Exhibit 4
STOCKHOLDERS' AGREEMENT
-----------------------
STOCKHOLDERS' AGREEMENT (this "Agreement") entered into as of the 23/rd/ day
---------
of July, 2001, among Environmental Power Corporation, a Delaware Corporation
("EPC"), Xxxxxx X. Xxxxxxxxxx ("Xxxxxxxxxx") and Xxxxxx X. Xxxxxx ("Xxxxxx"),
----- ---------- ------
the majority stockholders of EPC (Xxxxxxxxxx and Xxxxxx are collectively
referred to herein as the "Majority Stockholders") and Xxxxxx X. Xxxx ("Xxxx"),
--------------------- ----
Xxxxxxxx X. Xxxxx ("Xxxxx"), Xxxxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxxx X. Xxxxxxx
----- -------
("Xxxxxxx"), Xxxx X. X'Xxxx ("X'Xxxx"), Xxxxx X. Xxxxxx ("Xxxxxx"), Xxxxxxx
Xxxxxxx and Xxxxx Xxxxxx, as Trustees of the Trust under the will of Xxxxxx
Xxxxxxx FBO Xxxxxxx Xxxxxxx (the "Trust"), Xxxxxxxx Ventures Inc. Money Purchase
Pension Plan - DLJSC Custodian FBO Xxxxxxx Xxxxxxx Trustee (the "Plan"), Amro
International S.A. ("Amro"), Xxxxx Xxxxxx ("Xxxxxx"), Xxxx X. Xxxxx ("Xxxxx")
and Hitel Group ("Hitel"), principal stockholders of Microgy Cogeneration
Systems, Inc., a Colorado corporation ("Microgy") (Kast, Brant, Xxxxxxx,
-------
Xxxxxxx, O'Shea, Krauss, the Trust, the Plan, Amro, Xxxxxx, Xxxxx and Hitel are
collectively referred to herein as the "Principal Microgy Stockholders").
------------------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, EPC, Microgy and the Principal Microgy Stockholders have entered
into a Share Exchange Agreement dated as of June 20, 2001 (the "Exchange
--------
Agreement"), pursuant to which the Principal Microgy Stockholders have agreed,
---------
subject to the terms and conditions thereof, to exchange an aggregate 15,919,147
shares of Common Stock, par value $.001 per share, of Microgy for an aggregate
5,521,549 shares of Common Stock of EPC, par value $0.01 per share ("EPC Common
----------
Stock") and 197,760.7 shares of Series B Preferred Stock of EPC, par value $0.01
-----
per share ("EPC Preferred Stock"), and Xxxxxxx has agreed to exchange 800,000
-------------------
warrants for EPC Derivative Securities, as defined therein; and
WHEREAS, the parties desire to provide representation on the EPC Board of
Directors for the Principal Microgy Stockholders in their capacity as
stockholders of EPC and stability in management of EPC; and
WHEREAS, the Exchange Agreement provides, as a condition precedent to the
closing under the Exchange Agreement, for the execution and delivery of this
Agreement.
NOW, THEREFORE, in connection with the Exchange Agreement and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
SECTION 1. Definitions. In addition to the terms defined elsewhere herein,
-----------
when used herein the following terms shall have the meanings indicated:
(a) "Affiliate" as applied to any Person, means any other Person
---------
directly or indirectly controlling, controlled by or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as applied to any Person, shall mean (a) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by
contract or otherwise, or (b) ownership, directly or indirectly, of 10% or more
of the Equity Interests of such Person.
(b) "Beneficially Owned" means Stock owned by a Stockholder, or an
------------------
Affiliate or Family Member of that Stockholder where the Stockholder has the
power to direct or control the exercise of voting rights with respect thereto.
(c) "Existing Directors" means the five (5) Directors of EPC
------------------
immediately prior to the Closing.
(d) "Family Member" means a parent, child, descendant or sibling of
-------------
the Stockholder, the spouse of any of the foregoing or the Stockholder, or the
estate, any guardian, custodian, conservator or committee of, or any trust for
the benefit of, the Stockholder or any of the foregoing.
(e) "Incumbent Directors" shall mean the Existing Directors (as well
-------------------
as any additional Incumbent Directors selected in accordance with Sections 4(a)
and (d)) or any replacement or substitution therefor designated as such by the
Majority Stockholders.
(f) "Microgy Designees" shall mean the three directors elected to
-----------------
fill vacancies on the Board as contemplated by Section 9.6 of the Exchange
Agreement (as well as any additional Microgy Designees selected in accordance
with Sections 4(a) and (d)), or any replacement or substitution therefor
designated as such by the Principal Microgy Stockholders.
(g) "Person" means any individual, corporation (including not-for-
------
profit), general or limited partnership, limited liability company, limited
liability partnership, joint venture, estate, trust, association, organization,
governmental entity or other entity of any kind or nature.
(h) "Stock" means shares of EPC Common Stock and EPC Preferred
-----
Stock.
(i) "Stockholders" or "Stockholder" means collectively, or
------------ -----------
individually, any of the Principal Microgy Stockholders or the Majority
Stockholders.
(j) Unless otherwise separately defined in this Agreement, all
capitalized terms when used herein, shall have the same meaning and definition
as is set forth in the Exchange Agreement.
SECTION 2. Termination.
-----------
(a) This Agreement may be terminated by written consent of the
Principal Microgy Stockholders and the Majority Stockholders.
(b) This Agreement shall terminate automatically on June 30, 2003.
SECTION 3. Amendment to Certificate of Incorporation. EPC agrees to arrange
-----------------------------------------
for a meeting of stockholders as soon as the Company deems practicable (but in
any event in a time frame which permits the Company to comply with its
obligations under Section 2(a) of the
2
Registration Rights Agreement (as defined in the Exchange Agreement) to present
a proposal to increase the authorized shares of EPC Common Stock from 20,000,000
to a greater amount (at least sufficient to cause the conversion of the Series B
Preferred Stock and the other EPC Derivative Securities) as the Board deems
desirable. Each of the Stockholders agrees to vote all of the shares of Stock
Beneficially Owned or controlled by such Stockholder at such meeting of EPC's
stockholders (or, if not approved at such meeting, at any other meeting of EPC
stockholders which occurs) to amend EPC's Certificate of Incorporation to
increase the authorized shares of EPC Common Stock as contemplated by the
previous sentence.
SECTION 4. Election of Directors and Officers; Authority of Officers.
---------------------------------------------------------
(a) Number of Directors. Except as otherwise agreed by the Majority
-------------------
Stockholders and the Principal Microgy Stockholders, following the actions
contemplated by Section 9.6 of the Exchange Agreement, each of the Stockholders
agrees to take all such lawful action, including affirmatively voting the shares
of Stock Beneficially Owned or controlled by such Stockholder, as necessary to
cause the proportion of Microgy Directors to Incumbent Directors to remain
approximately 3:5 (or as close thereto as practicable). Notwithstanding the
foregoing, the parties agree and acknowledge that directors may hereafter be
elected by the Board and/or stockholders of EPC who are neither Microgy
Designees nor Incumbent Directors in connection with financings or to add
directors with desired skills or attributes or to comply with corporate
governance or listing requirements.
(b) Covenant to Vote for Majority Designees. Each of the
---------------------------------------
Stockholders shall vote all of the shares of the Stock Beneficially Owned or
controlled by such Stockholder (i) at each annual or special meeting of the
EPC's stockholders called for the purpose of electing Directors or (ii) by
written consent (in lieu of an annual or special meeting) of the EPC's
stockholders for the purpose of electing Directors, in favor of the election or
reelection of the Incumbent Directors.
(c) Covenant to Vote for Microgy Designees. Each of the Stockholders
--------------------------------------
shall vote all of the shares of the Stock Beneficially Owned or controlled by
such Stockholder (i) at each annual or special meeting of the EPC's stockholders
called for the purpose of electing Directors or (ii) by written consent (in lieu
of an annual or special meeting) of the EPC's stockholders for the purpose of
electing Directors, in favor of the election or reelection of the Microgy
Designees.
(d) Filling Vacancies. If at any time there shall exist a vacancy on
-----------------
EPC's Board by reason of the death, resignation or removal of any Microgy
Designee or Incumbent Director or an increase in the number of Microgy Designees
and Incumbent Directors in accordance with Section 4(a) above, each Stockholder
who is then a Director of EPC shall, in his capacity as director (subject to his
fiduciary duties to EPC) elect a designee (reasonably acceptable to the Board)
of the Majority Stockholders (in the case of a vacancy in Incumbent Directors)
or of the Principal Microgy Stockholders (in the case of a vacancy in Microgy
Designees) to fill the vacancy. In the event the vacancy is not filled as
contemplated by the prior sentence, the Stockholders agree to promptly take all
such lawful action as reasonably within their power to duly call and convene a
special meeting (or by written consent in lieu of a special meeting) of EPC's
stockholders as soon as reasonably practicable to appoint a Microgy Designee
3
or Incumbent Director, as the case may be, to fill such vacancy, and thereafter
each of the Stockholders shall affirmatively vote their Stock to duly elect such
nominee.
(e) Removal of Microgy Designee or Majority Designee. Each of the
------------------------------------------------
Stockholders agrees not to vote the Shares of Stock Beneficially Owned or
controlled by such Stockholder to remove a person who remains a Microgy Designee
or Incumbent Director, except for cause or as requested by the Principal Microgy
Stockholders or Majority Stockholders, as the case may be.
(f) Officers. Each Stockholder who is a Director of EPC shall, in
--------
his capacity as director (subject to his fiduciary duties to EPC), unless
otherwise agreed by a majority of the then Incumbent Directors, retain in office
the Chairman and Chief Executive Officer and President of EPC existing
immediately prior to the Closing and not take any action to alter the respective
powers and functions of such offices.
SECTION 5. Standstill Agreement. The Principal Microgy Stockholders agree
--------------------
that until this Agreement is terminated in accordance with Section 2 hereof,
unless such stockholder has been specifically invited in writing by a majority
of the then Incumbent Directors (or in the case of Section 5(a)(i) below, has
obtained the consent of a majority of the then Incumbent Directors), such
stockholder will not in any manner, directly or indirectly, (a) effect or seek,
offer or propose (whether publicly or otherwise) to effect, or cause or
participate in or in any way assist any other person to effect or seek, offer or
propose (whether publicly or otherwise) to effect or participate in, (i) in the
case of Messrs. Xxxx and Xxxxx, any acquisition of any securities (or beneficial
ownership thereof) or assets of EPC, or any of its subsidiaries, except as
contemplated in the Exchange Agreement; (ii) any tender or exchange offer or
merger or other business combination involving EPC or any of its subsidiaries,
(iii) any recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to EPC or any of its subsidiaries or (iv)
any "solicitation" of "proxies" (as such terms are used in the proxy rules of
the Securities and Exchange Commission) or consents to vote any voting
securities of EPC, except as contemplated herein, (b) form, join or in any way
participate in a "group" (as defined under the Securities Exchange Act of 1934,
as amended), with respect to the securities of EPC, except as contemplated
herein, (c) otherwise act, alone or in concert with others, to seek to control
or influence the management, Board or policies of EPC, (other than acting as a
shareholder or director in the ordinary course), (d) take any action which might
force EPC to make a public announcement regarding any of the types of matters
set forth in (a) above, (e) advise, assist or encourage any other persons in
connection with the foregoing, or (f) enter into any discussions or arrangements
with any third party with respect to any of the foregoing.
SECTION 6. Severability: Governing Law. If any provision of this Agreement
---------------------------
shall be determined to be illegal and unenforceable by any court of law, the
remaining provisions shall be severable and enforceable in accordance with their
terms. To the extent a provision in this Agreement is unenforceable as to time,
duration or geographic scope, the parties hereby stipulate that such court of
law is authorized to reduce such scope and enforce said provision to the fullest
extent permitted by law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, applicable to
instruments made and performed entirely in such state.
4
SECTION 7. Benefits of Agreement. This Agreement shall be binding upon and
---------------------
inure to the benefit of the parties and their respective successors and
permitted assigns, legal representatives and heirs (it being understood that
transfers of Stock are subject to the provisions of Section 16 below) and this
Agreement does not create, and shall not be construed as creating, any rights
enforceable by any other Person.
SECTION 8. Notices. Unless otherwise provided herein, any notice, request,
-------
instruction or other documents to be given hereunder by any party to any other
party or parties shall be in writing and delivered in person or by courier or by
facsimile transmission (followed by mailing certified mail, postage prepaid,
return receipt requested) or mailed by certified mail, postage prepaid, return
receipt requested, as follows:
(i) If to EPC, to it at the following address:
Environmental Power Corporation
000 Xxxxxx Xxxxxx, Xxxxx 0X
Xxxxxxxxxx, XX 00000
Attn: Chief Executive Officer
Telephone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxxx & Whitney LLP
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(ii) If to Xxxxxx or Xxxxxxxxxx, to him at the following address:
Environmental Power Corporation
000 Xxxxxx Xxxxxx, Xxxxx 0X
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000;
With a copy to:
Xxxxxx & Whitney LLP
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
5
(iii) If to a Principal Microgy Stockholder, to it at the address listed on
Schedule 2.1 to the Exchange Agreement
With a copy to, in the case of Messrs. Eastman, Brunner, Xxxx, Xxxxx
and Xxxxx:
D. Xxxxxxxxx Xxxxx, Esq.
Rothgerber Xxxxxxx & Xxxxx LLP
0000 00/xx/ Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to, in the case of all other Principal Microgy Holders:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxx & Associates
Counselors at Law, P.C.
00 Xxxx 00/xx/ Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000; and
(iv) If to another Holder, to it c/o Xxxxxx X. Xxxx and/or Xxxxxxxx X.
Xxxxx;
or to such other place and with such other copies as any party may designate as
to itself by written notice to the others.
All such notices, requests, instructions, documents and other
communications will (i) if delivered personally to the address as provided in
this Section 8, be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this Section 8, be deemed
given upon receipt, and (iii) if delivered by mail in the manner described above
to the address as provided in this Section 8, be deemed given upon receipt (in
each case regardless of whether such notice is received by any other Person to
whom a copy of such communication is to be delivered pursuant to this Section 8.
SECTION 9. Modification. Except as otherwise provided herein, neither this
------------
Agreement nor any provision hereof can be modified, changed, discharged or
terminated except by an instrument in writing signed by EPC and each of the
Stockholders.
SECTION 10. Captions and References to Sections. The captions herein are
-----------------------------------
inserted for convenience only and shall not define, limit, extend or describe
the scope of this Agreement or affect the construction hereof. Sections
mentioned by number only are the respective sections of this Agreement.
SECTION 11. Availability of Equitable Remedies. Each of the Stockholders
----------------------------------
acknowledges that a breach of the provisions of this Agreement will not be
adequately compensated by money damages. Accordingly, any party shall be
entitled, in addition to any
6
other right or remedy available to it, to an injunction restraining such breach
or a threatened breach and to specific performance of any such provision of this
Agreement, and in either case no bond or other security shall be required in
connection therewith, and the parties hereby consent to such injunction and to
the ordering of specific performance.
SECTION 12. Entire Agreement. This Agreement sets forth the entire
----------------
understanding of the parties with respect to the subject matter hereof and
supersedes all existing agreements among them concerning such subject matter.
SECTION 13. Waiver. Any waiver by any party of a breach of any provision of
------
this Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be evidenced by a
writing signed by the party against whom the waiver is sought to be enforced.
SECTION 14. Pronouns. Any masculine personal pronoun shall be considered to
--------
mean the corresponding feminine or neuter personal pronoun, and vice versa, as
the context requires.
SECTION 15. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument. This Agreement
shall become effective and binding upon each proposed party hereto upon the
execution and delivery of a counterpart hereof by such party.
SECTION 16. Transfer of Stock. Nothing herein shall act to prohibit or
-----------------
prevent the Stockholders from transferring, by sale, gift, bequest or in any
other manner, any or all of the Stock Beneficially Owned or controlled by such
Stockholder. Notwithstanding the foregoing, however, a Stockholder may not
transfer any of such Stock to a director, officer or 10% shareholder of EPC or
to an Affiliate or Family Member of such Stockholder or to another Stockholder
or otherwise in a private transaction unless said transferee has agreed, in
writing, to be bound by the applicable terms of this Agreement.
SECTION 17. Legend. Any certificates issued on or after the date hereof
------
evidencing Stock Beneficially Owned by a party hereto shall bear a legend to the
effect that such Stock is subject to the provisions of this Agreement.
SECTION 18. Action. Any designation or agreement hereunder by the group of
------
Majority Stockholders or the group of Principal Microgy Stockholders shall be by
holders of a majority of the voting power in Stock among the members of such
group or by such other method as the members of such group may agree in writing
from time to time.
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
ENVIRONMENTAL POWER CORPORATION
By: __________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
______________________________________
Xxxxxx X. Xxxxxx
______________________________________
Xxxxxx X. Xxxxxxxxxx
______________________________________
Xxxxxx X. Xxxx
______________________________________
Xxxxxxxx Xxxxx
______________________________________
Xxxxxx X. Xxxxxxx
______________________________________
Xxxxxx X. Xxxxxxx
______________________________________
Xxxx X. X'Xxxx
______________________________________
Xxxxx X. Xxxxxx
8
XXXXXXX XXXXXXX AND XXXXX XXXXXX,
AS TRUSTEES OF THE TRUST U/W/O
XXXXXX XXXXXXX FBO XXXXXXX XXXXXXX
____________________________
Xxxxxxx Xxxxxxx, Trustee
____________________________
Xxxxx Xxxxxx, Trustee
XXXXXXXX VENTURES INC. MONEY
PURCHASE PENSION PLAN DLJSC -
CUSTODIAN FBO XXXXXXX XXXXXXX
TRUSTEE
By: _________________________________
Name:
Title:
AMRO INTERNATIONAL, S.A.
By: _________________________________
Name:
Title:
_____________________________________
Xxxxx Xxxxxx
_____________________________________
Xxxx X. Xxxxx
HITEL GROUP
By: _________________________________
Name:
Title:
9
