties, and supersedes all prior and contemporaneous agreements, term sheets, letters, discussions, communications and understandings, both oral and written, which the parties acknowledge have been merged into this Agreement.  No party, representative, attorney or agent has relied upon any collateral contract, agreement, assurance, promise, understanding or representation not expressly set forth hereinabove.  The parties hereby expressly waive all rights and remedies, at law and in equity, directly or indirectly arising out of or relating to, or which may arise as a result of, any Person’s reliance on any such assurance.

 

[Signature Page Follows]

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

 

[Signature Page to First Equity Trust, Inc. Stock Purchase Agreement]

 

 

 

 

Neah Power Systems, Inc.

22118 20th Avenue SW, Suite 142

Bothell, Washington 98021

Fax No.:   ###-###-####

Email: ***@***

 

with a copy to:

 

Seyfarth Shaw LLP

975 F Street, N.W.

Washington, D.C. 20004

Attention: Ernest M. Stern, Esq.

Fax No.:   ###-###-####

Email:   ***@***

 

 

First Equity Trust, Inc.

570 Lexington Ave., 22nd Floor

New York, NY 10022