STOCKHOLDERS AGREEMENT

 

THIS STOCKHOLDERS AGREEMENT (this “Agreement”) is made as of November 12, 2012
by and among Flex Power Generation, Inc., a Delaware corporation (the
“Company”), and the Stockholders (as defined herein).

 

1.          Definitions. Capitalized terms have the definitions set forth in
Exhibit A and as otherwise defined herein.

 

2.          Right of First Offer; Tag-Along Rights.

 

(a)          Right of First Offer.

 

(i)          Grant. Subject to the terms of Section 2(c), each Stockholder
hereby unconditionally and irrevocably grants to the Company a Right of First
Offer to purchase all (but not less than all) of the Transfer Stock that such
Stockholder may propose to transfer in a Proposed Transfer, at the same price
and on the same terms and conditions as those offered to the Prospective
Transferee.

 

(ii)         Notice; Exercise. Each Stockholder proposing to make a Proposed
Transfer must deliver a Proposed Transfer Notice to the Company not later than
45 days prior to the consummation of such Proposed Transfer. Such Proposed
Transfer Notice shall contain the material terms and conditions (including price
and form of consideration) of the Proposed Transfer and the identity of the
Prospective Transferee. To exercise its Right of First Offer under this
Section 2, the Company must deliver a Company Exercise Notice to the selling
Stockholder within 15 days after delivery of the Proposed Transfer Notice (the
“ROFO Exercise Period”).

 

(iii)        Forfeiture of Rights. If the Company fails to agree in the Company
Exercise Notice to purchase the total amount of Transfer Stock in accordance
with this Section 2(a), then the Company shall be deemed to have forfeited any
right to purchase any such Transfer Stock, and the selling Stockholder shall be
free to sell all, but not less than all, of the Transfer Stock to the
Prospective Transferee on terms and conditions substantially similar to (and in
no event more favorable than) the terms and conditions set forth in the Proposed
Transfer Notice, it being understood and agreed that (A) any such sale or
transfer shall be subject to the other terms and restrictions of this Agreement,
including without limitation the terms and restrictions set forth in Section
10(i)(ii) and Section 10(j); (B) any future Proposed Transfer shall remain
subject to the terms and conditions of this Agreement, including this Section 2;
and (C) such sale shall be consummated within (I) 120 days after delivery of the
Proposed Transfer Notice if the applicable purchase price for the Transfer Stock
is $10,000,000 or more, or (II) 60 days after delivery of the Proposed Transfer
Notice if the applicable purchase price for the Transfer Stock is less than
$10,000,000 (as applicable, the “Post-ROFO Sale Date”), and, if such sale is not
consummated by the applicable Post-ROFO Sale Date, such Proposed Transfer shall
again become subject to the Right of First Offer on the terms set forth herein.

 

 

 

 

(iv)        Consideration; Closing. If the consideration proposed to be paid for
the Transfer Stock is in property, services or other non-cash consideration, the
fair market value of the consideration shall be as determined in good faith by
the Board of Directors. If the Company cannot for any reason pay for the
Transfer Stock in the same form of non-cash consideration, the Company may pay
the cash value equivalent thereof, as determined in good faith by the Board of
Directors. The closing of the purchase of Transfer Stock by the Company shall
take place, and all payments from the Company shall have been delivered to the
selling Stockholder, by the later of (A) the date specified in the Proposed
Transfer Notice as the intended date of the Proposed Transfer and (B) the
applicable Post-ROFO Sale Date.

 

(b)          Effect of Failure to Comply.

 

(i)          Transfer Void; Equitable Relief. Any Proposed Transfer not made in
compliance with the requirements of this Agreement shall be null and void ab
initio, shall not be recorded on the books of the Company or its transfer agent
and shall not be recognized by the Company. Any breach of this Agreement would
result in substantial harm to the non-breaching parties for which monetary
damages alone could not adequately compensate. Therefore, any non-breaching
party shall be entitled to seek protective orders, injunctive relief and other
remedies available at law or in equity (including, without limitation, seeking
specific performance or the rescission of purchases, sales and other transfers
of Transfer Stock not made in strict compliance with this Agreement).

 

(ii)         Violation of Right of First Offer. If any Stockholder becomes
obligated to sell any Transfer Stock to the Company under this Agreement and
fails to deliver such Transfer Stock in accordance with the terms of this
Agreement, the Company may, at its option, in addition to all other remedies it
may have, send to such Stockholder the purchase price for such Transfer Stock as
is herein specified and transfer to the name of the Company on the Company’s
books the certificate or certificates representing the Transfer Stock to be
sold.

 

(c)          Exempt Transfers.

 

(i)          Exempted Transfers. Notwithstanding the foregoing or anything to
the contrary herein, the provisions of Section 2(a) shall not apply: (A) to a
Proposed Transfer specifically approved as an “exempt transfer” under clause (A)
of this Section 2(c)(i) by a majority of the Board of Directors, including a
majority of disinterested directors; (B) in the case of a Stockholder that is an
entity, upon a transfer by such Stockholder to its Affiliates, stockholders,
members, partners or other equity holders, (C) to a repurchase from a
Stockholder by the Company pursuant to an agreement containing vesting and/or
repurchase provisions approved by the Board of Directors, (D) in the case of a
Stockholder that is a natural person, upon a transfer by such Stockholder made
for bona fide estate planning purposes, either during his or her lifetime or on
death by will or intestacy to his or her spouse, child (natural or adopted), or
any other direct lineal descendant of such Stockholder (or his or her spouse)
(all of the foregoing collectively referred to as “family members”), or any
other natural person approved by unanimous consent of the Board of Directors of
the Company, or any custodian or trustee of any trust, partnership or limited
liability company for the benefit of, or the ownership interests of which are
owned wholly by, such Stockholder or any such family members, (E) to any sale or
transfer from a Stockholder to another Stockholder; (F) to a pledge, gift or
transfer of Transfer Stock to any nonprofit organization approved by unanimous
consent of the Board of Directors for purposes of clause (F) of this
Section 2(c)(i) (each, an “Approved Nonprofit”); or (G) to purchases of Transfer
Stock from an Approved Nonprofit by the Company; provided that in the case of
clause(s) (B), (D) or (F), the Stockholder shall deliver prior written notice to
the Company of such pledge, gift or transfer and such Transfer Stock shall at
all times remain subject to the terms and restrictions set forth in this
Agreement and such transferee shall, as a condition to such issuance, deliver a
counterpart signature page to this Agreement as confirmation that such
transferee shall be bound by all the terms and conditions of this Agreement as a
Stockholder (but only with respect to the securities so transferred to the
transferee), including the obligations of a Stockholder with respect to Proposed
Transfers of such Transfer Stock pursuant to Section 2; and provided further in
the case of any transfer pursuant to clause (D) or (F) above, that such transfer
is made pursuant to a transaction in which there is no consideration actually
paid for such transfer.

 

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(ii)         Exempted Offerings. Notwithstanding the foregoing or anything to
the contrary herein, (a) the provisions of Section 2 shall not apply to the sale
of any Capital Stock to the public in connection with the IPO, and (b) the
provisions of Section 2(a) shall not apply to the sale pursuant to a Sale of the
Company approved by Initiating Stockholders pursuant to Section 3.

 

(iii)        Prohibited Transferees. Notwithstanding the foregoing, no
Stockholder shall transfer any Transfer Stock to any entity which, in the
determination of the Company’s Board of Directors, directly or indirectly
competes with the Company.

 

(d)          Divorce. This Section 2(d) shall apply to any Stockholder who is a
natural person with respect to which a marital divorce occurs in which the
Stockholder does not retain the entire interest in the Company owned by the
Stockholder prior to such divorce.

 

(i)          Option to Repurchase. Upon the occurrence of a divorce of a
Stockholder in which the Stockholder does not retain the entire interest in the
Company owned by the Stockholder prior to such divorce (a “Divorce Event”), the
Company shall have the right, but not the obligation, to purchase all Capital
Stock with respect to which the Divorce Event occurred, on the terms and
conditions set forth in this Section 2(d)(i) (the “Divorce Option”). The Company
must give written notice of that Stockholder’s intent to exercise the Divorce
Option within 90 days after the Company receives written notice of the
occurrence of the Divorce Event (the “Divorce Notice Period”).

 

(1)         Definitions. For purposes of a Divorce Option, the Capital Stock to
which the Divorce Option applies shall be hereinafter referred to as the
“Divorce Stock”. The selling Stockholder (or the personal representative,
conservator, trustee or other successor in interest of the selling Stockholder)
with respect to any Divorce Option shall be referred to as the “Divorcing
Stockholder”. The “Divorce Option Date” shall be the date on which the Company
exercises the Divorce Option.

 

(2)         Exercise of Divorce Option. To exercise a Divorce Option within a
Divorce Notice Period, the Company shall give written notice (a “Divorce Option
Notice”) to the Divorcing Stockholder stating that the Company desires to
acquire the Divorce Stock. Failure to provide a Divorce Option Notice within the
Divorce Notice Period shall be deemed an election not to purchase the Divorce
Stock. If, within the Divorce Notice Period, a Divorce Option Notice is given
pursuant to which the Company elects to acquire the Divorce Stock, then the
Divorce Stock shall be sold on the terms and conditions set forth below.

 

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(3)         Valuation; Purchase Price. The purchase price for the purchase of a
share of Divorce Stock (the “Divorce Purchase Price”) shall be the value of such
share in connection with a hypothetical liquidation of the Company at the
post-money valuation applied to the Company at the conclusion of its most recent
bona fide equity financing involving gross proceeds to the Company of at least
$1,000,000, less a 30% minority, lack of control and lack of marketability
discount.

 

(4)         Terms for Payment; Status of Ownership; Closing Procedure. The
Divorce Stock shall be conveyed to the Company free and clear of all liens,
claims and encumbrances. Closing of the transfer of the Divorce Stock pursuant
to this Section 2(d)(i) (the “Divorce Closing”) shall take place at the offices
of the Company within 60 days following the Divorce Option Date. The Divorce
Purchase Price shall be paid in cash or immediately available funds at the
Divorce Closing.

 

(5)         Closing Adjustments. If, at the Closing, the Divorce Stock is
subject to any lien, claim or encumbrance, the Company may elect (A) to cause
the Divorce Purchase Price (or a portion thereof) to be applied to discharge
such lien, claim or encumbrance, (B) to take the Divorce Stock subject to such
lien, claim or encumbrance and to reduce the Divorce Purchase Price otherwise
payable to the Divorcing Stockholder by the amount of such lien, claim or
encumbrance, or (C) if the lien, claim or encumbrance was created without the
consent of the Company, to terminate the proceedings under this Section 2(d)(i)
because of the existence of such lien, claim or encumbrance.

 

(6)         Assignment of Repurchase Option. The Company may freely assign, in
whole or in part, a Divorce Option to one or more Stockholders without the
consent of the Divorcing Stockholder or any other Person.

 

(ii)         Irrevocable Proxy. To the extent a Divorce Event occurs and the
applicable Divorce Stock is not purchased pursuant to Section 2(d)(i), the
transfer of Divorce Stock to the Stockholder’s spouse in connection with the
Divorce Event shall be conditioned upon (1) the execution and delivery of
documents joining such spouse as a party to this Agreement as a “Stockholder”,
as requested by the Company, (2) the execution and delivery of an enforceable
and irrevocable proxy, in form reasonably acceptable to the Company, from the
spouse in favor of the Divorcing Stockholder in which the spouse forever grants
to the Divorcing Stockholder all voting rights with respect to the transferred
Divorce Stock, and (3) if requested by the Company, delivery by the Divorcing
Stockholder’s spouse’s legal counsel of a legal opinion stating that the proxy’s
terms are fully binding on and enforceable against the spouse.

 

3.          Drag-Along Right.

 

(a)          Sale of the Company. A “Sale of the Company” means either: (a) a
transaction or series of related transactions in which a Person, or a group of
related Persons, acquires from stockholders of the Company shares representing
more than 50% of the outstanding voting power of the Company (a “Sale of
Control”); or (b) a transaction that qualifies as a Deemed Liquidation Event.
The term “Approved Sale of the Company” means a Sale of the Company where
either:

 

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(i)          Stockholders holding at least 55% of the then outstanding voting
power of the Company (the “Initiating Stockholders”) approve a Sale of the
Company in writing, specifying that this Section 3 shall apply to such
transaction, or

 

(ii)         The Sale of the Company is approved in writing by SAIL, so long as
SAIL holds at least 40% of the then outstanding voting power of the Company.

 

(b)          Actions to be Taken. In connection with an Approved Sale of the
Company, each Stockholder hereby agrees:

 

(i)          if such transaction requires stockholder approval, with respect to
all Capital Stock that such Stockholder owns or over which such Stockholder
otherwise exercises voting power, to vote (in person, by proxy or by action by
written consent, as applicable) all Capital Stock in favor of, and adopt, such
Sale of the Company (together with any related amendment to the Certificate
required in order to implement such Sale of the Company) and to vote in
opposition to any and all other proposals that could reasonably be expected to
delay or impair the ability of the Company to consummate such Sale of the
Company;

 

(ii)         if such transaction is a Sale of Control, to sell the same
proportion of shares of Capital Stock (and, if approved in writing by the
Initiating Stockholders and the acquiror in connection with the Sale of Control,
the Convertible Securities) of the Company beneficially held by such Stockholder
as is being sold by the Initiating Stockholders to the Person to whom the
Initiating Stockholders propose to sell their Capital Stock, and, except as
permitted in Section 3(c), on the same terms and conditions as the Initiating
Stockholders;

 

(iii)        to execute and deliver all related documentation and take such
other action in support of the Sale of the Company as shall reasonably be
requested by the Company or the Initiating Stockholders in order to carry out
the terms and provision of this Section 3, including without limitation
executing and delivering instruments of conveyance and transfer, and any
purchase agreement, merger agreement, indemnity agreement, escrow agreement,
consent, waiver, governmental filing, share certificates duly endorsed for
transfer (free and clear of impermissible liens, claims and encumbrances) and
any similar or related documents;

 

(iv)        not to deposit, and to cause their Affiliates not to deposit, except
as provided in this Agreement, any Capital Stock or Convertible Securities of
the Company owned by such party or Affiliate in a voting trust or subject any
Capital Stock or Convertible Securities to any arrangement or agreement with
respect to the voting of such Capital Stock or Convertible Securities, unless
specifically requested to do so by the acquiror in connection with the Sale of
the Company;

 

(v)         to refrain from exercising any dissenters’ rights or rights of
appraisal under applicable law at any time with respect to such Sale of the
Company; and

 

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(vi)        if the consideration to be paid in exchange for the Capital Stock
(and, if applicable, Convertible Securities) pursuant to this Section 3 includes
any securities and due receipt thereof by any Stockholder would require under
applicable law (A) the registration or qualification of such securities or of
any person as a broker or dealer or agent with respect to such securities or (B)
the provision to any Stockholder of any information other than such information
as a prudent issuer would generally furnish in an offering made solely to
“accredited investors” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended, the Company may cause to be paid to any such
Stockholder in lieu thereof, against surrender of the Capital Stock (and, if
applicable, Convertible Securities) which would have otherwise been sold by such
Stockholder, an amount in cash equal to the fair value (as determined in good
faith by the Company) of the securities which such Stockholder would otherwise
receive as of the date of the issuance of such securities in exchange for the
Capital Stock (and, if applicable, Convertible Securities).

 

(c)          Restrictions. Notwithstanding the foregoing, a Stockholder will not
be required to comply with Section 3(b) in connection with any proposed Sale of
the Company (the “Proposed Sale”) unless:

 

(i)          any representations and warranties to be made by such Stockholder
in connection with the Proposed Sale are limited to representations and
warranties related to authority, ownership and the ability to convey title to
such Capital Stock (and, if applicable, Convertible Securities), including but
not limited to representations and warranties that (A) the Stockholder holds all
right, title and interest in and to the Capital Stock (and, if applicable,
Convertible Securities) such Stockholder purports to hold, free and clear of all
liens and encumbrances, (B) the obligations of the Stockholder in connection
with the transaction have been duly authorized, if applicable, (C) the documents
to be entered into by the Stockholder have been duly executed by the Stockholder
and delivered to the acquirer and are enforceable against the Stockholder in
accordance with their respective terms, and (D) neither the execution and
delivery by the Stockholder of documents to be entered into in connection with
the transaction, nor the performance of the Stockholder’s obligations
thereunder, will cause a breach or violation of the terms of any agreement, law
or judgment, order or decree of any court or governmental agency;

 

(ii)         the Stockholder shall not be liable for the inaccuracy of any
representation or warranty made by any other Person in connection with the
Proposed Sale, other than the Company (except to the extent that funds may be
paid out of an escrow or holdback established to cover breaches of
representations, warranties and covenants of the Company as well as breaches by
any stockholder of any of identical representations, warranties and covenants
provided by all stockholders);

 

(iii)        the liability for indemnification, if any, of such Stockholder in
the Proposed Sale and for the inaccuracy of any representations and warranties
made by the Company in connection with such Proposed Sale, is several and not
joint with any other Person (except to the extent that funds may be paid out of
an escrow or holdback established to cover breach of representations, warranties
and covenants of the Company as well as breach by any stockholder of any of
identical representations, warranties and covenants provided by all
stockholders), and is pro rata in proportion to the amount of consideration paid
to such Stockholder in connection with such Proposed Sale (in accordance with
the provisions of the Certificate);

 

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(iv)        liability shall be limited to such Stockholder’s applicable share
(determined based on the respective proceeds payable to each Stockholder in
connection with such Proposed Sale in accordance with the provisions of the
Certificate) of a negotiated aggregate indemnification amount that applies
equally to all Stockholders but that in no event exceeds the amount of
consideration otherwise payable to such Stockholder in connection with such
Proposed Sale, except with respect to claims related to fraud by such
Stockholder of breaches of the representations listed in Section 3(c)(i), the
liability for which need not be limited as to such Stockholder; and

 

(v)         upon the consummation of the Proposed Sale, (A) each Stockholder
will receive the same form of consideration for their class or series of Capital
Stock as is received by other Stockholders in respect of the same class or
series of Capital Stock, (B) each Stockholder will receive the amount of
consideration per share of such class or series of Capital Stock as is received
by other Stockholders in respect of shares of the same class or series of
Capital Stock, (C) with respect to any Sale of Control for which the Initiating
Stockholders and acquiror approve in writing the purchase of the Convertible
Securities, each Stockholder will receive the same amount of consideration per
Convertible Security as is received by other Stockholders in respect of the same
Convertible Security with the same exercise/conversion price, and (D) unless the
holders of at least 66 2/3% of the then outstanding Capital Stock elect
otherwise by written notice given to the Company at least five days prior to the
effective date of any such Proposed Sale, the aggregate consideration receivable
by all holders of Capital Stock shall be allocated among the holders of Capital
Stock (and, if applicable, Convertible Securities on a net
as-exercised/as-converted basis) on the basis of any liquidation preferences to
which the holders of each respective series and classes of Capital Stock are
entitled in a Deemed Liquidation Event (assuming for this purpose that the
Proposed Sale is a Deemed Liquidation Event) in accordance with the Certificate
in effect immediately prior to the Proposed Sale.

 

(d)          The Stockholders acknowledge that the consideration payable in
connection with the Sale of the Company may not be sufficient to provide for
full payment of all liquidation preferences to all series of the Company’s
preferred stock, or to provide for any payment with respect to the Common Stock.
The purchase price payable in connection with a Sale of Control shall be
allocated among the shares to be sold as though the total purchase price was
being distributed in a liquidation of the Company under the Certificate.

 

4.          Rights to Future Financings.

 

(a)          Subject to the terms and conditions of this Section 4 and
applicable securities laws, if the Company proposes to offer or sell any New
Securities for an investment of cash proceeds in the Company in connection with
a bona fide financing transaction, the Company shall first offer such New
Securities to each Investor. An Investor shall be entitled to apportion the
rights to future financings hereby granted to it among itself and its Affiliates
in such proportions as it deems appropriate.

 

(b)          The Company shall give notice (the “Offer Notice”) to each
Investor, stating (i) its bona fide intention to offer such New Securities, (ii)
the number of such New Securities to be offered, and (iii) the price and terms,
if any, upon which it proposes to offer such New Securities.

 

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(c)          By notification to the Company within 20 days after the Offer
Notice is given, each Investor may elect to purchase or otherwise acquire, at
the price and on the terms specified in the Offer Notice, up to that portion of
such New Securities which equals the proportion that the Investment Stock issued
and held by such Investor bears to the aggregate Capital Stock then issued and
outstanding. At the expiration of such 20-day period, the Company shall promptly
notify each Investor that elects to purchase or acquire all the shares available
to it (each, a “Fully Exercising Investor”) of any other Investor’s failure to
do likewise. During the 10-day period commencing after the Company has given
such notice, each Fully Exercising Investor may, by giving notice to the
Company, elect to purchase or acquire, in addition to the number of shares
specified above, up to that portion of the New Securities for which Investors
were entitled to subscribe but that were not subscribed for by the Investors
which is equal to the proportion that the Investment Stock issued and held by
such Fully Exercising Investor bears to the Investment Stock issued and held by
all Fully Exercising Investors who wish to purchase such unsubscribed shares.
The closing of any sale pursuant to this Section 4(c) shall occur within the
later of (i) 90 days of the date of the Offer Notice is given and (ii) the
initial sale of New Securities pursuant to Section 4(a).

 

(d)          If all New Securities referred to in the Offer Notice are not
elected to be purchased or acquired as provided in Section 4(c), the Company
may, during the 90-day period following the expiration of the periods provided
in Section 4(c), offer and sell the remaining unsubscribed portion of such New
Securities to any Person or Persons at a price not less than, and upon terms no
more favorable to the offeree than, those specified in the Offer Notice. If the
Company does not enter into an agreement for the sale of the New Securities
within such period, or if such agreement is not consummated within 30 days of
the execution thereof, the right provided hereunder shall be deemed to be
revived and such New Securities shall not be offered unless first reoffered to
the Investors in accordance with this Section 4.

 

(e)          The rights of first offer in this Section 4 shall not be applicable
to (i) New Securities not issued or sold in connection with an investment of
cash proceeds in the Company in bona fide financing transaction, (ii) Exempted
Securities; or (iii) shares of Common Stock issued in the IPO.

 

(f)          Unless otherwise agreed by the Company and Investors holding at
least a majority of the Investment Stock not held by such Investor, the right of
first offer set forth in Sections 4(a)-(d) shall terminate with respect to any
Investor who fails to purchase, in connection with two separate financings
subject to Section 4(a) each involving gross proceeds to the Company of at least
$1,000,000, all of such Investor’s pro rata amount of the New Securities offered
to such Investor in the applicable initial Offer Notice. Following any such
termination, such Investor shall no longer be deemed an “Investor” for any
purpose of this Section 4.

 

(g)          Notwithstanding any provision hereof to the contrary, in lieu of
complying with the provisions of Section 4(a)-(d), the Company may elect to give
notice to the Investors within 30 days after the issuance of New Securities.
Such notice shall describe the type, price, and terms of the New Securities.
Each Investor shall have 20 days from the date notice is given to elect to
purchase up to the number of New Securities that would, if purchased by such
Investor, maintain such Investor’s percentage-ownership position, calculated as
set forth in Section 4(c) before giving effect to the issuance of such New
Securities. The closing of such sale shall occur within 60 days of the date
notice is given to the Investors.

 

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5.          Voting Provisions Regarding Board of Directors.

 

(a)          Election of ESS Nominee. So long as ESS and RNS hold in the
aggregate at least 5% of the then outstanding Common Stock of the Company,
assuming full conversion of all outstanding Preferred Stock of the Company, each
Stockholder agrees to vote, or cause to be voted, all of its Capital Stock, or
director votes derived from such Capital Stock, for election of a nominee
identified by ESS (or if ESS does not provide a nominee, then RNS) to the Board
of Directors (the “ESS Director”). All Stockholders agree to execute any written
consents required to perform the obligations of this provision.

 

(b)          Observer Rights. If ESS and RNS have the right to nominate a
director pursuant to Section 5(a) but no such director is nominated, until such
time that a director is nominated pursuant to Section 5(a), the Company shall
invite a representative of ESS (or if ESS does not provide a representative,
then RNS) to attend all meetings of its Board of Directors in a nonvoting
observer capacity and, in this respect, shall give such representative copies of
all notices, minutes, consents, and other materials that it provides to its
directors; provided, however, that such representative shall agree to hold in
confidence and trust all information so provided.

 

(c)          Committees and Subsidiaries. All committees of the Board of
Directors shall be appointed by the Board and shall have at least one
independent member who is not an Affiliate of SAIL.

 

(d)          Election of Other Directors. With respect to the election of all
directors except the ESS Director, each Stockholder agrees to vote, or cause to
be voted, all of its Capital Stock, or director votes derived from such Capital
Stock, for election of each of the nominees identified by the holders of a
majority of the outstanding Preferred Stock voting together on an as converted
to Common Stock basis (including the Common Stock issued upon conversion
thereof). All Stockholders agree to execute any written consents required to
perform the obligations of this provision.

 

6.          Lock-Up.

 

(a)          Agreement to Lock-Up. Each Stockholder hereby agrees that it will
not, without the prior written consent of the managing underwriter, during the
period commencing on the date of the final prospectus relating to the Company’s
IPO and ending on the date specified by the Company and the managing underwriter
(such period not to exceed 180 days) or, if required by such underwriter, such
longer period of time as is necessary to enable such underwriter to issue a
research report or make a public appearance that relates to an earnings release
or announcement by the Company within 18 days prior to or after the date that is
180 days after the effective date of the registration statement relating to such
offering, but in any event not to exceed 210 days following the effective date
of the registration statement relating to such offering (i) lend, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Capital
Stock held immediately prior to the effectiveness of the registration statement
for the IPO or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Capital Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Capital Stock or other securities, in cash
or otherwise. The foregoing provisions of this Section 6 shall not apply to the
sale of any shares to an underwriter pursuant to an underwriting agreement
pursuant to which the Company is a party. The underwriters in connection with
the IPO are intended third-party beneficiaries of this Section 6 and shall have
the right, power and authority to enforce the provisions hereof as though they
were a party hereto. Each Stockholder further agrees to execute such agreements
as may be reasonably requested by the underwriters in the IPO that are
consistent with this Section 6 or that are necessary to give further effect
thereto.

 

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(b)          Stop Transfer Instructions. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
shares of Capital Stock of each Stockholder (and transferees and assignees
thereof) until the end of such restricted period.

 

7.          Legend. Each certificate representing shares of Capital Stock held
by the Stockholders or issued to any permitted transferee in connection with a
transfer permitted by this Agreement hereof shall be endorsed with the following
legend:

 

THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A STOCKHOLDERS AGREEMENT, AS MAY BE
AMENDED FROM TIME TO TIME, (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST
FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON
ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY
ALL THE PROVISIONS OF THAT STOCKHOLDERS AGREEMENT, INCLUDING CERTAIN
RESTRICTIONS ON TRANSFER, OWNERSHIP, VOTING AND OTHER MATTERS SET FORTH THEREIN.

 

Each Stockholder agrees that the Company may instruct its transfer agent to
impose transfer restrictions on the shares represented by certificates bearing
the legend referred to in this Section 7 to enforce the provisions of this
Agreement, and the Company agrees to promptly do so. The legend shall be removed
upon termination of this Agreement at the request of the holder.

 

8.          Restrictive Covenants.

 

(a)          During the period of any Stockholder’s ownership of Capital Stock,
and for a period of one year thereafter, neither any Stockholder, nor any
Affiliate thereof, shall, without the approval of all of the disinterested
members of the Board of Directors, directly or indirectly,

 

(i)          knowingly or intentionally, cause, induce, or attempt to cause or
induce, any Person who is a customer, supplier, licensee, licensor, franchisee,
employee, consultant, or other business relation of the Company to deal with any
competitor of the Company (provided that this Section 8(a)(i) shall not apply to
ESS or RNS with respect to their ownership of or affiliation with FlexEnergy,
Inc. or any of its Affiliates); or

 

-10-

 

 

(ii)         hire or employ, or attempt to hire or employ, any employee of the
Company that was employed by the Company during Stockholder’s ownership of
Capital Stock, unless such individual has not been employed by the Company
during the preceding six months.

 

(b)          If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 8 is invalid or unenforceable, the
parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed. If any of the covenants set forth in this Section 8
are breached, such breach would cause irreparable harm to the non-violating
party and, in the event of such breach, the non-violating party shall be
entitled, in addition to monetary damages and to any other remedies available to
the non-violating party under this Agreement and at law, to equitable relief,
including injunctive relief, and the payment by the violating party of all costs
incurred by the non-violating party in enforcing the covenants set forth in this
Section 8, including reasonable attorneys’ fees. No party shall be required to
prove that money damages are inadequate or to provide any bond or other security
in connection with any such decree, order or injunction or in connection with
any related Action pursuant to this Section 8.

 

9.          Irrevocable Proxy. Each party to this Agreement hereby constitutes
and appoints the President and Treasurer of the Company, and a designee of the
Initiating Stockholders, and each of them, with full power of substitution, as
the proxies of the party with respect to the matters set forth herein, including
without limitation, election of the ESS Director in accordance with Section 5
and votes regarding any Sale of the Company pursuant to Section 3, and hereby
authorizes each of them to represent and to vote, if and only if the party (a)
fails to vote or (b) attempts to vote (whether by proxy, in person or by written
consent), in a manner which is inconsistent with the terms of this Agreement,
all of such party’s Capital Stock in favor of the election of persons as members
of the Board determined pursuant to and in accordance with the terms and
provisions of this Agreement or approval of any Sale of the Company pursuant to
and in accordance with the terms and provisions of Section 3. The proxy granted
pursuant to the immediately preceding sentence is given in consideration of the
agreements and covenants of the Company and the parties in connection with the
transactions contemplated by this Agreement and, as such, is coupled with an
interest and shall be irrevocable unless and until this Agreement terminates or
expires pursuant to Section 10(a) or Section 10(h). Each party hereto hereby
revokes any and all previous proxies with respect to the Capital Stock and shall
not hereafter, unless and until this Agreement terminates or expires pursuant to
Section 10(a) or Section 10(h), purport to grant any other proxy or power of
attorney with respect to any of the Capital Stock, deposit any of the Capital
Stock into a voting trust or enter into any agreement (other than this
Agreement), arrangement or understanding with any person, directly or
indirectly, to vote, grant any proxy or give instructions with respect to the
voting of any of the Capital Stock, in each case, in conflict with any of the
matters set forth herein.

 

-11-

 

 

10.         Miscellaneous.

 

(a)          Automatic Termination. This Agreement shall automatically terminate
immediately prior to the consummation of the earlier of (i) the Company’s IPO or
(ii) a Deemed Liquidation Event; provided, however, that the obligations set
forth in Section 6 shall survive a termination pursuant to the Company’s IPO
until the obligations of the Stockholders set forth therein have been fully
performed and the obligations set forth in Section 8 shall survive for one
additional year beyond termination.

 

(b)          Stock Split. All references to numbers of shares in this Agreement
shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization affecting the Capital Stock occurring
after the date of this Agreement.

 

(c)          Ownership. Each Stockholder represents and warrants that such
Stockholder is the sole legal and beneficial owner of the shares of Capital
Stock subject to this Agreement and that no other person or entity has any
interest in such shares (other than a community property interest as to which
the holder thereof has acknowledged and agreed in writing to the restrictions
and obligations hereunder).

 

(d)          Manner of Voting. The voting of Capital Stock pursuant to this
Agreement may be effected in person, by proxy, by written consent or in any
other manner permitted by applicable law. If any Capital Stock voted pursuant to
this Agreement is preferred stock convertible into Common Stock, the voting of
such shares of convertible preferred stock shall be counted on an as-converted
to Common Stock basis.

 

(e)          Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed effectively
given upon the earlier of actual receipt or: (i) personal delivery to the party
to be notified, (ii) when sent, if sent by electronic mail or facsimile during
normal business hours of the recipient, and if not sent during normal business
hours, then on the recipient’s next business day, (iii) five days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid, or (iv) one business day after deposit with a nationally recognized
overnight courier, freight prepaid, specifying next business day delivery, with
written verification of receipt. All communications shall be sent to the
Stockholders at their addresses as set forth in the corporate records of the
Company, or to such email address, facsimile number or address as subsequently
modified by written notice given in accordance with this Section 10(e). If
notice is given to the Company, it shall be sent to 9400 Toledo Way, Irvine,
California 92618, or to such email address, facsimile number or address as
subsequently modified by written notice given in accordance with this Section
10(e); and a copy (which shall not constitute notice) shall also be sent to
Bryan Cave LLP, 3161 Michelson, 15th Floor, Irvine, California 91612, Attn.:
Amit S. Parekh, Esq.

 

(f)          Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.

 

-12-

 

 

(g)          Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) constitutes the full and entire understanding and agreement
between the parties with respect to the subject matter hereof, and any other
written or oral agreement relating to the subject matter hereof existing between
the parties are expressly canceled.

 

(h)          Amendment; Waiver and Termination. This Agreement may be amended,
modified or terminated (other than pursuant to Section 10(a)) and the observance
of any term hereof may be waived (either generally or in a particular instance
and either retroactively or prospectively) only by a written instrument executed
by (i) the Company, and (ii) Stockholders holding more than 50% of the
outstanding Common Stock of the Company, assuming full conversion of all
outstanding Preferred Stock of the Company. Any amendment, modification,
termination or waiver so effected shall be binding upon the Company, the
Investors, the Stockholders and all of their respective successors and permitted
assigns whether or not such party, assignee or other shareholder entered into or
approved such amendment, modification, termination or waiver. Notwithstanding
the foregoing:

 

(i)          any amendment, modification, termination or waiver applicable only
to the Investors may be effected by Investors holding at least a majority of the
voting power represented by the Investment Stock then outstanding and held by
all of the Investors, and the consent of non-Investor Stockholders shall not be
required for such amendment, modification, termination or waiver;

 

(ii)         this Agreement may not be amended, modified or terminated and the
observance of any term hereunder may not be waived with respect to any Investor
or Stockholder without the written consent of such Investor or Stockholder
unless such amendment, modification, termination or waiver applies to all
Investors and Stockholders, respectively, in the same fashion; and

 

(iii)        neither Section 4, Sections 5(a), (b) or (c) nor this Section
10(h)(iii) may be amended, modified or terminated (other than pursuant to
Section 10(a)) without the express prior written consent of ESS and RNS; and

 

(iv)        Schedule 1 may be amended by the Company from time to time in
accordance with the Restructuring Agreement of even date herewith by and among
the Company and certain of its Stockholders, to update information regarding
outstanding Investment Stock without the consent of the other parties hereto.

 

The Company shall give prompt written notice of any amendment, modification or
termination hereof or waiver hereunder to any party hereto that did not consent
in writing to such amendment, modification, termination or waiver. No waivers of
or exceptions to any term, condition or provision of this Agreement, in any one
or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.

 

-13-

 

 

(i)          Assignment of Rights.

 

(i)          The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and permitted assigns
of the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

(ii)         Any successor or permitted assignee of any Stockholder, including
any Prospective Transferee who purchases Transfer Stock in accordance with the
terms hereof, shall deliver to the Company, as a condition to any transfer or
assignment, a counterpart signature page hereto pursuant to which such successor
or permitted assignee shall confirm their agreement to be subject to and bound
by all of the provisions set forth in this Agreement that were applicable to the
predecessor or assignor of such successor or permitted assignee.

 

(iii)        Except in connection with an assignment by the Company by operation
of law to the acquirer of the Company, the rights and obligations of the Company
hereunder may not be assigned under any circumstances.

 

(j)          Additional Stockholders. If after the date of this Agreement, the
Company enters into an agreement with any Person to issue shares of Capital
Stock or Convertible Securities to such Person, then the Company shall cause
such Person, as a condition precedent to entering into such agreement, to become
a party to this Agreement by executing an Adoption Agreement in the form
attached hereto as Exhibit B, agreeing to be bound by and subject to the terms
of this Agreement as a Stockholder and thereafter such person shall be deemed a
Stockholder for all purposes under this Agreement.

 

(k)          Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

 

(l)          Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.

 

(m)          Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law.

 

(n)          Disputes.

 

-14-

 

 

(i)          Exclusive Jurisdiction; Venue; Waiver of Jury Trial. The parties
(A) hereby irrevocably, unconditionally and exclusively submit to the
jurisdiction of the state courts of Delaware and to the jurisdiction of the
United States District Court for the District of Delaware for the purpose of any
suit, action or other proceeding arising out of or based upon this Agreement,
(B) agree not to commence any suit, action or other proceeding arising out of or
based upon this Agreement except in the state courts of Delaware or the United
States District Court for the District of Delaware, and (C) hereby waive, and
agree not to assert, by way of motion, as a defense, or otherwise, in any such
suit, action or proceeding, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune
from attachment or execution, that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court. Each of the parties to this Agreement consents to personal
jurisdiction for any equitable action sought in the U.S. District Court for the
District of Delaware or any court of the State of Delaware having subject matter
jurisdiction. THE PARTIES AGREE TO WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
SUCH DISPUTE AND THAT THE MATTER WILL BE TRIED SOLELY TO THE COURT. THE PARTIES
UNDERSTAND THAT THEY ARE GIVING UP VALUABLE LEGAL RIGHTS UNDER THIS PROVISION,
INCLUDING THE RIGHT TO TRIAL BY JURY, AND THAT THEY VOLUNTARILY AND KNOWINGLY
WAIVE THOSE RIGHTS.

 

(ii)         Specific Enforcement. If any of the provisions of this Agreement
are not performed by the parties in accordance with their specific terms or are
otherwise breached the other parties will be irreparably harmed. Accordingly,
each of the Company and the Stockholders shall be entitled to an injunction to
prevent breaches of this Agreement, and to specific enforcement of this
Agreement and its terms and provisions in any action instituted in any court of
the United States or any state having subject matter jurisdiction.

 

(iii)        Attorney Fees. The prevailing party shall be entitled to reasonable
attorney’s fees, costs, and necessary disbursements in addition to any other
relief to which such party may be entitled.

 

(iv)        Remedies Cumulative. All remedies, either under this Agreement or by
law or otherwise afforded to any party, shall be cumulative and not alternative.

 

(o)          Further Assurances. At any time or from time to time after the date
hereof, the parties shall cooperate with each other, and at the request of any
other party, to execute and deliver any further instruments or documents and to
take all such further action as the other parties may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder.

 

(p)          Counterparts; Facsimile. This Agreement may be executed in two or
more original or facsimile counterparts, each of which shall be deemed an
original. To the extent executed and delivered by electronic or similar
reproduction of such signed writing using a facsimile machine or electronic
mail, this Agreement, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person.

 

(q)          ESS Affiliates. The parties agree that (i) delivery to ESS by the
Company of any notice required hereunder shall also constitute notice with
respect to any Affiliate of ESS that may also be a Stockholder and/or Investor,
and the Company shall not be required to deliver any separate corresponding
notice to any Affiliate of ESS, (ii) any consent or approval by ESS hereunder
shall also constitute consent, waiver or approval by any Affiliate of ESS that
may also be a Stockholder and/or Investor hereunder, and the Company shall not
be required to obtain a separate corresponding consent, waiver or approval from
any Affiliate of ESS, and (iii) any formal exercise of rights hereunder by ESS
shall either include an exercise of corresponding rights hereunder by each
Affiliate of ESS possessing corresponding rights or shall be deemed waive the
exercise of any such rights hereunder by such Affiliate of ESS. This Section
10(q) shall not be deemed to grant or extend any rights of ESS to any Affiliate
of ESS.

 

-15-

 

 

(r)          Consent of Spouse. If any Stockholder is married on the date of
this Agreement, such Stockholder’s spouse shall execute and deliver to the
Company a consent of spouse in the form of Exhibit C (“Consent of Spouse”),
effective on the date hereof. Notwithstanding the execution and delivery
thereof, such consent shall not be deemed to confer or convey to the spouse any
rights in such Stockholder’s shares of Capital Stock that do not otherwise exist
by operation of law or the agreement of the parties. If any Stockholder should
marry or remarry subsequent to the date of this Agreement, such Stockholder
shall within 30 days thereafter obtain his/her new spouse’s acknowledgement of
and consent to the existence and binding effect of all restrictions contained in
this Agreement by causing such spouse to execute and deliver a Consent of Spouse
acknowledging the restrictions and obligations contained in this Agreement and
agreeing and consenting to the same.

 

[SIGNATURES ON FOLLOWING PAGE]

 

-16-

 

 

IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Stockholders Agreement as of the date first written above.

 

  COMPANY:         Flex Power Generation, Inc.               By:            
Name:      Title:  

 

Stockholders Agreement

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Stockholders Agreement as of
the date first written above.

 

  STOCKHOLDER:               (Print Stockholder Name)               (Signature
on behalf of Stockholder)               (Printed name of signor, if different
from Stockholder name above)               (Title of signor on behalf of
Stockholder, if any)           Full name and address of Stockholder for notices:
                       

 

Stockholders Agreement

 

 

 

 

EXHIBIT A

 

DEFINITIONS

 

“Affiliate” means, with respect to any specified Person, any other Person who
directly or indirectly, controls, is controlled by or is under common control
with such Person, including without limitation any general partner, managing
member, officer or director of such Person, or any venture capital fund now or
hereafter existing which is controlled by one or more general partners or
managing members of, or shares the same management company with, such Person.

 

“Agreement” means this Stockholders Agreement.

 

“Board of Directors” means the board of directors of the Company; provided
however that any duly authorized and formed Operations Committee shall have the
power and authority, subject to such Operations Committee’s charter as it may be
approved by the Board of Directors, to make, grant or otherwise act with respect
to any determination, designation, approval, consent or other action on behalf
of the Board of Directors required, provided for, or otherwise contemplated by
this Agreement, except (a) as subsequently limited or rescinded by resolution of
the Board of Directors from time to time, (b) for actions conflicting with
contrary resolutions of the Board of Directors with respect to the proposed
action, or (c) for actions for which applicable laws or the Certificate of
Incorporation do not permit such power and authority to be delegated by the
Board of Directors to a committee thereof. In addition, any grant of powers and
authority by the Board of Directors to the Operations Committee shall remain
subject to any additional approvals or third party consents to which the powers
and authority of the Board of Directors are subject by contract and/or
applicable law.

 

“Capital Stock” means shares of Common Stock and any other class or series of
capital stock of the Company (whether now outstanding or hereafter authorized
and issued in any context), in each case now owned or subsequently acquired
(however acquired, whether through issuance, sale, transfer, stock splits, stock
dividends, reclassifications, recapitalizations, similar events or otherwise) by
any Stockholders or their respective successors or permitted transferees or
assigns. Unless the context otherwise requires, in any case where this Agreement
refers to a specified percentage or proportion of outstanding Capital Stock,
such percentage or proportion shall be calculated on a fully-converted basis.

 

“Certificate” means the Company’s certificate of incorporation, as amended and
filed with the Delaware Secretary of State from time to time.

 

“Common Stock” means shares of Common Stock of the Company, $.001 par value per
share.

 

“Company” has the meaning specified in the introductory paragraph of this
Agreement.

 

“Company Exercise Notice” means written notice from the Company notifying the
selling Stockholders that the Company intends to exercise its Right of First
Offer as to the Transfer Stock with respect to any Proposed Transfer.

 

 

 

 

“Convertible Securities” means any evidences of indebtedness, shares, rights,
options, warrants or other securities directly or indirectly convertible into or
exchangeable for Common Stock or any other class of series of capital stock of
the Company (whether now outstanding or hereafter authorized and issued in any
context).

 

“Deemed Liquidation Event” means a (a) merger or consolidation in which (i) the
Company is a constituent party or (ii) a subsidiary of the Company is a
constituent party and the Company issues shares of its Capital Stock pursuant to
such merger or consolidation, except any such merger or consolidation involving
the Company or a subsidiary in which the shares of Capital Stock of the Company
outstanding immediately prior to such merger or consolidation continue to
represent, or are converted into or exchanged for shares of capital stock that
represent, immediately following such merger or consolidation, at least a
majority, by voting power, of the equity ownership of (1) the surviving or
resulting Person or (2) if the surviving or resulting Person is a wholly owned
subsidiary of another Person immediately following such merger or consolidation,
the parent of such surviving or resulting Person (provided that, for the purpose
of this definition of “Deemed Liquidation Event,” all shares of Common Stock
issuable upon exercise of Convertible Securities outstanding immediately prior
to such merger or consolidation or upon conversion of Convertible Securities
outstanding immediately prior to such merger or consolidation shall be deemed to
be outstanding immediately prior to such merger or consolidation and, if
applicable, converted or exchanged in such merger or consolidation on the same
terms as the actual outstanding shares of Common Stock are converted or
exchanged); or (b) the sale, lease, transfer, exclusive license or other
disposition, in a single transaction or series of related transactions, by the
Company or any subsidiary of the Corporation of all or substantially all the
assets of the Company and its subsidiaries taken as a whole, or the sale or
disposition (whether by merger or otherwise) of one or more subsidiaries of the
Corporation if substantially all of the assets of the Corporation and its
subsidiaries taken as a whole are held by such subsidiary or subsidiaries,
except where such sale, lease, transfer, exclusive license or other disposition
is to a wholly owned subsidiary of the Corporation.

 

“ESS” means Energy Special Situations Fund II, L.P. together with its
Affiliates.

 

“ESS Director” has the meaning specified in Section 5(a).

 

“Exempted Securities” means (a) shares of Common Stock or Convertible Securities
issued by reason of a dividend, stock split or split-up; (b) shares of Common
Stock or Convertible Securities issued to employees or directors of, or
consultants or advisors to, the Corporation or any of its subsidiaries pursuant
to a plan, agreement or arrangement approved by the Board of Directors; (c)
shares of Common Stock or Convertible Securities issued to banks, equipment
lessors, financial institutions or real property lessors pursuant to a debt
financing, equipment leasing or real property leasing transaction approved by
the Board of Directors; (d) shares of Common Stock or Convertible Securities
issued to suppliers or third party service providers in connection with the
provision of goods or services pursuant to transactions approved by the Board of
Directors or (e) shares of Common Stock or Convertible Securities issued in
connection with acquisitions, sponsored research, collaboration, technology
license, development, OEM, marketing or other similar agreements or strategic
partnerships approved by the Board of Directors.

 

-2-

 

 

“Fully Exercising Investor” has the meaning specified in Section 4(c).

 

“Initiating Stockholders” has the meaning specified in Section 3(a)(i).

 

“Investment Stock” means (a) the holdings of Capital Stock initially listed on
Schedule 1, and (b) any holdings of subsequently issued Capital Stock issued in
connection with a cash investment in the Company made as part of a bona fide
financing transaction or conversion or exchange of Company indebtedness in
connection with a capital restructuring, which shall be added to Schedule 1 from
time to time by the Board of Directors to reflect the current holdings of
Investment Stock and be final and binding on the Stockholders.

 

“Investor” means any Stockholder which, together with its Affiliates, holds
Investment Stock (to the extent of such holdings of Investment Stock)
representing at least 5% of the issued and outstanding Common Stock of the
Company, assuming full conversion of all outstanding Preferred Stock of the
Company.

 

“IPO” means the Company’s first underwritten public offering of its Common Stock
under the Securities Act.

 

“New Securities” means, collectively, equity securities of the Company, whether
or not currently authorized, as well as rights, options, or warrants to purchase
such equity securities, or securities of any type whatsoever that are, or may
become, convertible or exchangeable into or exercisable for such equity
securities, but specifically excluding any equity securities issued by the
Company pursuant to the terms of the Restructuring Agreement among the Company
and the “New Investors” and “Existing Investors” named therein, dated
November 12, 2012.

 

“Offer Notice” has the meaning specified in Section 4(b).

 

“Person” means an individual, firm, corporation, partnership, association,
limited liability company, trust or any other entity.

 

“Proposed Sale” has the meaning specified in Section 3(c).

 

“Proposed Transfer” means any assignment, sale, offer to sell, pledge, mortgage,
hypothecation, encumbrance, disposition of or any other like transfer or
encumbering of any Transfer Stock (or any interest therein) proposed by any of
the Stockholders.

 

“Proposed Transfer Notice” means written notice from a Stockholder setting forth
the terms and conditions of a Proposed Transfer.

 

“Prospective Transferee” means any person to whom a Stockholder proposes to make
a Proposed Transfer.

 

“Restructuring Agreement” means the Restructuring Agreement of even date
herewith among the Company and certain of the Stockholders.

 

“Right of First Offer” means the right, but not an obligation, of the Company,
or its permitted transferees or assigns, to purchase some or all of the Transfer
Stock proposed to be sold in a Proposed Transfer on the terms and conditions
specified in the Proposed Transfer Notice.

 

-3-

 

 

“RNS” means RNS Flex, LLC. together with its Affiliates.

 

“ROFO Exercise Period” has the meaning specified in Section 2(a)(ii).

 

“Sale of the Company” has the meaning specified in Section 3(a).

 

“Sale of Control” has the meaning specified in Section 3(a).

 

“SAIL” means SAIL Venture Partners II, L.P. together with its Affiliates.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Stockholder” means any holder of Capital Stock or Convertible Securities that
is a party to this Agreement or that subsequently becomes a party to this
Agreement.

 

“Transfer Stock” means shares of Capital Stock or Convertible Securities
proposed to be sold in a Proposed Transfer.

 

-4-

 

 

EXHIBIT B

 

ADOPTION AGREEMENT

 

This Adoption Agreement (“Adoption Agreement”) is executed on, 20 , by the
undersigned (the “Holder”) pursuant to the terms of that certain Stockholders
Agreement dated as of November 12, 2012 (the “Agreement”), by and among the
Company and certain of its Stockholders, as such Agreement may be amended or
amended and restated hereafter. Capitalized terms used but not defined in this
Adoption Agreement shall have the respective meanings ascribed to such terms in
the Agreement. By the execution of this Adoption Agreement, the Holder agrees as
follows.

 

1.1           Acknowledgement. Holder acknowledges that Holder is acquiring
certain shares of the capital stock of the Company (the “Stock”), and will be a
“Stockholder” for all purposes of the Agreement.

 

1.2           Agreement. Holder hereby (a) agrees that the Stock, and any other
shares of capital stock or securities required by the Agreement to be bound
thereby, shall be bound by and subject to the terms of the Agreement and (b)
adopts the Agreement with the same force and effect as if Holder were originally
a party thereto.

 

1.3           Notice. Any notice required or permitted by the Agreement shall be
given to Holder at the address or facsimile number listed below Holder’s
signature hereto.

 

 

HOLDER:     ACCEPTED AND AGREED:           By:            Flex Power Generation,
Inc. Name:          Title:               By:                  Title:   

 

Notice Address:                             Facsimile Number:    

 

 

 

 

EXHIBIT C

 

CONSENT OF SPOUSE

 

I, _______________, spouse of _______________, acknowledge that I have read the
Stockholders Agreement, dated as of November 12, 2012 and as it may be amended
from time to time, to which this Consent is attached as Exhibit C (the
“Agreement”), and that I know the contents of the Agreement. I am aware that the
Agreement contains provisions regarding certain rights to certain other holders
of Capital Stock (as defined in the Agreement) of the Company regarding the
voting and transfer of shares of Capital Stock of the Company which my spouse
may own including any interest I might have therein.

 

I hereby agree that my interest, if any, in any shares of Capital Stock of the
Company subject to the Agreement shall be irrevocably bound by the Agreement and
further understand and agree that any community property interest I may have in
such shares of Capital Stock of the Company shall be similarly bound by the
Agreement.

 

I am aware that the legal, financial and related matters contained in the
Agreement are complex and that I am free to seek independent professional
guidance or counsel with respect to this Consent. I have either sought such
guidance or counsel or determined after reviewing the Agreement carefully that I
will waive such right.

 

Dated as of    

 

      Signature           Print Name

 

 

 

 

SCHEDULE 1

 

INVESTMENT STOCK

 

Stockholder   Investment Stock       RNS Flex, LLC   2,485,921 shares of Series
B Preferred Stock           1,242,960 shares of Series B Preferred Stock      
SAIL Venture Partners II, LP.   2,259,928 shares of Series A Preferred Stock    
      3,795,618 shares of Series C Preferred Stock           2,043,795 shares of
Series D Preferred Stock           1,951,314 shares of Common Stock       SAIL
2010 Co-Investment Partners, LP   7,969 shares of Common Stock       SAIL 2011
Co-Investment Partners, LP   13,281 shares of Common Stock       Louisiana
Sustainability Fund   5,238,443 shares of Series C Preferred Stock          
2,820,700 shares of Series D Preferred Stock       ESS Participation Fund II, LP
  63,345 shares of Series B Preferred Stock       Energy Special Situations Fund
II, LP   1,041,509  shares of Series B Preferred Stock       Jay W. Decker  
103,580 shares of Series B Preferred Stock       Mark McComiskey   34,527 shares
of Series B Preferred Stock