Page 20 of 31
Exhibit 7
ESCROW AGREEMENT
Pursuant to this Escrow Agreement (this "Agreement"), dated May 3,
2002, Environmental Power Corporation, a Delaware corporation ("EPC"), and
Xxxxxxxx X. Xxxxx ("Xxxxx" and together with EPC, the "Depositors") hereby
establish Escrow Account No. 00000000 (the "Account") with U.S. Bank Trust
National Association, a national banking association (the "Agent"), to be
maintained and administered in accordance with the following terms and
conditions:
The EPC securities and stock powers described on Schedule I attached
hereto and incorporated herein (together with any funds paid to the Agent by EPC
or its designees to purchase securities in the Account and any interest earned
thereon, the "Assets") will be deposited in the Account upon delivery thereof to
the Agent at its office in New York, New York, in the manner and at the time(s)
specified in the said Schedule I. The Agent is hereby authorized and directed by
each of the Depositors, as their escrow agent, to hold, deal with and dispose of
the Assets as provided in the instructions set forth in Schedule II attached
hereto and incorporated herein; subject, however, to the terms and conditions
set forth below, which, in all events, shall govern and control over any
contrary or inconsistent provisions contained in Schedules I or II attached
hereto.
1. Agent's Duties. Agent's duties and responsibilities shall be
--------------
limited to those expressly set forth in this Agreement, and Agent shall not be
subject to, or obliged to recognize, any other agreement between any or all of
the Depositors or any other persons even though reference thereto may be made
herein; provided, however, this Agreement may be amended at any time or times by
an instrument in writing signed by all the parties hereto. Agent shall not be
subject to or obligated to recognize any notice, direction or instruction of any
or all of the parties hereto or of any other person, except as expressly
provided for and authorized in Schedule II and in performing any duties under
this Agreement, Agent shall not be liable to any party for consequential
damages, (including, without limitation lost profits) losses, or expenses,
except for gross negligence or willful misconduct on the part of the Agent.
2. Court Orders or Process. If any controversy arises between the
-----------------------
Depositors to this Agreement, or with any other party, concerning the subject
matter of this Agreement, its terms or conditions, Agent will not be required to
determine the controversy or to take any action regarding it. Agent may hold all
documents and funds and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in Agent's discretion, Agent
may require, despite what may be set forth elsewhere in this Agreement. In such
event, Agent will not be liable for interest or damage. Agent is authorized, in
its sole discretion, to comply with orders issued or process entered by any
court with respect to the Account, the Assets or this Escrow Agreement, without
determination by the Agent of such court's jurisdiction in matter. If any Assets
are at any time attached, garnished, or levied upon under any court order, or in
case the payment, assignment, transfer, conveyance or delivery of any such
property shall be stayed or enjoined by any court order, or in case any order,
judgment or decree shall be made or entered by any court affecting such property
or any part thereof, then in any such events Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel of its own choosing is binding upon
it; and if Agent complies with any such order, writ, judgment or decree, it
shall not be liable to any of the
Page 21 of 31
Depositors or to any other person, firm or corporation by reason of such
compliance even though such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, set aside or vacated.
3. Agent's Actions and Reliance. Agent shall not be personally
----------------------------
liable for any act taken or omitted by it hereunder if taken or omitted by it in
good faith and in the exercise of its own best judgment. Agent shall also be
fully protected in relying upon any written notice, instruction, direction,
certificate or document which in good faith it believes to be genuine.
4. Collections. Unless otherwise specifically indicated in
-----------
Schedule II, Agent shall proceed as soon as practicable to collect any checks,
interest due, matured principal or other collection items with respect to Assets
at any time deposited in the Account. All such collections shall be subject to
the usual collection procedures regarding items received by Agent for deposit or
collection. Agent shall not be responsible for any collections with respect to
Account Assets if Agent is not registered as record owner thereof or otherwise
is not entitled to request or receive payment thereof as a matter of legal or
contractual right. All collection payments shall be deposited to the Account,
except as otherwise provided in Schedule II. Agent shall not be required or have
a duty to notify anyone of any payment or maturity under the terms of any
instrument, security or obligation deposited in the Account, nor to take any
legal action to enforce payment of any check, instrument or other security
deposited in the Account. The Account is a safekeeping escrow account, and no
interest shall be paid by Agent on any money deposited or held therein, except
as provided in Section 6 hereof.
5. Agent Responsibility. Agent shall not be responsible or liable
--------------------
for the sufficiency or accuracy of the form, execution, validity or genuineness
of documents, instruments or securities now or hereafter deposited in the
Account, or of any endorsement thereon, or for any lack of endorsement thereon,
or for any description therein. Registered ownership of or other legal title to
Assets deposited in the Account shall be maintained in the name of Agent, or its
nominee, only if expressly provided in Schedule II. Agent may maintain
qualifying Assets in a Federal Reserve Bank or in any registered clearing agency
(including, without limitation, the Depository Trust Company) as Agent may
select, and may register such deposited Assets in the name of Agent or its agent
or nominee on the records of such Federal Reserve Bank or such registered
clearing agency or a nominee of either. Agent shall not be responsible or liable
in any respect on account of the identity, authority or rights of the persons
executing or delivering or purporting to execute or deliver any such document,
security or endorsement or this Agreement.
6. Investments. All monies held in the Account shall be invested
-----------
by Agent in its name or its nominee's name, in such instruments or securities
and at the written direction of the such Depositor, as expressly authorized in
Schedule II. Such Depositor shall furnish the Agent with written instructions to
sell securities (including shares or units in any money market mutual funds) to
make any payments from the Account as provided hereunder. If no such
instructions are received, Agent is authorized to sell any such securities held
in the Account as necessary for that purpose. Agent shall not be responsible for
the selection, quality or maturity of such investments, or for the timely
reinvestment of interest or maturity proceeds thereof except as provided in the
immediately following paragraph.
In the absence of duly authorized and complete directions regarding
investment of cash held in the Account, Agent shall automatically invest and
reinvest the same in units of the money
2
Page 22 of 31
market mutual funds identified on Schedule III attached hereto and incorporated
herein, which funds may be managed by an affiliate of the Agent.
Monies credited to any account or fund maintained hereunder which are
uninvested pending disbursement or receipt of proper investment directions or as
directed herein, may be deposited to and held in a non-interest bearing demand
deposit account established with the Commercial Banking Department of the Agent
or with any bank affiliated with the Agent, without the pledge of securities to
or other collateralization of such deposit accounts.
The Depositors acknowledge and agree that the Agent is authorized to
invest from or through its trust department or any other bank affiliated with
Agent through common control by U.S. Bancorp.
7. Notices/Directions to Agent. Notices and directions to Agent
---------------------------
from Depositors, or from other persons authorized to give such notices or
directions as expressly set forth in Schedule II, shall be in writing and signed
by an authorized representative as identified pursuant to Schedule II, and shall
not be deemed to be given until actually received by Agent's employee or officer
who administers the Account. Agent shall not be responsible or liable for the
authenticity or accuracy of notices or directions properly given hereunder if
the written form and execution thereof on its face purports to satisfy the
requirements applicable thereto as set forth in Schedule II, as determined by
Agent in good faith without additional confirmation or investigation.
8. Books and Records. Agent shall maintain books and records
-----------------
regarding its administration of the Account, and the deposit, investment,
collections and disbursement or transfer of Assets, shall retain copies of all
written notices and directions sent or received by it in the performance of its
duties hereunder, and shall afford each Depositor reasonable access, during
regular business hours, to review and make photocopies (at Depositor's cost) of
the same.
9. Disputes Among Depositors and/or Third Parties. In the event
----------------------------------------------
Agent is notified of any dispute, disagreement or legal action between or among
any of the Depositors, and/or any third parties, relating to or arising in
connection with the Account, the Assets or the performance of the Agent's duties
under this Agreement, the Agent shall be authorized and entitled, subject to
Section 2 hereof, to suspend further performance hereunder, to retain and hold
the Assets then in the Account and take no further action with respect thereto
until the matter has been fully resolved, as evidenced by written notification
signed by all Depositors and any other parties to such dispute, disagreement or
legal action.
10. Notice by Agent. Any notices which Agent is required or
---------------
desires to give hereunder to any of the Depositors shall be in writing and may
be given by mailing the same to the address indicated below opposite the
signature of such Depositor (or to such other address as said Depositor may have
theretofore substituted therefor by written notification to Agent), by United
States certified or registered mail, postage prepaid. For all purposes hereof
any notice so mailed shall be as effectual as though served upon the person of
the Depositor to whom it was mailed at the time it is deposited in the United
States mail by Agent whether or not such undersigned thereafter actually
receives such notice. Whenever under the terms hereof the time for Agent's
giving a notice or performing an act falls upon a Saturday, Sunday, or holiday,
such time shall be extended to the next business day.
3
Page 23 of 31
11. Legal Counsel. If Agent believes it to be reasonably necessary
-------------
to consult with counsel concerning any of its duties in connection with the
account or this Agreement, or in case Agent becomes involved in litigation on
account of being escrow agent hereunder or on account of having received
property subject hereto, then in either case, its costs, expenses, and
reasonable attorney's fees shall be paid one-half by each Depositor.
12. Agent Compensation. Agent shall be paid a fee for its services
------------------
as set forth on Schedule IV attached hereto and incorporated herein, which shall
be subject to increase upon notice sent to Depositors, and reimbursed for its
reasonable costs and expenses incurred. If Agent's fees, or reasonable costs or
expenses, provided for herein, are not promptly paid, Agent shall have the right
to sell such portion of the Assets held in the Account as necessary and
reimburse itself therefor from the proceeds of such sale or from the cash held
in the Account. In the event that the conditions of this Agreement are not
promptly fulfilled, or if Agent renders any service not provided for in this
Agreement, or if the Depositors request a substantial modification of its terms,
or if any controversy arises, or if Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, including allocated costs of in-house counsel, and
expenses occasioned by such default, delay, controversy or litigation and Agent
shall have the right to retain all documents and/or other things of value at any
time held by Agent in this escrow until such compensation, fees, costs, and
expenses are paid. The Depositors jointly and severally promise to pay these
sums upon demand. The Depositors shall be jointly and severally liable to pay
all Agent's usual charges and Agent may deduct such sums from the funds
deposited. As between themselves, the Depositors shall each be responsible for
one-half of such charges. The Depositors and their respective successors and
assigns agree jointly and severally to indemnify and hold Agent harmless against
any and all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, including allocated costs of
in-house counsel and disbursements that may be imposed on Agent or incurred by
Agent in connection with the performance of his/her duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter. Agent shall have a first lien on the property and
papers held under this Agreement for such compensation and expenses.
13. Agent Resignation. It is understood that Agent reserves the
-----------------
right to resign at any time by giving written notice of its resignation,
specifying the effective date thereof, to the Depositors. Within 30 days after
receiving the aforesaid notice, the Depositors agree to appoint a successor
escrow agent to which Agent may transfer the Assets then held in the Account,
less its unpaid fees, costs and expenses. If a successor escrow agent has not
been appointed and has not accepted such appointment by the end of the 30-day
period, Agent may apply to a court of competent jurisdiction for the appointment
of a successor escrow agent, and the costs, expenses and reasonable attorney's
fees which Agent incurs in connection with such a proceeding shall be paid by
the Depositors.
14. Notices. All notices, demands and other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement will
be in writing and personally delivered, delivered by courier, mailed by first
class mail, return receipt requested, or sent by facsimile (with such facsimile
followed by mailing first class mail). Notices, demands and communications to
the parties will, unless another address is specified in writing, be sent to the
address indicated below or to such other place and with such other copies as any
party may designate as to itself by written notice to the others:
4
Page 24 of 31
Notices to Xxxxx:
Xxxxxxxx X. Xxxxx
0000 X. Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile No. (000) 000-0000
Notices to EPC:
Environmental Power Corporation
Xxx Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Facsimile No. (000) 000-0000
With a copy to:
Xxxxxx & Whitney LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Facsimile No. (000) 000-0000
Notices to Agent:
US Bank
Corporate Trust Services
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
Facsimile No. (000) 000-0000
All such notices, requests, instructions, documents and other communications
will (i) if delivered personally or by courier, be deemed given upon delivery,
(ii) if delivered by facsimile transmission, be deemed given upon receipt, and
(iii) if delivered by mail in the manner described above, be deemed given upon
receipt.
15. Governing Law. This Escrow Agreement shall be construed,
-------------
enforced, and administered in accordance with the laws of the State of New York.
The Agent hereby agrees to hold, deal with and dispose of the Assets at
any time deposited to the Account in accordance with the foregoing Escrow
Agreement.
16. Automatic Succession. Any company into which the Agent may be
--------------------
merged or with which it may be consolidated, or any company to whom Agent may
transfer a substantial amount of its Escrow business, shall be the Successor to
the Agent without the execution or
5
Page 25 of 31
filing of any paper or any further act on the part of any of the Parties,
anything herein to the contrary notwithstanding.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ENVIRONMENTAL POWER CORPORATION
By: ________________________________
Xxxxxx X. Xxxxxxxxxx,
President:
By: ________________________________
Xxxxxxxx X. Xxxxx
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Agent
By: ________________________________
Name:
Title:
6
Page 26 of 31
SCHEDULE I
----------
DELIVERY OF ASSETS
------------------
Description of Assets Means of Delivery Date of Delivery
--------------------- ----------------- ----------------
Certificate No. 7629 representing Physical delivery May, 2002
1,802,486 shares of EPC Common Stock
(the "Option Shares"), together with
fifteen (15) stock powers, executed in
blank by Xxxxx
Page 27 of 31
SCHEDULE II
-----------
INSTRUCTIONS OF DEPOSITORS
--------------------------
In connection with the Option Agreement, dated as of May 2, 2002, made and
entered into by and between EPC and Xxxxx (the "Option Agreement"), the Agent
shall disburse the Assets:
.. to exercise its Option under the Option Agreement, EPC (or its designee(s),
as the case may be) shall, prior to the close of business on April 30, 2003
(the "Expiration Date") give written notice substantially in the form of
Annex A hereto (each, an "Exercise Notice") to the Agent and Xxxxx
specifying the number of Option Shares it is purchasing and EPC (or its
designees) shall pay, by wire transfer to the Escrow Agent, an amount equal
to the product of (x) $0.35 and (y) the number of Option Shares being
purchased. Upon receipt of the Exercise Notice and purchase price funds,
the Escrow Agent shall deliver the certificate representing the Option
Shares to EPC's transfer agent (American Stock Transfer & Trust Co., 00
Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxx Xxxxx/Xxxx Xxxxx) (the
"Transfer Agent"), accompanied by an executed stock power or powers
deposited by Xxxxx, which shall be dated and completed by the Escrow Agent,
together with instructions to the Transfer Agent (substantially in the form
of Annex B hereto) to deliver a new certificate for the Option shares being
purchased to EPC (or its designee(s), as the case may be) and to deliver a
new certificate registered in the name of Xxxxx for the balance of the
Option shares to the Escrow Agent. Such new certificates shall bear the
same restrictive legends as the certificate submitted to the Transfer
Agent, except that the certificate issued to EPC or its designee(s) shall
not bear the legend that they are subject to the Option Agreement. Promptly
after submitting the stock certificate and power and instruction letter to
the transfer agent, the Escrow Agent shall remit the purchase price funds
received from EPC or its designees to Xxxxx. Promptly following the
Expiration Date and the processing of any Option exercise made prior to the
close of business on the Expiration Date, the Agent shall deliver the
certificate for any unpurchased Option Shares to Xxxxx;
.. at any time and from time to time, in accordance with a Joint Written
Direction. The Depositors, as between themselves, agree to promptly furnish
the Agent with Joint Written Directions as to release of the Assets as
necessary to effect the provisions of the Option Agreement. For purposes
hereof, "Joint Written Direction" shall mean a written direction executed
by the Depositors and directing the Agent to disburse all or a portion of
the Assets. Such Joint Written Direction may be executed in counterparts;
or
.. pursuant to a court order issued by a court of competent jurisdiction from
which no further appeal may be taken.
Written instructions as to investments of cash in the Account may be given only
by Xxxxx. Any other instruction as to Assets shall require a joint written
instruction from both Depositors (which may be executed in counterparts).
Page 28 of 31
Annex A to Schedule II
----------------------
_________________, 200_
US Bank
Corporate Trust Services
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
Re: Environmental Power Corporation ("EPC")/Xxxxx;
Escrow Account No. 00000000
------------------------------------------------
Dear Xx. Xxxxxx:
The undersigned [, as a designee of EPC,] hereby exercises the Option
under the Stock Option and Right of First Refusal Agreement dated as of May 2,
2002 between EPC and Xxxxxxxx X. Xxxxx to purchase ___ shares of EPC Common
Stock.
The undersigned is wiring to you the purchase price of $__________
($0.35 per share being purchased).
Please arrange for the certificate for such shares to be registered and
delivered by the transfer agent as follows:
Name: _______________________
Tax ID No.: _______________________
Address: _______________________
_______________________
Thank you very much for your assistance.
Very truly yours,
[ENVIRONMENTAL POWER CORPORATION]
[Designee name]
cc: Xxxxxxxx X. Xxxxx
0000 X. Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
[If applicable, in separate letter or at bottom of page: EPC hereby confirms
that __________ is EPC's designee with respect to the exercise provided above
ENVIRONMENTAL POWER CORPORATION
By: ______________________________
Name:
Title: ]
Page 29 of 31
Annex B to Schedule II
----------------------
_________________, 200_
American Stock Transfer & Trust Co.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx/Xxxx Xxxxx
Re: Environmental Power Corporation (the "Company")
-----------------------------------------------
Dear Xx. Xxxxx and Xx. Xxxxx:
Enclosed please find Certificate No. _____ (the "Existing Certificate")
representing _____ shares of Common Stock of the Company registered in the name
of Xxxxxxxx X. Xxxxx, together with [a stock power] [stock powers] executed by
Xx. Xxxxx to transfer ____ of such shares to [the Company] [name of designee]
[and an additional ___ of such shares to [name of designee]].
Please cancel the Existing Certificate and in place thereof issue:
. a new certificate for [the _______ shares] [____ of the shares]
being transferred to [Environmental Power Corporation, Xxx Xxxx
Xxxxxx, 0xx Xxxxx, Xxxxxxxxxx, XX 00000] [name and address of
designee], which new certificate should bear the same legends as
the Existing Certificate except that the legend relating to the
Stock Option and Right of First Refusal Agreement should be
omitted; and
. [add comparable instructions for any additional transferee; and]
. a certificate for the _____ remaining shares (post-transfer)
registered in the name of Xxxxxxxx X. Xxxxx, which certificate in
Xx. Xxxxx'x name for the remaining shares should bear the same
legends as the Existing Certificate and should be delivered to US
Bank, Corporate Trust Services, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, XX 00000, Attn: Xxxx Xxxxxx.
Please contact Xxxx Xxxxxx at (000) 000-0000 with any questions
concerning the above instructions.
Thank you very much for your assistance.
Very truly yours,
U.S. BANK TRUST NATIONAL
ASSOCIATION
By: ______________________________
Page 30 of 31
SCHEDULE III
------------
AUTOMATIC MONEY MARKET INVESTMENTS
----------------------------------
INVESTMENT AUTHORIZATION LETTER
-------------------------------
In the absence of specific written direction to the contrary, U.S. Bank Trust
National Association (or U.S. Bank) is hereby directed to invest and reinvest
proceeds and other available moneys in the following funds as permitted by the
operative documents. Please xxxx one space with an X for the investment vehicle
selection, and sign below.
a. _____________ First American Prime Obligations Fund (Class A)
b. X First American Treasury Obligations Fund (Class A)
-------------
c. _____________ First American Government Obligations Fund (Class A)
d. _____________ First American Tax Free Obligations Fund (Class A)
SEE FIRST AMERICAN FUNDS, INC. PROSPECTUS WHICH HAS BEEN PROVIDED. NOTE THAT
THE ABOVE FUNDS' INVESTMENT ADVISOR AND CUSTODIAN ARE SUBSIDIARIES OF U.S.
BANCORP. SHARES OF THE ABOVE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK INCLUDING U.S. BANK NATIONAL ASSOCIATION, U.S. BANK
TRUST NATIONAL ASSOCIATION, OR ANY OF THEIR AFFILIATES, NOR ARE THEY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING
POSSIBLE LOSS OF PRINCIPAL. Neither U.S. Bank Trust National Association nor
U.S. Bank will vote proxies for the First American Funds. Proxies will be
mailed to you for voting.
Fee Basis: Approval of investment of any of these First American mutual funds
includes approval of the fund's fees and expenses as detailed in the enclosed
prospectus, including advisory and custodial fees and shareholder service
expenses (which may be so-called 12b-1 shareholder service fees), which fees and
expenses are paid to U.S. Bank Trust National Association or U.S. Bank,
subsidiaries of U.S. Bancorp.
Xxxxxxxx X. Xxxxx
---------------------------------- ----------------------------------------
Name Signature of Authorized Directing Party
---------------------------------- ----------------------------------------
Trust Account Number Title
----------------------------------------
Date
Page 31 of 31
SCHEDULE IV
-----------
Agent's Fees
------------
Initial Acceptance Fee: $1,000.00
-----------------------
Includes review of the Escrow Agreement and establishing
procedures and controls. (Payable
upon execution of the Escrow Agreement.)
Annual Administration Fee: $2,500.00
--------------------------
Covers normal administrative duties as prescribed to the
terms of the Escrow Agreement.
(Payable in advance.)
Miscellaneous Services:
-----------------------
Fee per Investment of Funds . . . $75.00
(The above fee will be waived for funds deposited in our
money market sweep vehicle that is rated Aaa, AAAm by Xxxxx'x
Investor Service and Standard and Poor's Corporation,
respectively.)
Out-of-Pocket: AT COST
--------------
Expenses including but not limited to
postage, shipping and future counsel fees, if necessary. We do not
expect the utilization of counsel in this transaction.
NOTE: Charge for performing other services not specifically covered in this
schedule will be determined by an appraisal of the services rendered.
