STOCKHOLDERS' AND VOTING AGREEMENT
among
U.S. ENERGY SYSTEMS, INC.,
certain stockholders of
U.S. ENERGY SYSTEMS, INC.,
Major Stockholders of
XXXXXX ALTERNATIVE POWER CORPORATION
and
CINERGY SOLUTIONS, INC.
Dated as of November 28, 2000
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms......................................................................1
ARTICLE II
CERTAIN OBLIGATIONS PRIOR TO EFFECTIVE TIME
SECTION 2.01. Voting Agreement...........................................................................5
SECTION 2.02. No Disposition or Encumbrance of Shares....................................................6
SECTION 2.03. No Solicitation of Transactions............................................................7
SECTION 2.04. Extraordiary Activities...................................................................7
ARTICLE III
CERTAIN OBLIGATIONS AFTER THE EFFECTIVE TIME
SECTION 3.01. Election to Board of Directors.............................................................8
SECTION 3.02. Redemptions................................................................................9
ARTICLE IV
RESTRICTIONS ON TRANSFER
SECTION 4.01. General Restriction.......................................................................11
SECTION 4.02. Legends...................................................................................11
SECTION 4.03. Lock-Up...................................................................................12
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF USE AND THE STOCKHOLDERS
SECTION 5.01. Authority Relative to This Agreement......................................................12
SECTION 5.02. No Conflict...............................................................................13
SECTION 5.03. Title to the Shares.......................................................................13
SECTION 5.04. Authority of USE Relative to This Agreement...............................................13
SECTION 5.05. No USE Conflict...........................................................................13
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Termination...............................................................................14
SECTION 6.02. Expenses..................................................................................14
SECTION 6.03. Notices...................................................................................14
SECTION 6.04 Headings..................................................................................16
SECTION 6.05. Severability..............................................................................16
SECTION 6.06. Entire Agreement..........................................................................16
SECTION 6.07. Assignment................................................................................16
SECTION 6.08. Amendment.................................................................................16
SECTION 6.09. Governing Law.............................................................................17
SECTION 6.10. Counterparts..............................................................................17
SECTION 6.11. Equitable Relief..........................................................................17
SECTION 6.12. Jurisdiction and Service of Process.......................................................17
SECTION 6.13. Further Assurances........................................................................17
SECTION 6.14. Limitations on Amendments.................................................................17
STOCKHOLDERS' AND VOTING AGREEMENT
THIS STOCKHOLDERS' AND VOTING AGREEMENT, is entered into as of November
28, 2000, among U. S. ENERGY SYSTEMS, INC., a Delaware corporation ("USE"),
the stockholders of USE who are signatories hereto (the "USE Stockholders"),
Cinergy Solutions, Inc. ("CSI") and the Major Shareholders (as defined in the
Merger Agreement) of XXXXXX ALTERNATIVE POWER CORPORATION, a Delaware
corporation ("Zapco"), who are signatories hereto (the "Zapco Stockholders",
and, together with the USE Stockholders and CSI, the "Stockholders").
WHEREAS, concurrently herewith, USE, Zapco and USE Acquisition Corp., a
Delaware corporation ("Merger Sub"), are entering into an Agreement and Plan
of Reorganization and Merger (the "Merger Agreement"; capitalized terms being
used herein as defined therein unless otherwise defined herein), which
provides, among other things, for Merger Sub to merge with and into Zapco,
with Zapco as the surviving corporation (the "Merger"), and for outstanding
shares of Zapco capital stock to be converted into cash and shares of USE
capital stock;
WHEREAS, as a condition to the willingness of the parties to enter into
the Merger Agreement, USE and the Stockholders have agreed to enter into this
Agreement; and
WHEREAS, the parties wish to set forth certain arrangements relating to
the governance of USE and the disposition of shares of USE stock after the
Merger;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Stockholders' and Voting
Agreement, and all amendments hereto made in accordance with the provisions of
Section 6.08.
"Beneficial owner" or "Beneficially own" has the meaning given such
term in Rule 13d-3 under the Exchange Act.
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"Board" means the Board of Directors of USE.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in New York,
New York.
"By-Laws" means USE's By-laws, as in effect from time to time.
"Capital Stock" means, with respect to any Person at any time, any and
all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of capital stock, partnership
interests (whether general or limited) or equivalent ownership interests in or
issued by such Person.
"Cause" has the meaning specified in Section 3.01(e).
"Certificate of Incorporation" means USE's Certificate of
Incorporation, as amended or restated from time to time, and any certificates
of designation of USE as in effect from time to time.
"Change of Control" means the occurrence of any of the following events
with respect to any specified Person: (a) there shall be consummated (i) any
merger, consolidation or combination (excluding the transactions contemplated
by the Merger Agreement) (any, a "Combination") involving such Person in which
such Person is not the continuing or surviving corporation, or pursuant to
which shares of such Person's voting stock would be converted in whole or in
part into cash, other securities or other property, other than a Combination
involving such Person in which the holders of such Person's voting stock
immediately prior to the Combination have substantially the same proportionate
ownership of voting stock of the surviving corporation immediately after the
Combination, or (ii) any sale, lease, exchange or transfer (in one transaction
or a series of related transactions) of all or substantially all of the assets
of such Person, or (b) any other Person or a subsidiary thereof or any
employee benefit plan sponsored by such Person or a subsidiary thereof or a
corporation owned, directly or indirectly, by the stockholders of such Person
in substantially the same proportions as their ownership of stock of such
Person, other than a party hereto or any Affiliate of any such party shall
become the Beneficial Owner of securities of such Person representing 50% or
more of the combined voting power of the then outstanding securities
ordinarily (and apart from rights accruing in special circumstances) having
the right to vote in the election of directors of such Person, as a result of
a tender or exchange offer, open market purchase or purchases, privately
negotiated purchase or otherwise.
"CSI Shares" means all USE Shares owned or held beneficially or of
record by CSI or its Permitted Transferees.
"Competing Transaction" means any of the following (other than the
Merger and the transactions contemplated by the Merger Agreement): (a) a
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merger, consolidation, share exchange, business combination or other similar
transaction as a result of which the stockholders of any specified Person
immediately prior to such transaction will, after such transaction, own less
than 50% of the voting stock of the combined, surviving or merged entity; (b)
any sale, lease, exchange, transfer or other disposition of 50% or more of the
assets of such party and its subsidiaries, taken as a whole; or (c) a tender
offer or exchange offer for, or any acquisition of, 50% or more of the
outstanding voting securities of such party by a Person not affiliated with
any party hereto.
"Control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
specified Persons, means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the affairs or
management of one of such Persons, whether through the ownership of voting
securities, as trustee or executor, by contract or otherwise, including,
without limitation, the ownership, directly or indirectly, of securities
having the power to elect a majority of the board of directors or similar body
governing the affairs of such Person.
"ESI" means Energy Systems Investors LLC.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Former Zapco Stockholders" means the Zapco Stockholders and their
Permitted Transferees.
"Permitted Transferee" means in the case of each Stockholder, (a) any
Affiliate of such Stockholder, (b) any member of his or her immediate family,
(c) a spouse, lineal descendant or a trust for the benefit of the Stockholder
or one or more members of his or her immediate family, or (d) upon such
Stockholder's death, any executor, administrator, testamentary trustee,
legatee, heir or beneficiary of the Stockholder if, and only if, in the case
of clauses (a) through (d) the transferee agrees in writing to be subject to
this Agreement with the same rights and obligations as the transferring
Stockholder.
"Person" means any individual, partnership, firm, corporation, limited
liability company, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"Public Offering" means an underwritten public offering of equity
securities of USE pursuant to an effective registration statement under the
Securities Act.
"Restricted Shares" means all USE Shares other than (a) USE Shares that
have been registered under a registration statement pursuant to the Securities
Act; (b) USE Shares with respect to which a Sale has been made in reliance
upon, and in accordance with, Rule 144; or (c) USE Shares with respect to
which the holder thereof shall have delivered to USE either (i) a written
opinion, in form and substance reasonably satisfactory to USE, of counsel, who
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shall be reasonably satisfactory to USE, or (ii) a "no action" letter from the
Commission, to the effect that subsequent transfers of such USE Shares may be
effected without registration under the Securities Act.
"Restricted Stockholders" mean the Zapco Stockholders and the USE
Restricted Stockholders.
"Rule 144" means Rule 144 (or any successor provision) under the
Securities Act.
"Sale" or "Transfer" means any sale, assignment, transfer, distribution
or other disposition of Shares or of a participation or other right therein,
whether voluntarily or by operation of law.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Series A Preferred Stock" means USE's Series A Preferred Stock.
"Series C Preferred Stock" means USE's Series C Preferred Stock.
"Share" means any USE Share or Zapco Share.
"Stockholder" means each Person (other than USE) who or which shall be
a party to this Agreement, whether in connection with the execution and
delivery hereof as of the date hereof or otherwise, so long as such Person
shall own, beneficially or of record, any Shares.
"Subsidiary" or "Subsidiaries" of any Person means any corporation,
partnership, limited liability company, joint venture, association or other
entity, all of the capital stock or other similar equity interests of which
are owned beneficially and of record by such Person directly or indirectly
through one or more intermediaries.
"USE" has the meaning specified in the preamble to this Agreement.
"USE Common Stock" means shares of common stock, par value $.01, of
USE.
"USE Plan" means USE's 2000 Executive Incentive Compensation Plan.
"USE Preferred Stock" means any share of preferred stock of USE of any
series, class or designation, including the Series A Preferred Stock and the
Series C Preferred Stock.
"USE Restricted Stockholders" means ESI, Xxxxx Xxxxxxxxx and Xxxxxxxx
Xxxxxxxxx.
"USE Share" means any share of USE Common Stock or USE Preferred Stock.
"Warrants" means USE's Series B Warrants.
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"Zapco Common Stock" means any share of common stock, no par value per
share, of Zapco.
"Zapco Preferred Stock" means any share of preferred stock of Zapco of
any series, class or designation.
"Zapco Share" means any share of Zapco Common Stock or Zapco Preferred
Stock.
ARTICLE II
CERTAIN OBLIGATIONS PRIOR TO EFFECTIVE TIME
SECTION 2.01. (a) Voting Agreement. Except as provided in Section
2.01(b) hereof each Stockholder, severally and not jointly, hereby agrees
that, from and after the date hereof and until the earlier of (i) the
Effective Time, or (ii) the termination of the Merger Agreement in accordance
with its terms, at any meeting of either the stockholders of USE or of Zapco,
as applicable, however called, and in any action by consent of either the
stockholders of USE or of Zapco, as applicable, such Stockholder will vote (or
cause to be voted) such Stockholder's Shares owned beneficially or of record
by such Stockholder at the time (including any Shares for which such
Stockholder has been appointed or granted a proxy or otherwise has the power
to vote, it being understood that pursuant to the Voting Trust Agreement dated
June 15, 1998 among certain Stockholders of Zapco, Xxxxxxx Xxxxxx is entitled
to vote certain Zapco Shares, including 1,900 Zapco Shares owned by Xxxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxxxxxx and Xxxxxxx Xxxxxxxxx, and all of
such Zapco Shares shall be voted in the manner in which Xxxxxxx Xxxxxx is
obligated to vote his Zapco Shares pursuant to this Agreement): (A) in favor
of the approval and adoption of the Merger Agreement, the Merger and all the
transactions contemplated by the Merger Agreement and otherwise in such manner
as may be necessary to consummate the Merger; (B) against any action,
proposal, agreement or transaction that would result in a breach of any
covenant, obligation, agreement, representation or warranty of USE or Zapco,
as applicable, contained in the Merger Agreement; and (C) against any action,
proposal, agreement or transaction (other than the Merger Agreement or the
transactions contemplated thereby) that would result in any of the conditions
to USE's or Zapco's, as applicable, obligations under the Merger Agreement not
being fulfilled, provided, however, that the Zapco Stockholders shall not be
obligated to vote in favor of the Merger pursuant to clause (A) above if prior
to the meeting of Zapco's shareholders to approve the Merger there occurs a
Change of Control of USE, USE enters into a transaction that would result in
such a Change of Control of USE or any Person (not affiliated with any party
hereto) (an "Announcing Person") formally announces its intention to commence
a tender offer or exchange offer for 50% or more of USE's outstanding voting
securities if such announcing Person has the financial means to consummate
such a tender offer or exchange offer (it being understood that this provision
shall not restrict such Stockholders in their capacity as directors from
exercising their fiduciary obligation to USE and its stockholders or from
taking any action pursuant to Section 6.01 and 6.02 of the Merger Agreement)
or Section 2 of the Termination Fee Agreement (as defined in the Merger
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Agreement)); and further provided, however, that the USE Stockholders and CSI
shall not be obligated to vote in favor of the Merger pursuant to clause (A)
above if prior to the meeting of USE's Shareholders there occurs a Change of
Control of Zapco or Zapco enters into a transaction that would result in such
a Change of Control of Zapco. No Stockholder shall enter into any agreement or
understanding with any Person or entity to vote such Stockholder's shares or
give instructions in any manner inconsistent with this Section 2.01(a). The
Stockholders acknowledge receipt and review of a copy of the Merger Agreement.
(b) The parties acknowledge that the obligations of ESI under Section
2.01(a) above and 3.01(d) below (except as to voting in favor of the CSI
Designee (as defined in Section 3.01(c))) are subject and subordinate to the
voting restrictions respecting its Shares contained in Section 7 of the Pledge
Agreement between ESI and USE dated as of July 31, 2000, as amended by
Amendment No. 1 dated as of October 20, 2000 (the "Pledge Agreement
Restrictions") and in the event of any inconsistency between Section 2.01(a)
and the Pledge Agreement Restrictions, the Pledge Agreement Restrictions shall
govern.
SECTION 2.02. No Disposition or Encumbrance of Shares. Each Restricted
Stockholder, severally and not jointly, hereby agrees that, except as
contemplated by this Agreement, between the date hereof and the earlier of (a)
the Effective Time, or (b) the termination of the Merger Agreement in
accordance with its terms, such Restricted Stockholder shall not (x) sell,
transfer, tender, assign, contribute to the capital of any Person,
hypothecate, give or otherwise dispose of, grant a proxy or power of attorney
with respect to, deposit into any voting trust, or create or permit to exist
any security interest, lien, claim, pledge, option, right of first refusal,
agreement, limitation or other restriction on such Restricted Stockholder's
voting rights, or any charge or other encumbrance of any nature whatsoever
with respect to, any of such Restricted Stockholder's Shares (or agree or
consent to, or offer to do, any of the foregoing); provided, however, that the
restrictions contained in this Section 2.02 shall not apply to (i) the
placement or issuance of membership interests of ESI and the distribution of
any USE securities held by ESI pursuant to any operating agreement of ESI,
(ii) the placement, transfer or distribution of any of the Warrants held by
any USE Restricted Stockholder to any other USE Restricted Stockholder or
their Affiliates or in connection with the placement of ESI membership
interests, (iii) the conversion of any USE Series A Preferred Shares into USE
Common Shares by any USE Restricted Stockholder in accordance with the USE
Series A Preferred Shares Certificate of Designation, (iv) the exercise of any
USE stock options or Warrants held by any USE Restricted Stockholder; or (v)
the transfer of any Zapco Shares among any Zapco Stockholders or holders of
Zapco options or warrants, or of any USE Shares among USE Restricted
Stockholders or any transfers to Permitted Transferees. No Restricted
Stockholder shall take any action that would make any representation or
warranty of such Restricted Stockholder herein untrue or incorrect in any
material respect or have the effect of preventing or disabling such Restricted
Stockholder from performing its, his or her obligations or directly or
indirectly, initiate, solicit or encourage any Person to take actions that
could reasonably be expected to lead to the occurrence of any of the
foregoing.
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SECTION 2.03. No Solicitation of Transactions. Each Restricted
Stockholder, severally and not jointly, agrees that between the date of this
Agreement and the earlier of (a) the Effective Time, or (b) the termination of
the Merger Agreement in accordance with its terms, such Restricted Stockholder
will not (y) solicit, initiate, consider, encourage or accept any other
proposals or offers from any Person relating to any Competing Transaction, or
(z) participate in any discussions, conversations, negotiations and other
communications regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate in any way, assist or participate, in,
facilitate or encourage any effort or attempt by any other Person to seek a
Competing Transaction. Each Restricted Stockholder immediately shall cease and
cause to be terminated all existing discussions, conversations, negotiations
and other communications with any Persons conducted heretofore with respect to
any of the foregoing. Notwithstanding anything to the contrary in this
Agreement, however, any Stockholder in his capacity as a director or officer
of USE or Zapco shall be permitted (a) to take any action and participate in
any discussions or negotiations permitted under Section 1 of the Termination
Fee Agreement between USE, Zapco and CSI of even date and (b) to exercise his
fiduciary duties if an unsolicited proposal concerning a Competing Transaction
is received. Each Zapco Stockholder shall notify USE, and each USE Stockholder
shall notify Zapco, in each case promptly if any such proposal or offer, or
any inquiry or other contact with any Person with respect thereto, is made and
shall, in any such notice to USE or Zapco, as the case may be, indicate in
reasonable detail the identity of the Person making such proposal, offer,
inquiry or contact and the terms and conditions of such proposal, offer,
inquiry or other contact.
SECTION 2.04. Extraordinary Activities. Each Stockholder, severally and
not jointly, hereby agrees that, except as contemplated by this Agreement,
during the twenty (20) consecutive trading days ending on the trading day
which is two (2) Business Days prior to the Effective Time, neither such
Stockholder nor any Affiliates or Permitted Transferees of such Stockholder
shall, in the course of any one week period, make any Sales, transfers,
assignments, purchases or other acquisitions of any interest in (either
directly or indirectly) any USE Shares which Sales, transfers, assignments,
purchases or other acquisitions exceed the average weekly number of USE Shares
sold, transferred, assigned, purchased or otherwise acquired by such
Stockholder or the Affiliates or Permitted Transferees of such Stockholder
during the prior twelve (12) month period (other than USE Shares received in
the Merger or USE Shares purchased in connection with the exercise of any
currently outstanding option or warrant to acquire USE Shares or conversion of
any outstanding convertible securities of USE).
ARTICLE III
CERTAIN OBLIGATIONS AFTER THE EFFECTIVE TIME
SECTION 3.01. Elections to Board of Directors. (a) USE, the USE
Stockholders and CSI and their Permitted Transferees agree to exercise all
authority under applicable Law (i) to cause a vote on the approval of the USE
Plan to be placed on the ballot for the meeting (the "USE Meeting") of the
shareholders of USE to approve the Merger and (ii) to cause Xxxxxxx X. Xxxxxx
and one designee of AJG Financial Services, Inc. (the "Gallagher Designee") to
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be placed on the ballot for the USE Meeting as a nominee for election to the
Board of Directors of USE for a term beginning at the Effective Time and
ending at the third following shareholders meeting of USE that elect members
of USE's Board of Directors (the "First Term") on the conditional basis that
Xxxxxxx X. Xxxxxx'x and the Gallagher Designee's eligibility to serve on the
USE Board of Directors shall be subject to the consummation of the Merger.
(b) USE, the Zapco Stockholders, CSI and their Permitted Transferees
agree to exercise all authority under applicable Law to cause Xxxxx Xxxxxxxxx
to be placed on the ballot for the next shareholders meeting following the USE
Meeting that elects members of USE's Board of Directors as a nominee for
election to the Board of Directors of USE for a term ending at the third
following annual shareholders meeting that elects members of USE's Board of
Directors (the "Second Term"). This Section 3.01(b) shall not apply to the
Zapco Stockholders unless the Merger is consummated.
(c) USE, the Zapco Stockholders, the USE Stockholders and their
Permitted Transferees agree to exercise all authority under applicable Law to
cause M. Xxxxxxx Xxxxxxxx or any other person designated by CSI (the "CSI
Designee") to be placed on the ballot for the annual stockholders meeting of
USE in 2001 as a nominee for election to the Board of Directors for the Second
Term. This Section 3.01(c) shall not apply to the Zapco Stockholders unless
the Merger is consummated.
(d) Except as provided in Section 2.01(b) hereof, each USE Stockholder
shall take all actions necessary to vote all USE Shares entitled to vote and
owned or held beneficially or of record by such USE Stockholder at any annual
or special stockholders' meeting at which one or more directors are elected in
favor of, or shall take all actions by written consent in lieu of any such
meeting necessary to cause, the approval of the USE Plan and the election of
the directors as set forth in Sections 3.01(a) and 3.10(c) to the First Term
and the Second Term, as applicable.
(e) Each Zapco Stockholder shall take all actions necessary to vote all
USE Shares entitled to vote and owned or held beneficially or of record by
such Zapco Stockholder at any annual or special stockholders' meeting at which
one or more directors are elected in favor of, or shall take all actions by
written consent in lieu of any such meeting necessary to cause, the election
of the directors as set forth in Sections 3.01(b) and 3.01(c) to the Second
Term.
(f) CSI shall take all actions necessary to vote all CSI Shares
entitled to vote and owned or held beneficially or of record by CSI at any
annual or special stockholders' meeting at which one or more directors are
elected in favor of, or shall take all actions by written content in lieu of
any such meeting necessary to cause, the election of the directors as set
forth in Sections 3.01(a) and (b) to the First Term and the Second Term, as
applicable.
(g) Except as provided in Section 2.01(b) hereof, each USE Stockholder
agrees that, if, at any time, such USE Stockholder is then entitled to vote
for the removal of directors of USE, such USE Stockholder will not vote any
Shares in favor of the removal of any director elected pursuant to Section
3.01 (d) during the First Term or Second Term, as applicable, unless such
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removal shall be for Cause (as defined below). Each Zapco Stockholder agrees
that, if, at any time, such Zapco Stockholder is then entitled to vote for the
removal of directors of USE, such Zapco Stockholder will not vote any Shares
in favor of the removal of Xxxxx Xxxxxxxxx or any director elected pursuant to
Section 3.01 (e) before or during the Second Term unless such removal shall be
for Cause. CSI agrees that, if at any time, CSI is then entitled to vote for
the removal of directors of USE, CSI will not vote any Shares in favor of the
removal of Xxxxx Xxxxxxxxx or any director elected pursuant to Section 3.01(f)
before or during the First Term or Second Term as applicable unless such
removal shall be for Cause. "Cause" shall mean (i) the director having been
indicted of a crime which constitutes a felony under applicable law or having
entered a plea of guilty or nolo contendere with respect thereto, or (ii) the
engaging by the director in illegal or fraudulent conduct with respect to USE.
(h) Each Stockholder agrees to vote against any proposal that would
have the effect of amending or terminating Article III of USE's By-Laws as in
effect at the Effective Time.
(i) No party hereto shall enter into any agreement or undertaking with
any person or entity to vote such party's shares or give instructions in any
manner inconsistent with this Agreement.
SECTION 3.02. Redemptions. (a) If USE redeems any USE Common Stock or
Warrants held by any Restricted Stockholder (a "Redeemed Stockholder"), USE
shall contemporaneously therewith offer to repurchase such number of shares of
USE Common Stock or Warrants, as the case may be (the "Parity Securities"), of
the other Restricted Stockholders that it can offer to repurchase using the
Parity Redemption Amount (as defined). The term "Parity Redemption Amount"
means, (1) with respect to a redemption of shares of USE Common Stock, the
dollar amount equal to the product obtained by multiplying (i) a fraction, (A)
the numerator of which is the dollar amount (inclusive of the accrued but unpaid
dividends on USE Common Stock to be paid in connection with such redemption) to
be paid by USE to the holders of such USE Common Stock in connection with such
redemption of such stock and (B) the denominator of which is equal to the total
amount USE would have to pay to the holders of USE Common Stock (inclusive of
the accrued but unpaid dividends on the USE Common Stock, to be paid in
connection with such redemption) to redeem all the shares of USE Common Stock,
then outstanding (without giving effect to such redemption) by (ii) the number
of shares of USE Common Stock of the other Restricted Stockholders and (2) with
respect to a redemption of Warrants, the dollar amount equal to the product
obtained by multiplying (i) a fraction, (A) the numerator of which is the dollar
amount to be paid by USE to the holders of such Warrants in connection with such
redemption of such Warrants and (B) the denominator of which is equal to the
total amount USE would have to pay to the holders of Warrants to redeem all the
Warrants, then outstanding (without giving effect to such redemption) by (ii)
the number of Warrants of the other Restricted Stockholders.
(b) USE shall offer to repurchase the Parity Securities at the
redemption price (the "Redemption Price") received by the Redeemed Stockholder
as follows:
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(i) Such offer (the "Offer") shall be addressed by USE to the
other Restricted Stockholders (the "Eligible
Stockholders") at their addresses listed in this Agreement
(or to such other address that they shall designate in
writing in accordance with Section 6.03 hereof). Such
Offer shall formally notify (the "Notice") the Eligible
Stockholders of USE's willingness to repurchase the Parity
Securities at the Redemption Price for cash.
(ii)The Eligible Stockholders shall have, for a period of ten
(10) days after the receipt of the Notice, the right to
sell their USE Common Stock or Warrants, as the case may
be, to USE for the Redemption Price, under the terms set
forth in this Section 3.02 (b)(ii) or Warrants, as the
case may be, below.
(iii) Each Eligible Stockholder shall notify USE in writing of
its desire to sell its USE Common Stock or Warrants, as
the case may be, for the specified Redemption Price. Each
Eligible Stockholder shall have the right to have
repurchased a pro-rata portion of its USE Common Stock or
Warrants, as the case may be, based on the number of
shares of USE Common Stock or Warrants, as the case may
be, held by such Eligible Stockholder relative to the
aggregate number of shares of USE Common Stock or
aggregate number of Warrants, as the case may be, of all
Eligible Stockholders who are interested in having their
USE Common Stock or Warrants, as the case may be,
repurchased. If any Eligible Stockholder elects not to
have repurchased its pro rata portion of the Parity
Securities it shall within ten (10) days so notify USE.
Each Eligible Stockholders who has elected to have
repurchased its pro rata portion of the Parity Securities
also shall have the right to have repurchased a portion of
the pro rata portions of the Parity Securities which other
Eligible Stockholders elected not to have repurchased on a
pro-rata basis, based on the number of shares of USE
Common Stock or Warrants, as the case may be, held by such
Eligible Stockholder relative to the aggregate number of
shares of USE Common Stock or aggregate number of
Warrants, as the case may be, of all Eligible Stockholders
who elected to purchase, until the Eligible Stockholders
have chosen to repurchase all or less than all of the
Parity Securities repurchased. Thereafter, a closing shall
take place.
ARTICLE IV
RESTRICTIONS ON TRANSFER
SECTION 4.01. General Restriction. From and after the Effective Time,
the Former Zapco Stockholders agree that they will not, directly or
indirectly, make or solicit any Sale of any USE Shares, except in compliance
with the Securities Act and this Agreement.
10
SECTION 4.02. Legends. (a) USE shall affix to each certificate
evidencing USE Shares of the Former Zapco Stockholders a legend in substantially
the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION OF
TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER
UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH ACT DOES NOT APPLY.
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCKHOLDERS' AND VOTING
AGREEMENT, DATED AS OF NOVEMBER 28, 2000, AS IT MAY THEREAFTER BE
AMENDED, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE ISSUER. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE
MADE ON THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS
SHALL HAVE BEEN COMPLIED WITH."
(b) USE shall affix to each certificate evidencing USE Shares of any
Stockholder other than a Former Zapco Stockholder a legend in substantially
the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCKHOLDERS' AND VOTING
AGREEMENT, DATED AS OF NOVEMBER 28, 2000, AS IT MAY THEREAFTER BE
AMENDED, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE ISSUER. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE
MADE ON THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS
SHALL HAVE BEEN COMPLIED WITH."
(c) In the event that any USE Shares shall cease to be Restricted
Shares, USE shall, upon the written request of the holder thereof, issue to
such holder a new certificate evidencing such USE Shares without the first
paragraph of the legend required by Section 4.02(a) endorsed thereon;
provided, however, that such holder shall furnish USE or its transfer agent
such certificates, legal opinions or other information as USE or its transfer
agent may reasonably require to confirm that the legend is not required on
such certificate. In the event that any USE Shares shall cease to be subject
to the restrictions on transfer set forth in this Agreement but remain
Restricted Shares, USE shall, upon the written request of the holder thereof,
issue to such holder a new certificate evidencing such USE Shares without the
second paragraph of the legend required by Section 4.02(a). In the event that
any Shares shall cease to be entitled to any rights and subject to any
obligations set forth in this Agreement, USE shall, upon the written request
of the holder thereof, issue to such holder a new certificate evidencing such
USE Shares without the legend required by Section 4.02(b).
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SECTION 4.03. Lock-Up. Each Restricted Stockholder hereby agrees that,
for a period of twelve (12) months following the Effective Time, such
Restricted Stockholder shall not, directly or indirectly, (including via puts,
calls or other derivatives) sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or otherwise
transfer or dispose of (other than to Permitted Transferees who agree to be
similarly bound) any USE Shares or rights, options or warrants issued by USE
("USE Rights") held by such Restricted Stockholder at any time during such
period; provided, however that such Restricted Stockholders may exercise USE
Rights it being understood that the Shares issuable upon such exercise shall
be subject to this Agreement; and provided, further that ESI shall be
permitted to take such action as it deems appropriate, including without
limitation the sale or distribution of ESI membership interests, USE Shares,
or the Warrants pursuant to the Operating Agreement by and among ESI and its
members, so long as upon any USE Shares or USE Right being distributed by ESI
to any Stockholder such USE Shares and USE Rights shall be subject to the same
extent as other USE Shares and USE Rights held by such Stockholders.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF USE AND THE STOCKHOLDERS
Each Stockholder, severally and not jointly, hereby represents and
warrants to USE (in the case of each Zapco Stockholder) and to each other
Stockholder, in each case in respect of such Stockholder only, as to the
matters set forth in Sections 5.01 through 5.03, and USE hereby represents and
warrants to each Zapco Stockholder as to the matters set forth in Sections
5.04 and 5.05:
SECTION 5.01. Authority Relative to This Agreement. Such Stockholder
has all necessary power and authority to execute and deliver this Agreement,
to perform such Stockholder's obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by such Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
SECTION 5.02. No Conflict. (a) The execution and delivery of this
Agreement by such Stockholder do not, and the performance of this Agreement by
such Stockholder shall not, (i) conflict with or violate its charter,
organizational documents, by-laws, operating agreement, partnership agreement,
or similar agreements and instruments, if applicable, or any law, rule,
regulation, order judgment or decree applicable to such Stockholder or by
which the Shares owned by such Stockholder are bound or affected or (ii)
result in any breach of, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the Shares owned by such
12
Stockholder pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which such Stockholder is a party or by which such Stockholder or the
Shares owned by such Stockholder are bound or affected)
(b) The execution and delivery of this Agreement by such Stockholder do
not, and the performance of this Agreement by such Stockholder shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental authority, domestic or foreign, except for
applicable requirements, if any, of the Exchange Act.
SECTION 5.03. Title to the Shares. As of the date hereof, such
Stockholder is the record and beneficial owner of the number of Shares set
forth beneath such Stockholder's name on the signature page hereof. Such
Shares are all the Shares owned, either of record or beneficially, by such
Stockholder. The Shares owned by such Stockholder are owned free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on such Stockholder's voting rights, charges
and other encumbrances of any nature whatsoever. Except as provided in this
Agreement, such Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Shares owned by
such Stockholder.
SECTION 5.04. Authority of USE Relative to This Agreement. USE has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
USE and constitutes a legal, valid and binding obligation of USE, enforceable
against USE in accordance with its terms.
SECTION 5.05. No USE Conflict. (a) The execution and delivery of this
Agreement by USE do not, and the performance of this Agreement by USE shall
not, (i) conflict with or violate its Certificate of Incorporation or By-Laws
or any law, rule, regulation, order judgment or decree applicable to USE or
(ii) result in any breach of, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the properties or
assets of USE pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which USE is a party or by which USE or its properties and assets are bound
or affected).
(b) The execution and delivery of this Agreement by USE do not, and the
performance of this Agreement by USE shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental authority, domestic or foreign.
ARTICLE VI
MISCELLANEOUS
13
SECTION 6.01. Termination. Unless otherwise expressly provided herein
and except for Section 3.01(g), which shall terminate on the third anniversary
hereof, the obligations of the parties hereto shall terminate upon the
earliest of (a) the termination of the Merger Agreement in accordance with its
terms, or (b) the later of (i) the date which is eighteen months following the
date hereof and (ii) on the date upon which the Shareholder votes required by
Section 3.01(a), 3.01(b) and 3.01(c) have occurred. Nothing in this Section
6.01 shall relieve any party of liability for any breach of this Agreement.
SECTION 6.02. Expenses. Except as expressly set forth herein, costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the Person incurring
such costs and expenses whether or not the closing of the Merger occurs.
SECTION 6.03. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 6.03):
(a) If to USE, at:
Xxx Xxxxx Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxxxx, President and Chief Operating
Officer
with a copy to:
Xxxxxxxx Brog Leinwand
Xxxxxx Xxxxxxxx & Xxxxx P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
(b) If to the USE Stockholders, to the addresses set forth on the
signature pages hereof
(c) If to the Zapco Stockholders, to the addresses set forth on the
signature pages hereof, with a copy to:
14
Xxxxxxx & Xxxxxxx, LLP
Xxx Xxxxxxxx Xxx
Xxxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxxxx, Xx., Esq. and
Xxxxxx X. Xxxxxxxxx, Esq.
And
Xxxxxxxxxx Helpern Syracuse & Hirschtritt LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
And
(d) If to CSI, at:
Cinergy Solutions, Inc.
0000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: M. Xxxxxxx Xxxxxxxx, President & COO
Facsimile: 000-000-0000
With a copy to:
Cinergy Corp.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, General Counsel
Facsimile: 000-000-0000
SECTION 6.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 6.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law,
governmental regulation or public policy, all other terms and provisions of
this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to the greatest
extent possible.
15
SECTION 6.06. Entire Agreement. This Agreement and the agreements
referred to herein constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, between USE and the Stockholders with
respect to the subject matter hereof and thereof including without limitation
the letter agreements among USE, CSI and the USE Restricted Stockholders dated
as of October 12, 2000.
SECTION 6.07. Assignment. This Agreement may not be assigned by
operation of law or otherwise except by Stockholders to Permitted Transferees in
connection with a transfer of Shares hereunder.
SECTION 6.08. Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by, or on behalf of, each of the
parties. Any party to this Agreement may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties of the other
party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.
SECTION 6.09. Governing Law. This Agreement shall be governed by the
laws of the State of New York, without regard to the principles of conflicts
of law thereof. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in any New York state or federal court
sitting in New York County, New York, and the parties hereto hereby consent to
the jurisdiction of such courts in any such action or proceeding.
SECTION 6.10. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
SECTION 6.11. Equitable Relief. The parties hereto agree that the
remedy at law for any breach of this Agreement is inadequate. Accordingly, the
parties consent and agree that an injunction may be issued to restrain any
breach or alleged breach of this Agreement, with the posting of a bond or for
such other security as may be required by the court. In the event of any
controversy concerning the purchase or sale of any USE Shares hereunder or any
matter relating to the voting of the USE Shares, the terms of this Agreement
shall be enforceable in a court by a decree of specific performance. Such
remedies shall, however, be cumulative and not exclusive, and shall be in
addition to any other remedies which the parties may have.
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SECTION 6.12. Jurisdiction and Service of Process. Each party hereby
irrevocably: (1) agrees that any suit, action, or other legal proceeding arising
out of this Agreement or out of any of the transactions contemplated hereby or
thereby, may be brought in any New York court or United States federal court
located in the County of New York; (2) consents to the jurisdiction of each such
court in any such suit, action, or legal proceeding; (3) waives any objection
which such party may have to the laying of venue of any such suit, action, or
legal proceeding in any of such courts; (4) agrees that New York is the most
convenient forum for litigation of any such suit, action, or legal proceeding;
and (5) designates the Secretary of State of the State of New York as such
party's agent to accept and acknowledge on its behalf service of any and all
process in any such suit, action or legal proceeding brought in any such court,
and agrees and consents that any such service of process upon such agent shall
be taken and held to be valid personal service upon such party and that any such
service of process shall be of the same force and validity as if service were
made upon such party according to the laws governing the validity and
requirements of such service in the State of New York, and waives all claim of
error by reason of any such service.
SECTION 6.13. Further Assurances. Each Stockholder and USE will execute
and deliver all such further documents and instruments and take all such
further action as may be necessary in order to consummate the transactions
contemplated hereby.
SECTION 6.14. The Stockholders agree not to take any action to amend
USE's Certificate of Incorporation or By-Laws in a manner which would create a
conflict between such documents and this Agreement.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written, by, in the case of
USE, its authorized signatory thereunto duly authorized.
USE:
U. S. ENERGY SYSTEMS, INC.
By: /s/Xxxxx Xxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: President & Chief Operating Officer
USE STOCKHOLDERS:
By:/s/ Xxxxxx X. Xxxxxx
-------------------------
Xxxxxx X. Xxxxxx
Address:
By: /s/ Xxxxxxxx Xxxxxxxxx
--------------------------
Xxxxxxxx Xxxxxxxxx
Address:
By: /s/ Xxxxx Xxxxxxxxx
--------------------------
Xxxxx Xxxxxxxxx
Address:
ENERGY SYSTEMS INVESTORS, LLC
By: /s/ Xxxxx Xxxxxxxxx
---------------------------
Name: Xxxxx Xxxxxxxxx
Title:
Address:
18
MARATHON CAPITAL, LLC
By: /s/ Xxxxxxxx Xxxxxx
-------------------------------
Name: Xxxxxxxx Xxxxxx
Title: Manager
Address:
CASTLEBRIDGE PARTNERS, LLC
By: /s/ Xxxxx Xxxx
------------------------------
Name: Xxxxx Xxxx
Title:Manager
Address:
ZAPCO STOCKHOLDERS:
AJG Financial Services, Inc.
By: /s/ Xxxx X. Xxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Executive Vice President
XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxx
19
ENVIRONMENTAL OPPORTUNITIES FUND
By:/s/ Xxxxxxx Xxxxx
-----------------------------
Name:
Title:
ENVIRONMENTAL OPPORTUNITIES FUND/CAYMAN
By: /s/ Xxxxxxx Xxxxx
----------------------------------
Name:
Title:
FINOVA MEZZANINE CAPITAL CORP.
By:/s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
XXXXXXXX XXXX
/s/ Xxxxxxxx Xxxx
-----------------------------------
M & R ASSOCIATES
By: /s/ Xxxxxxxx Xxxx
---------------------------------
Name: Xxxxxxxx Xxxx
Title: President
20
XXXXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
XXXXXXX X. XXXXXXX
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------
XXXXXXX X. XXXXXXXXX
/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
CSI:
CINERGY SOLUTIONS, INC.
By:/s/ M. Xxxxxxx Xxxxxxxx
--------------------------------------
Name: M. Xxxxxxx Xxxxxxxx
Title: President and Chief Operating
Officer
21
