AMENDED AND RESTATED PLAN OF RECAPITALIZATION
Amended and Restated Plan of Recapitalization dated as of July 31, 2000 by
and between Energy Systems Investors, L.L.C. ("ESI"), a Delaware limited
liability company, Xxxxxxxx X. Xxxxxxxxx ("X. Xxxxxxxxx") and Xxxxx Xxxxxxxxx
("X. Xxxxxxxxx") (X. Xxxxxxxxx and X. Xxxxxxxxx being collectively referred to
herein as the "Schneiders"), and U.S. Energy Systems, Inc., a Delaware
corporation (the "Corporation").
R E C I T A L S
The parties hereto hereby amend and restate (as so amended and restated,
the "Plan of Recapitalization") the plan of recapitalization entered into by the
parties hereto as of July 31, 2000 (the "Initial Plan"). Subject to, and on the
terms and conditions set forth herein, this Plan of Recapitalization provides
that the (i) 1,138,888 outstanding shares of the Corporation's Series A
Convertible Preferred Stock (the "Series A Stock") will be exchanged for
1,138,888 shares of the Corporation's Series D Convertible Preferred Stock (the
"Series D Stock"), (ii) interest payable with respect to the limited recourse
promissory note issued by ESI in the original principal amount of $7,741,378.90
and bearing interest at the rate of 9.25% per annum (the "Note") will be reduced
to 6.25% per annum, and (iii) Series B Warrants, in the form annexed hereto as
Exhibit A (the "Warrants"), to acquire 1,500,000 shares of the Corporation's
Common Stock at an exercise price of $4.00 per share will be issued to the
persons identified in accordance with Section 1(b) hereof. The rights,
preferences, limitations and other terms and conditions of the Series D Stock
would be as set forth in the Certificate of Designation in the form annexed
hereto as Exhibit B (the "Certificate of Designation"). To effect the foregoing,
the parties hereto hereby agrees as follows:
1. Exchange of Series D Stock for Series A Stock; Interest Rate Reduction;
Issuance of Warrants.
(a) The parties hereto agree that commencing as of the date all the
conditions set forth in Section 2(b) herein have been waived by all the parties
hereto or satisfied (the "Effective Date"), the 1,138,888 shares of Series A
Stock will be exchanged for a like number of shares of Series D Stock (the
"Exchange") and the interest rate on the Note shall be reduced from 9.25% per
annum to 6.25% per annum (i.e., the interest payable through and including the
day immediately preceding the Effective Date shall be calculated at the rate
provided for in the Note and thereafter, shall be calculated at the rate
provided for herein and the allonge to the Note to be issued pursuant hereto
(the "Allonge")). (The rate of default interest on the Note shall not be
effected by this Plan of Recapitalization). The Corporation agrees that on the
Effective Date and notwithstanding that it may not be a Dividend Payment Date
(as defined in the Certificate of Designation governing the Series A Stock (the
"Series A Certificate of Designation")), or related record date, it will pay to
the holders of the Series A Stock the pro rata portion of the dividends thereon
that accrue from the Dividend Payment Date immediately preceding the Effective
Date through the day immediately preceding the Effective Date at the rate
provided for in the Series A Certificate of Designation.
(b) The Warrants have been committed for issuance and will be issued as
follows: 300,000 to X. Xxxxxxxxx, 65,854 to X. Xxxxxxxxx and 1,134,146 to ESI;
provided however that up to 580,500 of the Warrants allocated to ESI may be sold
by the Corporation to certain stockholders of Xxxxxx Alternative Power
Corporation (the "Zapco Stockholders") for $0.80 per Warrant in which case the
purchase price paid by ESI for its shares of Series A Stock will be reduced by
the aggregate amount paid to the Corporation by the Zapco Stockholders and as a
result the principal amount of the Note will be reduced by such amount.
(c) The parties hereto agree to execute such instruments and documents in
connection with the Exchange (including without limitation, the Allonge) as is
customary in similar transactions.
2. Conditions to Effectiveness of the Plan; Covenants with Respect to the
Plan.
(a) The parties hereto covenant and agree to cooperate and use commercially
reasonable efforts to cause the satisfaction (but not the waiver) of the
conditions set forth in Section 2(b).
(b) The effectiveness of the Plan of Recapitalization shall be subject to
the satisfaction by all of the parties hereto of the following conditions:
(i) the Certificate of Designation will have been filed with the
appropriate authorities in the State of Delaware;
(ii) a private letter ruling shall have been obtained from the
Internal Revenue Service to the effect that the consummation of the Plan of
Recapitalization will not have an adverse tax effect on the parties hereto;
and
(iii) the Plan of Recapitalization has been approved by the
stockholders of the Corporation to the extent required by Nasdaq.
(c) In the event such conditions have not been satisfied by December 31,
2001, this Plan of Recapitalization shall terminate and be of no further force
or effect and this Plan of Recapitalization shall be deemed abandoned and
terminated (and the Warrants will be of no further force or effect).
3. Miscellaneous.
(a) The Schneiders and ESI jointly and severally represent and warrant to
the Corporation that (i) immediately prior to the execution of the Initial Plan
they owned and immediately prior to the execution of the Plan of
Recapitalization, they own, in the aggregate, all of the issued and outstanding
shares of Series A Stock free and clear of any and all liens, claims and
encumbrances, other than the encumbrances imposed pursuant to the Pledge
Agreement dated as of July 31, 2000 by and between ESI and the Corporation, as
amended from time to time and (ii) there are no outstanding options or other
rights to acquire such shares of Series A Stock.
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(b) For the convenience of the parties, any number of counterparts of this
Plan of Recapitalization may be executed by the parties hereto and each such
executed counterpart shall be, and shall be deemed to be, an original
instrument.
(c) All notices, requests, demands and other communications which are
required or may be given under this Plan of Recapitalization (including all
legal process in regard hereto) shall be in writing and shall be deemed to have
been duly given or made: if by hand, immediately upon delivery; if by telex,
telecopier, telegram or similar electronic device, immediately upon sending,
provided it is sent on a business day, but if not, then immediately upon the
beginning of the first business day after being sent; if by Federal Express,
Express Mail or any other overnight delivery service, on the first business day
after dispatch; and if mailed by certified mail, return receipt requested, three
(3) business days after mailing. All notices, requests and demands are to be
given or made to the parties at the addresses set forth below (or to such other
address as a party may designate by notice in accordance with the provisions of
this Section 3(c)):
If to the Corporation: U.S. Energy Systems, Inc.
000 X. Xxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Att: President
If to any of ESI or the Schneiders: Xxxxxxxx X. Xxxxxxxxx
Xxxxx Xxxxxxxxx
Energy Systems Investors, L.L.C.
000 Xxxx Xxxxxx, Xxx. 0X
Xxx Xxxx, Xxx Xxxx 00000
(d) This Plan of Recapitalization shall be governed by and construed and
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enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein.
U.S. Energy Systems, Inc.
By: /s/ XXXXX XXXXXXX
---------------------------------
Xxxxx Xxxxxxx, President
Energy Systems Investors, L.L.C.
By: /s/ XXXXX XXXXXXXXX
---------------------------------
Xxxxx Xxxxxxxxx, Manager
/s/ XXXXX XXXXXXXXX
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Xxxxx Xxxxxxxxx
/s/ XXXXXXXX X. XXXXXXXXX
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Xxxxxxxx X. Xxxxxxxxx
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