Document:

EX-10.26

 

Exhibit 10.26

LOCK-UP AGREEMENT

                    , 2007

ZBB ENERGY CORPORATION

N93 W14475 Whittaker Way

Menomonee Falls, WI 53051

Ladies and Gentlemen:

     The undersigned understands that you, as Representatives of the several underwriters (the
“Underwriters”), propose to enter into an underwriting agreement (the “Underwriting Agreement”)
with ZBB Energy Corporation (the “Company”) providing for the public offering (the “Public
Offering”) by the Underwriters, including yourself, of common stock of the Company (the “Common
Stock”).

     In consideration of the grant of warrants to purchase up to ___shares (as adjusted to give
effect to the pending 1-for-17 reverse stock split) of your common stock (the “Common Stock”)
granted on September 29, 2006 (the “Warrants”), and for other good and valuable consideration,
receipt of which is hereby acknowledged, the undersigned hereby agrees, for a period of 180 days
after the First Time of Delivery (the “Lock-Up Period”), as such term is defined in the
Underwriting Agreement (the “Underwriting Agreement”) between you and Jesup & Lamont Securities
Corporation and Empire Financial Group, Inc., as Representatives of the several underwriters (the
“Representatives”), 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
of the Warrants, 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 Representatives. 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. Without limiting the foregoing, in no event shall the undersigned take any action that
would violate the Lock-Up Restriction on Securities set forth in section (g)(1) of Rule 2710 of the
Conduct Rules of the NASD.

     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 payment for and delivery of the Common Stock
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:

 	 
	 	 	 
	 	 	 
	 	 	 
	 

2EX-10.27

 

	 	 	 
	
	 	 
	Member of NASD, MSRB and SIPC	 	 
	EMPIRE FINANCIAL GROUP, INC.	 	 
	14 East 60 Street, 2nd Floor	 	 
	NY, NY 10022	 	 
	646-329-7007	 	 
	973-277-3634	 	 

June 28, 2006

Mr. Robert Parry

Chief Executive Officer

ZBB Energy Corporation

240 Barrington Street

Bibra Lake

Western Australia, 6163

Re: Proposed Firm Commitment Public Offering

Dear Mr. Parry:

We are pleased to submit the following proposal with respect to a firm commitment public offering
by ZBB Energy Corporation (“the Company”) up to a maximum of $15,000,000, the price of which
shall be determined by the market price prior to the Effective Date of the offering closing. This
letter states certain conditions and assumptions upon the proposed offering by Empire Financial
Group (EFH). It is our intent, immediately prior to the Effective Date, to enter into a “Firm
Commitment” Underwriting Agreement with ZBB Energy Corporation. The Underwriting Agreement shall
provide that the Underwriter shall be committed to take and pay for all of the Shares, if any are
purchased. The Underwriting Agreement and related agreements shall contain such terms and
conditions as are customarily contained in agreements of such character and among other things,
provide for the following:

	 	a)	 	An underwriting discount of eight percent (8%) of the amount raised in the
offering.

	 	b)	 	The sale to EFH and/or its designees, at the time of the closing of the
offering specified in the Underwriting agreement (the “Closing Date”) warrants (the
“Underwriter’s Warrants”) to purchase that aggregate number of shares as would be
equal to ten (10%) of the total number of shares sold pursuant to the public offering.
Neither the Underwriter’s Warrants nor any of the securities underlying the
Underwriter’s Warrants (Collectively, the Underlying Underwriter’s Warrants and
Underlying Underwriter’s Securities”) shall be redeemable by the

 

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	 	 	 	Company. The Underwriter’s Warrants and Underlying Underwriter’s Securities are
hereinafter sometimes collectively referred to as the “Underwriter’s Securities”.

	 	c)	 	The Underwriter’s Warrants will be exercisable between the first and fifth
anniversary dates of the Effective Date (the “Warrant Exercise Term”). EFH will agree
that during the (1) year period following the Effective Date, it will not transfer the
Underwriter’s Warrants or the underlying Underwriter’s Securities, except to EFH
officers, partners or members of the selling group. The Underwriter’s Warrants shall
be exercisable at a price per unit equal to one hundred and twenty percent (120%) of
the public offering price of the common shares and shall be exercisable at any time
from time to time, in whole or in part, during the warrant Exercise Term.

The Underwriter’s Warrants shall contain such terms and conditions as are satisfactory
in form and substance to EFH, the Company and their respective counsel, including,
without limitation anti-dilution and exercise provisions. At any time during the five
(5) years commencing after the Effective Date of the Registration Statement, EFH (or
the then holders of a majority of the Underwriter’s Warrants of the Underlying
Underwriter’s Securities) shall have the right to require the Company to prepare and
file a Post-Effective amendment to the Registration Statement or a new Registration
Statement, if then required under the Securities Act of 1933 (the “Act”), covering all
or any portion of the Underwriter’s Warrants and/or the Underlying Underwriter’s
Securities. ZBB Energy Corporation shall bear all expenses incurred in the preparation
and filing of such Post-Effective Amendment or new Registration Statement.

In addition, if at any time during the Warrant Exercise Term the Company shall prepare
and file one or more Registration Statements under the Act, with respect to a public
offering of equity or debt securities of the Company, or of any such securities of the
Company held by its shareholders, the Company will include in such Registration
Statement such number of Underwriter’s Warrants and/or Underlying Underwriter’s
Securities held by EFH and its designees or transferees as may be requested.

The Company shall bear all fees and expenses incurred by the Company in connection with
the preparation and filing of such Registration Statement. In the event of such a
proposed registration, the Company shall furnish the then holders of outstanding
Underwriter’s Warrants and Underlying Underwriter’s Securities with not less than
thirty (30) days written notice prior to the proposed date of filing of such
Registration Statement. Such notice shall continue to be given during the Warrant
Exercise Term by ZBB Energy Corporation to such holders until such time as all of the
Underwriter’s Warrants and Underlying Underwriter’s Securities have been registered.
The holders of the Warrant Securities shall exercise the “piggy-back” rights provided
for herein by giving written notice, within twenty (20) days of the receipt of the
Company’s notice of its intention to file a Registration Statement.

	 	d)	 	The Company will bear all fees, disbursements and expenses in connection with
the proposed offering, including, without limitation, the Company’s legal and
accounting fees and disbursements, the costs of preparing, printing and

 

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	 	 	 	delivering the Registration Statement, Prospectus and amendments, post-effective
amendments and supplements thereto, the Underwriting Agreement and documents and “Blue
Sky” memoranda (all in such quantities as EFH may require), preparing and printing
stock certificates and warrant certificates, filing fees, costs and expenses incurred
in registering the offering with National Association of Securities Dealers, Inc. (The
“NASD”), filing fees, costs and expenses (including fees and disbursements of counsel)
incurred in qualifying the offering under the “Blue Sky” laws of the states specified
by EFH transfer taxes, transfer agent and registrar fees, out-of-pocket costs,
exclusive of salaries and overhead, of holding “due diligence” meetings and the costs
of placing a “tombstone” advertisement in The Wall Street Journal.

	 	e)	 	In order to reimburse EFH for those costs, fees and expenses customarily
incurred by an underwriter during the process, ZBB Energy Corporation shall pay to EFH
a non-accountable expense allowance in the amount of two percent (2%) of the gross
proceeds of the offering (including the over-allotment option), which shall include
fees and disbursements of EFH’s counsel. EFH acknowledges that ZBB Energy corporation
has heretofore paid Twenty-Five Thousand Dollars ($25,000), as a deposit toward such
fees and expenses.

	 	f)	 	In addition, upon completion of the offering, the Company will enter into a
consulting agreement with EFH, pursuant to which the Company shall retain EFH as a
financial consultant for a period of twenty-four months, at a monthly fee of five
thousand dollars ($5,000) per month, payable monthly. In addition, the consulting
agreement shall provide that the Company will pay EFH a “Lehman formula” finder’s fee
in the event that EFH originates a merger, acquisition, to joint venture or other
transaction to which EFH is a party.

	 	g)	 	The Company shall pay for all “Blue Sky” filing fees as requested by EFH and
costs and expenses of “Blue Sky” registration or qualification (including fees and
disbursements of EFH’s legal counsel). The Company shall also pay as due, the state
registration, qualification and filing fees, NASD filing fees and accountable out of
pocket disbursements in connection with such registration, qualification or filing.

	 	h)	 	For the purpose of covering over-allotments, if any, which may occur during
the distribution and sale of the shares, the Company will grant EFH an option to
purchase all or part of an additional number of shares as will be equal to not more
than ten percent (10%), of the total number of shares initially offered to the public,
for the period of sixty (60) days from the effective Date. Such over-allotment period,
and any shares purchased by EFH pursuant to such option shall be resold to the public
on the same terms as the initially offered shares.

	 	i)	 	ZBB Energy Corporation agrees not to permit or cause a public sale or public
offering of any of its securities (in any manner, including pursuant to Rule 144 under
the Act) owned nominally or beneficially by the Company’s officers, directors and
shareholders owning five percent (5%) or more of the outstanding shares of Common
Stock for a period of twelve (12) months following the Effective Date without
obtaining the prior written approval of EFH. EFH has agreed to exempt a total of five
hundred thousand (500,000) shares held by non-executive officers to be designated by
the Company.

 

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	 	 	 	ZBB Energy Corporation shall cause such persons to execute an agreement with EFH, in
conformance with all SEC regulations eliminating “acting in concert” issues, regarding
such restrictions, in form and substance, satisfactory to the Company, EFH and their
respective counsels. No employee of ZBB Energy Corporation, will receive an annual
salary in excess of two hundred and fifty thousand dollars ($250,000.00) for a period
of twelve (12) months from the Effective Date. The foregoing limitation does not
include sales commissions paid to non-executive employees and bonuses payable to any
employee based upon performance criteria approved by the board of directors.

	 	j)	 	The Company shall continue to retain as its accountants PKF International or
another firm of independent certified public accountants acceptable to EFH for
twenty-four (24) months from the closing of the offering. Such accounting firm shall
have responsibility for the preparation of the financial statements and financial
exhibits, if any, to be included in the Registration Statement, and shall prepare all
certified financial statements and schedules to be included in the Registration
Statement. The Company shall retain as its lawyers a firm acceptable to EFH, which is
expert in securities law matters, and in the regulatory aspects of ZBB Energy
Corporation proposed business for a period of twelve (12) months.

	 	k)	 	The Company shall have the Shares approved for quotation on the AMEX, the
NASDAQ National Market System, or the NASDAQ SmallCap Market and/or the Boston Stock
Exchange, effective on the Effective Date. By the Effective Date, the Company shall
have registered its Common Stock with the Securities and Exchange Commission under the
provisions of the Securities Exchange Act of 1934 and will use its best efforts to
maintain such registration in effect for a period of at least five years from the
Effective Date. The Company agrees that it will, prior to the Effective Date,
register with, and for a period of five (5) years from the Effective Date remain
covered by, the corporate Record Savings and Annual Report Information Service
published by Standard & Poor’s Corporation.
	 
	 	l)	 	If the sale of the shares is completed:

	 	(1)	 	The Company shall retain Strategic Growth Investors, Inc. or another
investor/public relations firm reasonably acceptable to EFH for a period of
twenty-four (24) months from the completion of the offering. .

	 	(2)	 	The Company will accept an advisor of EFH, as a non-voting advisor to, its
Board of Directors, such designee, shall attend meetings of the Board and
receive reimbursement for reasonable costs incurred in attending such
meetings. To the extent permitted by law, Company will agree to indemnify EFH
and its designee for the actions of such designee as a director of the
Company. In the event Company maintains a liability insurance policy affording
coverage for the acts of its officers and directors, it will agree, if
possible, to include each of EFH and its designee as an insured under such
policy.

	 	(3)	 	To the extent permitted by law, ZBB Energy Corporation will
agree to indemnify EFH and its designee for the actions of such designee as a

 

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	 	 	 	director of the Company. In the event ZBB Energy Corporation maintains a
liability insurance policy affording coverage for the acts of its officers and
directors, it will agree, if possible, to include each of EFH and its designee
as an insured under such policy.

	 	(4)	 	The Company shall continue to retain a transfer agent
reasonably acceptable to EFH for the Common Stock for a period of twelve (12)
years following the Effective Date, at the request of EFH the Company shall
cause such transfer agent to provide EFH on a quarterly basis with copies of
the Company’s stock transfer sheets.

	 	(5)	 	For a period of not less than twenty (24) months from the
Effective Date, the Company will provide to EFH on a timely basis
quarterly statements setting forth such information regarding the Company’s
operations and financial position (including balance sheet, profit and loss
statements and data regarding outstanding purchase orders) as is regularly
prepared by management of ZBB Energy Corporation.

The Company represents and warrants to EFH that (i) it is not obligated to pay a finder’s fee or
consulting fee to anyone in connection with the introduction of ZBB Energy Corporation to EFH in
connection with its initial Public Offering: (ii) except for compensation paid to EFH, affiliates
of Montgomery Securities and affiliates of Bushido Investments, during the prior twelve months, it
has not paid any moneys or other compensation or issued any securities to any member of the NASD,
or to any affiliate or associate of such a member, or to any person in consideration for such
person raising funds for the Company, or providing consulting services to the Company, (iii) no
such compensation has heretofore been paid to any third party regarding this initial Public
Offering, except for payment to EFH hereunder; and (iv) affiliates of Montgomery Securities and
affiliates of Bushido Investments, no holder of the Company’s securities has (A) any right to
“piggyback” its securities on the Registration Statement or (B) any right to demand registration of
its securities.

In connection with the initial Public Offering, the Company shall register for resale shares of
common stock issuable upon conversion of convertible notes heretofore sold to affiliates of
Montgomery Securities and affiliates of Bushido Investments; provided, that such selling
stockholders shall agree with EFH that, without the prior written consent of EFH, they shall not
resell such registered shares in the market for a period of at least six (6) months following
completion of the offering.

EFH reserves the right, in its sole discretion, to reduce any item of its compensation or adjust
downward the terms thereof (including the number, type and exercise price of the Underwriter’s
Warrants) as specified herein in the event that a determination should be made by the NASD and/or
the securities department of any jurisdiction in which the offering is “Blue Skied” to the effect
that its aggregate compensation is excessive or that the terms thereof require such adjustment. Any
such reduction or adjustment shall not affect any other terms or provisions of the Letter of
Intent.

It is our intention to enter into the Underwriting Agreement on or immediately prior to the
Effective Date, however, EFH reserves the right not to proceed with the offering if, in its sole
judgment, (i) market conditions are unsuitable for such offering at the price per Security set
forth on page 1 hereof and ZBB Energy Corporation and EFH cannot agree on

 

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another price or structure; (ii) information comes to EFH’s attention relating the Company, its
management or its position in the industry which would preclude a successful public offering: (iii)
a material adverse change has occurred in the financial condition, business or prospects of the
Company, (iv) the company has failed to (a) expeditiously proceed with the offering, including the
preparation, execution and filing with all necessary governmental authorities of the Registration
Statement on Form SB-2. (b) cooperate with EFH in requesting effectiveness of the Registration
Statement at such time as EFH may deem appropriate: or (c) comply with all applicable statutes,
laws, rules and regulations; or (v) the Company cannot expeditiously proceed with the offering; or
(vi) the NASD determines that any payment (including cash and/or securities) paid by ZBB Energy
Corporation to any investment banker (other than EFH), consultant or to any other person is
“underwriter compensation” in connection with the proposed public offering- or (vii) war or act of
God or other calamity which would have substantial adverse effect or loss to ZBB Energy
Corporation; (viii) or the market for securities in general, or the Company’s securities in
particular, financial or economic conditions shall have materially changed from those reasonably
foreseeable as of the date hereof as to render it impracticable in the EFH’s judgment to make a
public offering of the securities, or there has been a material adverse change in market levels for
securities in general or financial or economic conditions which render it inadvisable to proceed;
or (ix) any action, suit or proceeding, threatened or pending, at law or equity against ZBB Energy
Corporation, or by any Federal State or other commission, board or agency wherein any unfavorable
result or decision could materially adversely affect the business, property, financial condition or
income or earnings of the Company. If EFH elects not to proceed with the offering as a result of
the condition enumerated in clauses (i through ix) above, the Company shall reimburse EFH in full
for its out-of-pocket expenses (including, without limitation, its legal fees and disbursements) up
to Twenty-Five Thousand Dollars ($25,000.00). After the execution of the Underwriting Agreement, in
the event the offering is not consummated for any reason whatsoever, the Company shall reimburse
KDS in full for its out-of-pocket expenses less amounts previously paid to it, as set forth in the
Underwriting Agreement.

This letter shall be deemed to have been made and delivered in Orlando, Florida and shall be
governed as to validity, interpretation, construction, effect and in all other aspects by the laws
of the State of Florida. ZBB Energy Corporation: (1) agrees that any legal suit, action or
proceeding arising out of or relating to those letter shall by instituted exclusively in Florida
State Circuit Court, County of Orange or in the United States District Court for the Southern
District of Florida, (2) waives any objection to the venue of any such suit, action or proceeding
and the right to assert such forum is not a convenient forum, and (3) irrevocably consents to the
jurisdiction of the Florida State Circuit Court, County of Orange and the United States District
Court for the Southern District of Florida in any such suit, action or proceeding,

The Company further agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the Florida State Circuit Court, County of Orange
and the United States District Court for the Southern District of Florida and agrees that service
of process upon it mailed by certified mail to As address shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding.

Except as otherwise set forth herein, neither the Company nor EFH will be under any obligation to
the other, until both ZBB Energy Corporation and EFH have executed and delivered the Underwriting
Agreement. It is Understood that this letter is merely a statement

 

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of intent and while the parties agree in principle to the contents hereof any legal obligations
between the parties shall be only as set forth in a duly negotiated and executed Underwriting
Agreement.

This shall be in form and content satisfactory to EFH, the Company and their respective counsel.
This letter shall, nevertheless, constitute a binding agreement relative to the reimbursement of
EFH’s expenses.

If the foregoing correctly sets forth our understanding with respect to the proposed offering on
behalf of the Company, will you please so confirm by signing and returning one copy of this letter,
whereupon we will instruct our counsel to cooperate with counsel for the Company in the preparation
of the appropriate Registration Statement under the Act, the Underwriting Agreement and related
documents so as to expedite the successful consummation of the public offering.

	 	 	 	 	 
	Very Truly Yours,	 	 
	 
	 	 	 	 
	EMPIRE FINANCIAL GROUP, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Don Wojnowski, CEO	 	 
	 
	 	 	 	 
	Accepted and confirmed:	 	 
	 
	 	 	 	 
	ZBB ENERGY CORPORATION	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Mr. Robert Parry, CEO

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