__________________, 2005
Beacon Power Corporation
Attn: President
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Re: Letter Agreement by NxtPhase Shareholder
Dear Sirs:
In order to induce Beacon Power Corporation, a Delaware corporation
("Beacon"), to execute the Arrangement Agreement dated April 22, 2005 (the
"Arrangement Agreement") by and among Beacon, Beacon Acquisition Co., a Nova
Scotia unlimited liability company, and NxtPhase T&D Corporation, a Canadian
corporation ("NxtPhase"), and to issue to the undersigned shareholder of
NxtPhase (the "Shareholder") shares of common stock, $0.01 par value per share,
of Beacon (the "Beacon Shares") pursuant to the Arrangement Agreement, (1) the
Shareholder represents, warrants and covenants as set forth in the attached
Exhibit A and (2) the Shareholder agrees to the provisions set forth in the
attached Exhibit B.
The Shareholder acknowledges and agrees that, in accordance with that
certain Investor Rights Agreement dated as of November 12, 2004 (the "Investor
Rights Agreement") by and among NxtPhase and the holders of Class A preferred
shares of NxtPhase, the Option (as defined in the Investor Rights Agreement) was
duly assigned by Xxxxxxx 2000, L.L.C., a Delaware limited liability company, to
Beacon on April 22, 2005. The Shareholder further agrees that Beacon may enforce
the Shareholder's obligations related to the Option as if Beacon were a direct
party to such Option. In the event of any conflict between the terms and
conditions of the Arrangement Agreement and the terms and conditions of the
Option, the terms and conditions of the Arrangement Agreement shall prevail.
The Shareholder has carefully read this Letter Agreement, including all
exhibits attached hereto (this "Letter Agreement"), and discussed its
requirements, to the extent the Shareholder believes necessary, with its counsel
and with counsel for NxtPhase. The Shareholder also acknowledges that Beacon is
relying on this Letter Agreement as an inducement in its entering into the
Arrangement Agreement.
The Shareholder understands that Beacon is entering into letter agreements
substantially similar to this Letter Agreement with certain other NxtPhase
shareholders. This Letter Agreement and any other documents entered into by the
Shareholder as requested by Beacon in connection herewith will be voidable ab
initio at the instance of the Shareholder and have no force and effect if:
1. the transactions contemplated in the Arrangement Agreement are not
consummated as contemplated therein or the Arrangement Agreement is
for any reason terminated;
2. Section 2.1 of and Schedule A to the Arrangement Agreement are
amended, restated, changed, revised or replaced without the
Shareholder's prior written consent; or
3. any of the letter agreements with Perseus 2000, L.L.C., El Dorado
Investment Company or Working Opportunity Fund (EVCC) Ltd. are
amended, restated or terminated.
In consideration of the Shareholder executing this Letter Agreement, Beacon
undertakes to promptly advise the Shareholder in writing of the occurrence of
any of the events listed in items 1 to 3 in the immediately preceding paragraph.
Each of Beacon, NxtPhase and the Shareholder acknowledge and agree that the
Arrangement Agreement does not confer any rights or remedies upon any person
other than Beacon and NxtPhase and their respective successor and permitted
assigns; provided, however, that (a) the provisions in Section 2.1 of the
Arrangement Agreement concerning the issuance of such number of Beacon Shares to
the Shareholder calculated pursuant to the Exchange Value and (b) the provisions
of Schedule A are intended for the benefit of the Shareholder.
This Letter Agreement is binding upon each of the parties hereto including
each of its predecessors, successors, parents, subsidiaries, agents, servants,
employees, insurers, heirs and permitted assigns.
Very truly yours,
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Jurisdiction of Residence Print Name of Shareholder
------------------------------------
Signature
------------------------------ ------------------------------------
No. of NxtPhase Common Shares held Address
------------------------------
No. of NxtPhase Class A Shares held
Xxxxxx and accepted as of the first date written above:
BEACON POWER CORPORATION
By:_________________________________
Name:
Title:
NXTPHASE T&D CORPORATION
By:________________________________
Name:
Title:
Exhibit A
Representations, Warranties, and Covenants
(a) The Shareholder has good and marketable title, free and clear of any
and all liens, encumbrances or security interests, to all of the shares of
capital stock of NxtPhase (the "NxtPhase Shares") surrendered by the Shareholder
to Beacon pursuant to the plan of arrangement contemplated by the Arrangement
Agreement (the "Plan of Arrangement"), and has the full right, power and
authority to surrender such NxtPhase Shares to Beacon pursuant to the Plan of
Arrangement. The Shareholder is the holder of such number of NxtPhase Shares
(both NxtPhase Class A shares and common shares) as set forth opposite its or
his address above.
(b) In the event the Shareholder is a Rule 145 Affiliate (as defined in the
Arrangement Agreement), the Shareholder acknowledges and agrees that Beacon
shall be entitled to place appropriate legends on the certificates evidencing
any Beacon Shares to be received by such Rule 145 Affiliate pursuant to the
terms of the Arrangement Agreement reflecting the restrictions set forth in Rule
145 promulgated by the Securities Act of 1933, as amended, and to issue
appropriate stop transfer instructions to the transfer agent for Beacon Shares.
Beacon hereby agrees to use its commercially reasonable efforts to take whatever
steps are reasonably necessary to ensure that all Beacon Shares issued or
issuable to the Shareholder are freely tradable and unrestricted and that it
will maintain its listing on a stock exchange for ten years hereafter.
(c) The Shareholder is a resident in the jurisdiction set forth opposite
its name above.
(d) The Shareholder acknowledges receipt of a copy of the final Arrangement
Agreement. The Shareholder represents to Beacon, to the best of its "Knowledge"
(as defined below), that no statement contained in Sections 3.2(a)-(c), (d)
(other than as a result of the Perseus Financing as defined in the Arrangement
Agreement), (e), (f), (h)-(j), (l), (o), (t) and (x) of the Arrangement
Agreement contains any untrue statement of a material fact, or omits to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading that would result in a Material Adverse Change
(as defined in the Arrangement Agreement) to Beacon. The Shareholder covenants
to provide to Beacon, within five (5) days of the receipt of the final joint
proxy statement/prospectus of Beacon and NxtPhase on Form S-4 (the "Registration
Statement"), a representation as to the accuracy of the statements in the
Registration Statement as follows: To the best of the Shareholder's Knowledge,
no statement contained in the Registration Statement relating to the Shareholder
furnished by the Shareholder to Beacon in writing expressly for use in the
Registration Statement contains any untrue statement of a material fact, or
omits to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading. As used in this Section
(d), "Knowledge" with respect to the Shareholder means the actual knowledge of
___________.
(e) In consideration of the covenants and promises contained in the
Arrangement Agreement, including the issuance of the Beacon Shares by Beacon,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Shareholder, including its respective predecessors,
successors, parents, subsidiaries, agents, servants, employees, attorneys,
insurers, heirs and assigns, does hereby release, remise and forever discharge
NxtPhase, including its predecessors, successors, parents, subsidiaries, agents,
servants, employees, attorneys, insurers, heirs and assigns from any and all
debts, actions, causes of actions, suits, accounts, covenants, contracts,
agreements, tort, damages and any and all claims, demands and liabilities
whatsoever, of every name and nature, whether known or unknown, suspected or
claimed, whether the Shareholder now has or ever had against NxtPhase
(collectively, the "Claims") since the beginning of time to the date of this
Letter Agreement, both at law and in equity, including but not limited to any
rights to receive dividends, vote, rights of first refusal to obtain or purchase
shares or securities of NxtPhase and rights related to the board of directors of
NxtPhase, to the extent existing with respect to, arising out of, or relating
to, the Shareholder's having owned or had the right to acquire securities of
NxtPhase; provided, however, the foregoing release shall not apply to any Claim
relating to Section (d) above. The Shareholder agrees to reconfirm the release
set forth in this Section (e) as of the date the arrangement, as contemplated by
the Arrangement Agreement, becomes effective, as shown on the certificate of
arrangement to be issued to NxtPhase (the "Effective Date").
(f) In the event the Shareholder is a resident of, or its principal place
of business is located in, British Columbia or Ontario, the Shareholder agrees
that the Beacon Shares are subject to the restrictions set forth in Multilateral
Instrument 45-102 "Resale of Securities," as adopted by the British Columbia
Securities Commission and the Ontario Securities Commission, respectively.
Beacon hereby agrees to use commercially reasonable efforts to take whatever
steps are reasonably necessary to ensure that an exemption, if available, is
obtained from the British Columbia Securities Commission and Ontario Securities
Commission.
(g) In the event the Shareholder is a resident of, or its principal place
of business is located in, Quebec, the Shareholder agrees that its participation
in the Plan of Arrangement is subject to regulatory approval in Quebec. Beacon
hereby agrees to use its commercially reasonable efforts to take whatever steps
are reasonably necessary to ensure that an exemption is obtained from the
Autorite des marches financiers.
(h) The Shareholder xxxxxx agrees that, in the event of any conflict
between the terms and conditions of the Arrangement Agreement and the terms and
conditions of the Option, the terms and conditions of the Arrangement Agreement
shall prevail. For the avoidance of doubt, (i) the Exchange Value (as defined
and calculated as set forth in the Arrangement Agreement) shall determine the
number of Beacon Shares issuable to the Shareholder as provided in the
Arrangement Agreement and (ii) Section 7.4 of the Investor Rights Agreement
shall remain in full force and effect.
(i) The Shareholder covenants and agrees to execute, upon reasonable
request, any additional documents, transfers and other assurances as may be
reasonably necessary or desirable to complete the exchange of certificate(s)
representing NxtPhase Shares for Beacon Shares.
Exhibit B
Indemnification
1.1 Indemnification by the Shareholder. The Shareholder shall indemnify
Beacon in respect of, and hold it harmless against, any and all debts,
obligations and other liabilities (whether absolute, accrued, contingent, fixed
or otherwise, or whether known or unknown, or due or to become due or
otherwise), monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation amounts paid in
settlement, interest, court costs, reasonable costs of investigators, reasonable
fees and expenses of attorneys, accountants, financial advisors and other
experts, and other reasonable expenses of litigation) (collectively, "Damages")
incurred or suffered by Beacon resulting from, relating to or constituting:
(a) any misrepresentation, breach of warranty or failure to perform any
covenant or agreement of the Shareholder contained in this Letter Agreement or
in any agreement, representation or other document which the Shareholder has
with or delivers to NxtPhase and/or Beacon, resulting in a Material Adverse
Change (as defined in the Arrangement Agreement) to Beacon; or
(b) any failure of the Shareholder to have good, valid and marketable title
to the NxtPhase Shares exchanged for Beacon Shares, free and clear of all
security interests, liens and encumbrances.
1.2 Indemnification Claims.
(a) General. In order to seek indemnification under this Exhibit B, Beacon
(the "Indemnified Party") shall give written notice (a "Claim Notice") to the
party from whom indemnification is sought (an "Indemnifying Party") which
contains (i) a description and the amount (the "Claimed Amount") of any Damages
incurred or reasonably expected to be incurred by the Indemnified Party, if
reasonable to determine, (ii) a reasonable explanation of the basis for
indemnification pursuant to this Exhibit B, and (iii) a demand for payment in
the amount of such Damages, if reasonable to determine.
(b) By Third Parties in Suits/Proceedings. The Indemnified Party shall give
written notification to the Indemnifying Party of the commencement of any suit
or proceeding relating to a third party claim for which indemnification pursuant
to this Exhibit B may be sought (a "Third Party Claim"). Such notification shall
be given promptly after receipt by the Indemnified Party of notice of such suit
or proceeding, and shall describe in reasonable detail (to the extent known by
the Indemnified Party) the facts constituting the basis for such suit or
proceeding and the amount of the claimed damages; provided, however, that no
delay on the part of the Indemnified Party in notifying the Indemnifying Party
shall relieve the Indemnifying Party of any liability or obligation hereunder
except to the extent of any damage or liability caused by or arising out of such
failure.
The Indemnified Party shall control the defense of any Third Party Claim.
The Indemnifying Party may participate therein at its own expense. The
Indemnified Party shall keep the Indemnifying Party advised of the status of
such suit or proceeding and the defense thereof. The Indemnifying Party shall
furnish the Indemnified Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Indemnified Party in the defense of such
suit or proceeding. The Indemnified Party shall not agree to any settlement of,
or the entry of any judgment arising from, any such suit or proceeding without
the prior written consent of the "Representative" (as defined below), which
shall not be unreasonably withheld or delayed. As used herein, "Representative"
shall mean El Dorado Investment Company or such other shareholder of NxtPhase
designated in writing by all other shareholders of NxtPhase who have signed
Letter Agreements with Beacon similar to that to which this Exhibit is attached.
A change in the Representative shall be effective on the date the Indemnified
Party receives written notice thereof.
(c) Procedure for Claims Not Made by Third Parties. Within 20 days after
delivery of a Claim Notice, the Indemnifying Party shall deliver to the
Indemnified Party a written response (the "Response") in which the Indemnifying
Party: (i) agrees that the Indemnified Party is entitled to receive all of the
Claimed Amount (in which case the Response shall be accompanied by a payment by
the Indemnifying Party to the Indemnified Party of the Claimed Amount, by
delivery of an appropriate number of Beacon shares, computed as described in
Section 1.4, below), (ii) agrees that the Indemnified Party is entitled to
receive part, but not all, of the Claimed Amount (the "Agreed Amount") (in which
case the Response shall be accompanied by a payment by the Indemnifying Parties
to the Indemnified Party of the Agreed Amount, by delivery of an appropriate
number of Beacon shares, computed as described in Section 1.4, below), or (iii)
disputes that the Indemnified Party is entitled to receive any of the Claimed
Amount. If the Indemnifying Party in the Response disputes its liability for all
or part of the Claimed Amount, the Indemnifying Party and the Indemnified Party
shall follow the procedures set forth below in this1.2(c) for the resolution of
such dispute (a "Dispute").
During the 60-day period following the delivery of a Response that reflects
a Dispute, the Indemnifying Party and the Indemnified Party shall use good faith
efforts to resolve the Dispute. If the Dispute is not resolved within such
60-day period, the Indemnifying Party and the Indemnified Party shall discuss in
good faith the submission of the Dispute to a mutually acceptable alternative
dispute resolution procedure (which may be binding or non-binding upon the
parties, as they agree in advance) (the "ADR Procedure"). In the event the
Indemnifying Party and the Indemnified Party agree upon an ADR Procedure, such
parties shall, in consultation with the chosen dispute resolution service (the
"ADR Service"), promptly agree upon a format and timetable for the ADR
Procedure, agree upon the rules applicable to the ADR Procedure, and promptly
undertake the ADR Procedure. The provisions of this 1.2(c) shall not obligate
the Indemnifying Party and the Indemnified Party to pursue an ADR Procedure or
prevent such parties from pursuing the Dispute in a court of competent
jurisdiction; provided, that, if the Indemnifying Party and the Indemnified
Party agree to pursue an ADR Procedure, neither the Indemnifying Party nor the
Indemnified Party may commence litigation or seek other remedies with respect to
the Dispute prior to completion of such ADR Procedure. Any ADR Procedure
undertaken by the Indemnifying Party and the Indemnified Party shall be
considered a compromise negotiation for purposes of federal and state rules of
evidence, and all statements, offers, opinions and disclosures (whether written
or oral) made in the course of the ADR Procedure by or on behalf of the
Indemnifying Party, the Indemnified Party or the ADR Service shall be treated as
confidential and, where appropriate, as privileged work product. Such
statements, offers, opinions and disclosures shall not be discoverable or
admissible for any purposes in any litigation or other proceeding relating to
the Dispute (provided that this sentence shall not be construed to exclude from
discovery or admission any matter that is otherwise discoverable or admissible).
The fees and expenses of any ADR Service used by the Indemnifying Party and the
Indemnified Party shall be shared equally by the Indemnifying Party and the
Indemnified Party.
(d) Third party Issues When No Lawsuit. Notwithstanding the other
provisions of this Section 1.2, if a third party asserts (other than by means of
a lawsuit covered by clause (b)) that the Indemnified Party is liable to such
third party for a monetary or other obligation which may constitute or result in
Damages for which the Indemnified Party may be entitled to indemnification
pursuant to this Exhibit B, and the Indemnified Party reasonably determines that
it has a valid business reason to fulfill such obligation, then (i) the
Indemnified Party shall be entitled to satisfy such obligation, without prior
notice to or consent from the Indemnifying Party, (ii) the Indemnified Party may
subsequently make a claim for indemnification in accordance with the provisions
of this Exhibit B, and (iii) the Indemnified Party shall be reimbursed, in
accordance with the provisions of this Exhibit B, for any such Damages for which
it is entitled to indemnification pursuant to this Exhibit B (subject to the
right of the Indemnifying Party to dispute the Indemnified Party's entitlement
to indemnification, or the amount for which it is entitled to indemnification,
under the terms of this Exhibit B).
1.3 Survival of Representations and Warranties. All representations and
warranties and covenants (including, without limitation, the covenants in
Section 1.4 below) contained in this Letter Agreement shall survive the
Effective Date and expire on the date 24 months following the Effective Date. If
an Indemnified Party delivers to the Indemnifying Party, before expiration of a
representation or warranty, either a Claim Notice based upon a breach of such
representation or warranty, or a notice that, as a result of a legal proceeding
instituted by or written claim made by a third party, the Indemnified Party
reasonably expects to incur Damages as a result of a breach of such
representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice. If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party.
1.4 Limitations.
(a) Notwithstanding any provision contained herein, or in any other
document executed by the Shareholder in connection herewith or the Arrangement
Agreement, the Shareholder shall not be liable to Beacon or its predecessors,
successors, parents, subsidiaries, agents, servants, employees, insurers, heirs
and assigns:
(i) pursuant to Section 1.2(b) for any individual claim that is less than
$_______,
(ii) for any claim by Beacon unless the aggregate of all claims by Beacon
against the Shareholder exceeds $________,
(iii) to pay cash to Beacon, it being understood that Beacon's claims for
all amounts shall be satisfied by the Shareholder returning to Beacon a number
of Beacon Shares equal to the amount of the Damages (valuing the Beacon Shares
using the same methodology as employed under the Arrangement Agreement),
(iv) for Damages exceeding the aggregate value of the Beacon Shares issued
to such Shareholder (valuing the Beacon Shares using the same methodology
employed under the Arrangement Agreement).
(v) subject to the limitations set forth in this Section 1.4, in excess of
the Shareholder's proportionate share of Damages resulting from the
Shareholder's indemnification obligations set forth in Section 1.1 above. Beacon
and NxtPhase agree that in the event of a claim for Damages resulting from a
breach of paragraph (d) of Exhibit A, such claim for Damages shall be against
all NxtPhase shareholders who have signed letter agreements for their pro-rata
share of the Damages and Beacon shall not be permitted to selectively prosecute
the Shareholder for its proportionate share of Damages. If Beacon or NxtPhase
fail to prosecute all NxtPhase shareholders in accordance with the foregoing or
settles, abandons, waives or compromises such claims, the Shareholder's
proportionate share of Damages will be proportionately adjusted.
For greater clarity, the Shareholder will not be jointly and severally
liable for Damages owing by any other NxtPhase shareholder either for breaches
relating to such other shareholder's title to its NxtPhase Shares, breaches of
any agreement between such other shareholder and Beacon or NxtPhase, or for such
other claim for Damages resulting from a breach of this Letter Agreement.
(b) No Indemnifying Shareholder shall have any right of contribution
against NxtPhase or the surviving corporation after the Effective Date.
(c) Recovery against the aggregate number of Beacon Shares issued to the
Shareholder pursuant to the Arrangement Agreement will be the sole and exclusive
remedy for satisfaction of indemnification. After exhaustion of the
Shareholder's indemnity, Beacon hereby agrees not to take, directly or
indirectly, any action against the Shareholder or any third party that may make
a counterclaim against the Shareholder that would exceed the Shareholder's
indemnity as provided in this Section 1.4.
