Exhibit 10.85
Amendment No. 2 to Shareholders' Agreement
This Amendment No. 2 to the Shareholders' Agreement is made as of the 1st day of
October 2003 (as supplemented or modified from time to time, "this Agreement")
by and among Scandinavian Energy Finance Limited, an Irish corporation (the
"Company"), Endoray Investments, B.V. a Dutch company ("USE"), which is a wholly
owned subsidiary of US Energy Systems, Inc. ("USE Parent"), USE Parent, and EIC
Electricity SA, a Swiss company ("EIC").
RECITALS
WHEREAS the parties hereto have previously entered into that certain
Shareholders' Agreement dated as of March, 2002 which was amended by Amendment
No. 1 dated as of the 19th of, February 2003 (collectively the "Shareholders'
Agreement");
WHEREAS as of September 30, 2003, USE has transferred beneficial ownership of
2,000 Ordinary Shares ("Transferred Shares") to Borg Energi AB ("BE") ("Ordinary
Share Transfer").
WHEREAS between September 24, 2003 and October 27, 2003 EIC has exented a
Shareholder Loan to the Company of mSEK 9.8 and USE Parent has extended a
Shareholder Loan to the Company of mSEK 10.2 (collectively the "Shareholder
Loans").
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WHEREAS it is expected that the Company and ESS AB require additional funding of
up to mSEK 28 from the date of this Agreement until the end of 2003 and EIC will
extend such additional funding to the Company and/or ESS AB and/or its
subsidiaries in the form of priority shareholder loans (the "Priority
Shareholder Loans").
WHEREAS in consideration of the Shareholder Loans and the Priority Shareholder
Loans the parties have agreed to certain distribution priorities ("the
Distribution Priorities").
WHEREAS in consideration of EIC contributing additional funding to the Company
and/or ESS AB and/or its subsidiaries during the remainder of 2003 and USE, USE
Parent and BE not contributing additional capital during 2003, the parties have
agreed to a dilution giving effect to an immediate increase of EIC's
shareholding in the Company from 49% to 66.666%.
WHEREAS the parties have agreed to change the respective service agreements with
USE and EIC effective as of the date of this Agreement, so that from the date
hereof the service fees payable to USE and EIC shall be pro-rated to the
shareholding of the respective party, failing such change to the respective
agreements with USE and EIC, both parties undertake that payments made under
such service agreements will give effect to the Distribution Priorities provided
herein.
WHEREAS the parties hereof now wish to amend the Shareholders' Agreement.
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NOW THEREFORE in consideration of the foregoing the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Capitalized Terms herein shall have the same meaning as the meaning
ascribed to them in the Shareholders' Agreement unless indicated
otherwise.
2. Section 1.2(a) of the Shareholders' Agreement is hereby amended by
deleting the word "seven" and replacing it with the word "six".
3. Section 1.2(b) of the Shareholders' Agreement is hereby amended by
replacing the first sentence with the sentence: USE and EIC shall have the
right to designate two individuals and four individuals, respectively, as
nominees for election as Directors and as directors of any future direct
or indirect subsidiary of the Company (a "Future Subsidiary").
4. Section 1.2(c) of the Shareholders' Agreement is amended by deleting the
existing section in its entirely and replacing it with the following
section:
"(c) Board of Directors.
The Board of Directors of the Company as of the date of Amendment No. 2
will consist of the following persons:
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Name of Directors Designating Shareholder
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Xxxxx Xxxxxxx USE
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Xxxxx X. Xxxxxxx USE
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Xxxxxxx Xxxx EIC
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Xxxxxxxxx Xxxxxxxx EIC
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Xxxxx Xxxxxx EIC
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Each of such persons shall hold office until such person's death,
resignation or removal, or until such person's successor shall have been
duly designated, where applicable and elected by the Shareholders."
5. Section 1.3, prefractory paragraph, of the Shareholders' Agreement is
hereby amended by deleting the word "six" and replacing it with the word
"five".
6. Section 1.3, shall be amended by deleting the list of Required Matters and
replacing it with the following:
Subject to Section 1.9 hereof, demand additional capital from the
Shareholders.
Subject to Section 1.3A hereof, borrow money or guarantee the
obligations of any Person not in the ordinary course of business, or
mortgage, pledge or grant a security interest in assets not in the
ordinary course of business, in any one transaction or a series of
related transactions.
Enter into a transaction or agreement with an Affiliate of a
Shareholder or amend any such agreement other than as specifically
set forth in this Agreement.
Dispose of assets not in the ordinary course of business.
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Subject to Section 1.9 hereof, authorise or issue any additional
Ordinary Shares or other equity interests of the Company or any
option or warrant to purchase such equity interests.
Engage in a business activity other than the Business.
Subject to Section 1.3A hereof, commence any process of dissolution,
liquidation, winding up, insolvency, examinership or voluntary
bankruptcy.
Approve any merger or consolidation of the Company.
Subject to Section 1.3A hereof, amend or modify any credit agreement
or implement any change in capital structure not in the ordinary
course of business.
Subject to Section 1.3A and Section 13.9 hereof, commence or settle
any litigation that involves an amount in excess of $100,000.
Engage or terminate principal auditors of the Company.
Subject to Section 1.3A hereof, take any material action or exercise
or waive any material right with respect to the Company's financing
agreements with Lantbrukskredit AB.
Take any action that would create or expand recourse to or the
financial or legal exposure of a Shareholder or an Affiliate of a
Shareholder (other than SEFL, ESS or its subsidiaries) in relation
to the Company, ESS or their subsidiaries.
Take any action that would create adverse tax or regulatory
consequences to a Shareholder or an Affiliate of a Shareholder
(other than SEFL, ESS or its subsidiaries) in relation to the
Company or ESS or their subsidiaries.
7. Section 1.3, third unlettered paragraph is hereby amended by deleting the
fourth sentence and replacing it with: Therefore, for example if the
Company had the right to nominate members of Gigantissimo 2321 AB board
as of the date of Amendment No. 2., EIC would have the right to designate
a majority of designees.
8. Section 1.3A is added and reads as follows:
The Shareholders acknowledge and recognize that due to current liquidity
issues at SEFL and ESS and disputes with LBK (i) the capital structure of
the
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Company and/or its subsidiaries, (ii) the terms and conditions of its loan
with Landbrukskredit, (iii) the terms, conditions and structure of its
holdings in ESS and/or its subsidiaries are all expected to be
restructured and/or (iv) the Shareholder and/or the Company and its
subsidiaries may have to commence litigation procedures against certain
third parties to give effect to the restructuring (the "Restructuring").
For purposes of this Agreement a sale of the assets or stock of SEFL
and/or ESS are not part of a Restructuring. In recognition that EIC has
committed to fund a disproportionate share of the cash requirements of
SEFL and ESS for the remainder of 2003 and in order to facilitate a
successful Restructuring, which is in the best interest of the Company,
USE and EIC agree that:
a) EIC shall assume the lead role in the Restructuring and as such subject
to Sections 1.3 and 1.9 hereof shall be primarily authorized to and
responsible for formulating and negotiating with relevant counterparties
the terms and conditions of such Restructuring, provided that the terms
and conditions of the Restructuring, proposed by EIC (i) are from the
standpoint of the Shareholders reasonably prudent under the circumstances,
and (ii) do not provide any direct or indirect economic benefit to any
Shareholder or their affiliate other than economic benefits which are
disclosed to all shareholders and which will be allocated amongst the
shareholders in accordance with section 1.10 hereof.
b) EIC shall keep USE fully informed on a contemporaneous basis of all
developments in the Restructuring and shall provide USE with all
correspondence and draft and final documentation respecting the
Restructuring. EIC shall not execute any binding documentation regarding
the Restructuring without providing USE with complete and accurate copies
of
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such documentation in advance in order to afford USE a meaningful
opportunity to review such documentation and discuss such documentation
with EIC and the Company's advisors.
9. Section l.4(a)(i) of the Shareholders' Agreement is hereby amended by
deleting the word "six" and replacing it with the word "five".
10. Section 1.9(e) of the Shareholder Agreement is amended by deleting the
unnumbered paragraph and replacing it with the following: then the
shareholder whose directors voted in favor of the capital call may fund
additional Priority Shareholder Loans, which shall not exceed the
Company's, or ESS and its subsidiaries' cash requirements to achieve their
purposes, as reasonably determined from time to time by the Company based
on reasonable line item budgets provided to the Shareholders by the
Company and/or ESS which shall bear an interest rate of XXXXXX 90 + 200bp
per annum compounded quarterly and which shall be paid from the Company's
cash in accordance with the Distribution Priorities as defined herein. In
the event of a funding pursuant to the immediately preceding sentence, the
Company shall issue new Ordinary Shares to the Shareholder supplying the
funding at a subscription price of 1 Euro per share in accordance with the
dilution mechanism immediately below (the "Dilution Mechanism").
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Dilution Mechanism
The Company shall issue 1,893 Ordinary Shares at a subscription price of
Euro 1 per share for every SEK 1 million of additional Priority
Shareholder Loans to the Company funded pursuant to this Section 1.9(e).
The shareholder whose directors voted against the capital call referred to
above shall irrevocably undertake to vote all of its shares in the Company
and direct its nominee directors to vote in favor of an resolution
required to give effect to the provisions contained in this paragraph
1.9(e). For purposes of this section 1.9 the Company's "purposes" shall
not include the payment of principal and interest due on Shareholder Loans
and or Priority Shareholder Loans.
11. A new subparagraph 1.9(f) is hereby added which states as follows:
Notwithstanding anything to the contrary herein, EIC shall fund the cash
requirements of the Company and ESS AB through December 31, 2003 ("2003
Cash Requirements") under the following terms and conditions:
i) EIC shall fund all 2003 Cash Requirements up to MSEK 28 as Priority
Shareholder Loans in accordance with Section 1.9(e) above and in
consideration of EIC's commitment to make such funding, the Company shall
issue EIC 52'998 Ordinary Shares at a subscription price of Euro 1 per
share.
ii) EIC will consider additional funding of all 2003 Cash Requirements in
excess of MSEK 28 as a Priority Shareholder Loan in accordance with
Section 1.9(e) above and upon such funding, the Company shall issue EIC
additional
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Ordinary Shares of Euro 1 per share in accordance with the Dilution
Mechanism. For the avoidance of doubt, this does not constitute a
commitment by EIC.
11. Section 1.10 is hereby replaced with the following paragraph:
1.10 Distribution Priorities. The parties shall, subject to applicable law
disburse the cash of the Company as follows:
1. Payment of services extended by third parties (including
amount others audit, tax and accounting services) and
taxes.
2. Payment of scheduled interest and principal under the
Lantbrukskredit loan.
3. Payment of scheduled interest and principal under any
other 3rd party loan.
4. Payment of accrued interest under the Priority
Shareholder Loans pro-rata to the respective amounts
extended by the shareholders. In case of certain
Priority Shareholder Loans have been lent to ESS AB
and/or its subsidiaries, the Company shall instruct ESS
AB to make such payment.
5. Repayment of principal of the Priority Shareholder Loans
pro-rata to the respective amounts extended by the
shareholders until such Priority Shareholder Loans are
fully repaid. In case of certain Priority Shareholder
Loans have been lent to ESS AB and/or its subsidiaries,
the Company shall instruct ESS AB to make such payment.
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6. Payment of accrued interest under the Shareholder Loans
pro-rata to the respective amounts extended by the
shareholders.
7. Repayment of principal of the Shareholder Loans pro-rata
to the respective amounts extended by the shareholders
until such Shareholder Loans are fully repaid.
8. On a pari-passu basis, payment of accrued service fees
to USE up to the amount accrued to the date of this
Agreement at ESS and to EIC up to the amount accrued to
the date of this Agreement at SEFL. In the case of
payment of service fees to USE, the Company shall
instruct ESS AB to make such payment. For the avoidance
of doubt, the total payments to USE and EIC made by the
Company and ESS under this paragraph 8 shall be split
49% to EIC and 51% to USE, except invoiced out-of-pocket
expenses, which amounts shall be paid to the party that
incurred the expense.
9. All remaining distributions shall be in accordance with
the percentage of ownership of Ordinary Shares as of the
date of such distribution. For purposes of this Section
1.10 all payments described above from ESS AB shall be
deemed to have been made by the Company.
12. Section 1.16 is hereby deleted in its entirety.
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13. Except as amended hereby, the Shareholders' Agreement is hereby ratified
and confirmed and, as so amended, remains in full force and effect on the
date hereof.
14. Pursuant to article 33 (4) of the articles of association of the Company,
USE and EIC hereby consent to the Ordinary Share Transfer.
15. The Shareholders agree to cause the Company to amend Article 34 of the
articles of association of the Company in the form annexed as schedule A
hereto.
16. So long as EIC is the controlling Shareholder of the Company, EIC shall
use reasonable efforts to cause the Company to deliver monthly income
statements and balance sheets as reasonably required by the Shareholders.
17. The Shareholders shall cause the Directors designated by them to approve
this Amendment No. 2 on behalf of the Company.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
as of the date first written above.
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ENDORAY INVESTMENTS, B.V.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Director
U.S. ENERGY SYSTEMS, INC.
By: Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: President
EIC ELECTRICITY SA
By: /s/ Xxxxxxxxx Xxxxxxxx
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Name: Xxxxxxxxx Xxxxxxxx
Title: Director
By: /s/ Xxxxxx Xxxxxxxxxx
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Name: Xxxxxx Xxxxxxxxxx
Title: Director
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PRESENT when the Common Seal
of SCANDINAVIAN ENERGY
FINANCE LIMITED was affixed
hereto:
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
Director
/s/ Xxxxxx Xxxxxxxx
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FOR AND ON BEHALF OF
AIB INTERNATIONAL FINANCIAL
SERVICES LTD.
AS SECRETARY
BORG ENERGY AB
By: Xxxxx Xxxx
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Name: Xxxxx Xxxx
Title: Director
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