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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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U.S. ENERGY SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 52-1216347
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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515 NORTH FLAGLER DRIVE, SUITE 702
WEST PALM BEACH, FLORIDA 33401
(561) 820-9779
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
SEYMOUR J. BEDER
SECRETARY, TREASURER AND CHIEF FINANCIAL OFFICER
U.S. ENERGY SYSTEMS, INC.
515 NORTH FLAGLER DRIVE, SUITE 702
WEST PALM BEACH, FLORIDA 33401
(561) 820-9779
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
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COPIES OF ALL COMMUNICATIONS TO:
BRUCE I. MARCH
AKERMAN, SENTERFITT & EIDSON, P.A.
SUNTRUST INTERNATIONAL CENTER
ONE S.E. 3RD AVENUE, 28TH FLOOR
MIAMI, FLORIDA 33131-1704
(305) 374-5600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number and the effective registration
statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
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Common Stock, par value $.01 per
share.............................. 716,430 shares $3 9/32 $2,349,890.40 $713
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(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating
the registration fee. On September 23, 1997, the average of the high
and low sales prices of the Common Stock as reported by the Nasdaq
Stock Market was $3 9/32 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
U.S. ENERGY SYSTEMS, INC.
716,430 SHARES
COMMON STOCK
This Prospectus relates to an aggregate of 716,430 shares (the "Shares") of
Common Stock, par value $.01 per share (the "Common Stock") of U.S. Energy
Systems, Inc. (the "Company") which may be offered (the "Offering") for sale by
persons (the "Selling Shareholders") who have acquired such shares in certain
acquisitions of businesses or other transactions by the Company not involving a
public offering. The Shares are being registered under the Securities Act of
1933, as amended (the "Securities Act"), on behalf of the Selling Shareholders
in order to permit the public sale or other distribution of the Shares. See
"Selling Shareholders."
The Shares may be sold or distributed from time to time by or for the
account of the Selling Shareholders or their pledge through underwriters or
dealers, through brokers or other agents, or directly to one or more purchasers,
including pledgees, at market prices prevailing at the time of sale or at prices
otherwise negotiated. This Prospectus also may be used, with the Company's prior
consent, by donees of the Selling Shareholders or by other persons acquiring the
Shares who wish to offer and sell such Shares under circumstances requiring or
making desirable its use. The Company will not receive any proceeds from the
sale of the Shares by the Selling Shareholders and will bear certain expenses
incident to the registration of the Shares. See "Selling Shareholders" and "Plan
of Distribution."
The Common Stock is listed on the Nasdaq SmallCap Market under the symbol
"USEY." On September 23, 1997, the last reported sales price for the Common
Stock on the Nasdaq SmallCap Market was $3 9/32 per share.
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SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS SEPTEMBER , 1997.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN ITS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SHAREHOLDERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
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PAGE
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Available Information....................................... 3
Incorporation of Certain Information by Reference........... 3
The Company................................................. 4
Risk Factors................................................ 6
Use of Proceeds............................................. 12
Selling Shareholders........................................ 13
Plan of Distribution........................................ 13
Legal Matters............................................... 15
Experts..................................................... 15
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AVAILABLE INFORMATION
The Company is a reporting company subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: Northeast Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048; and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of the
Commission, Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549 upon
payment of prescribed fees. The Commission maintains a web site
(http://www.sec.gov.) that contains reports, proxy statements and other
information filed by the Company.
The Company has filed with the Commission a Registration Statement on Form
S-3, including amendments thereto (the "Registration Statement"), relating to
the Common Stock offered hereby. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to the Registration Statement and the exhibits and
schedules filed as a part thereof, which may be obtained from the Commission in
the manner set forth above. Statements contained in this Prospectus concerning
the provisions or contents of any contract, agreement or any other document
referred to herein are not necessarily complete. With respect to each such
contract, agreement or document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description of
the matters involved, and each statement shall be deemed qualified in its
entirety by such reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-KSB
for the fiscal year ended January 31, 1997; (ii) the Company's Quarterly Reports
on Form 10-QSB for the quarters ended April 30, 1997 and July 31, 1997; (iii)
the Company's Current Reports on Form 8-K filed with the Commission on April 25,
1997, August 12, 1997 and August 22, 1997; and (iv) the Company's Registration
Statement on Form 8-A filed with the Commission on November 26, 1996, and any
amendment or report filed with the Commission for the purpose of updating such
description, under the Exchange Act.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offering made hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in a document or information incorporated or deemed to be incorporated herein
by reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The making of a modifying or superseding statement shall not be deemed an
admission that the modified or superseded statement, when made, constituted a
misrepresentation, an untrue statement of a material fact or an omission to
state a material fact that is required to be stated or that is necessary to make
a statement not misleading in light of the circumstances in which it was made.
The Company will furnish, without charge, to each person to whom a
Prospectus is delivered, upon written or oral request, a copy of the foregoing
Annual Report on Form 10-KSB, Quarterly Reports on Form 10-QSB, Current Reports
on Form 8-K and Registration Statement on Form 8-A, including exhibits thereto
(unless such exhibits are specifically incorporated by reference therein).
Requests for such documents should be submitted in writing to U.S. Energy
Systems, Inc., 515 North Flagler Drive, Suite 702, West Palm Beach, Florida
33401, Attention: Corporate Secretary, or by telephone at (561) 820-9779, or by
E-mail at www.usey.com.
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THE COMPANY
GENERAL
U.S. Energy Systems, Inc. is engaged in the cogeneration and independent
power plant ("IPP") industries as a project developer, owner and operator.
Cogeneration is the process of producing two or more energy forms (typically
electricity and heat) simultaneously from the same fuel source. A cogeneration
facility is a power plant which produces electricity and, simultaneously,
recovers waste heat to use in place of heat which would otherwise be made from
conventional sources such as furnaces or boilers. An IPP is a power plant which
is not owned and operated by a regulated public electric utility company.
Frequently, IPPs are cogeneration facilities. Federal and state laws have been
promulgated to promote competition in the sale of electric energy and to
encourage cogeneration and independent power facilities.
The Company's strategy is to seek projects requiring power production or
cogeneration and to become an equity participant with the owners, developers or
other involved parties in return for the Company's expertise in the structuring,
design, management and operation of the projects. Often, at the time of the
Company's initial involvement, such projects will have advanced beyond the
conceptualization stage to a point where the engineering, management and project
coordination skills the Company offers are required to proceed. Projects in
which the Company is involved or may become involved include (a) acquiring and
operating existing IPPs and cogeneration facilities in the United States, (b)
developing, constructing and operating new IPPs and cogeneration facilities in
the United States and in certain overseas markets, (c) designing and
constructing cogeneration and IPPs for third party owners, and (d) developing,
constructing and selling energy-efficient products using cogeneration technology
such as non-electric air conditioning. In addition, the Company has recently
entered the environmental business. See " -- Recent Developments."
In December 1996, the Company acquired a 95% interest in Steamboat
Envirosystems, L.L.C. ("Steamboat LLC"), which has purchased two geothermal
power plants in Steamboat Hills, Nevada (the "Steamboat Facilities"). The
Steamboat Facilities produce eight megawatts of electric power which is sold
under two power purchase agreements to Sierra Pacific Power Company.
Also in December 1996, the Company acquired an 81.5% interest in U.S.E.
Geothermal, LLC ("USG"). USG has, in turn, made a loan of $300,000 to Reno
Energy LLC ("Reno"), and has an option to purchase a 50% equity interest in
Reno. Reno plans to construct and operate a district heating plant which will
use geothermally-heated fresh water for the heating and cooling of an industrial
park and other potential commercial customers in the City of Reno, Nevada (the
"Reno Project").
In November 1994 the Company acquired a 50% interest in a partnership which
owns and operates a cogeneration plant which produces 2.5 megawatts of
electricity and 25 million British Thermal Units for heating at Plymouth State
College in Plymouth, New Hampshire. The Plymouth facility provides 100% of the
electrical and heating requirements for the campus, which is part of the
University of New Hampshire system, under a 20 year contract. The Company's
partners in the Plymouth project are Central Hudson Cogeneration Incorporated, a
subsidiary of Central Hudson Gas & Electric Corporation, and Equitable
Resources, Inc.
In January 1994, the Company purchased a 50% equity interest in a limited
liability company which owns a cogeneration facility in Lehi, Utah (the "Lehi
Facility"). The Company and its partners have sold one engine generator and have
decided to sell additional operating machinery and to purchase replacement
equipment, thereby increasing the plant's output capacity and efficiency. As
there are no contracts in effect at this time for the sale of electrical power
from this plant, receipt of revenues will also be dependent upon the Company
entering into such contracts with customers.
As a major element of its strategy, the Company intends to focus on
projects such as shopping malls, healthcare centers, food processing centers,
hotels and other facilities where large quantities of electricity, air
conditioning and hot water are required on a continuous and simultaneous basis.
The Company has signed a letter of intent with the owners of Bluebeard's Castle,
a large resort and commercial complex in St. Thomas, United States Virgin
Islands, to build and operate a 3 megawatt cogeneration plant and a 120,000
gallon per day water recovery system in the resort's property. Under the letter
of intent the Company, the resort manager
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and the resort owners would own the cogeneration plant and water system and
share revenues. The Company has received initial funding from the resort owners
and the first of six engine generators was installed during September 1996. The
Company has also entered into a joint development agreement with the Cowen
Investment Group to develop, build and operate cogeneration plants at shopping
malls. Toward this end, the joint venture has been in discussions with two of
the major mall owners in the United States. Under the joint development
agreement, savings from the cogeneration systems would be shared equally by the
mall owners and the joint development company (in which the Company would have a
40% profit interest). Under the joint development agreement, the Company will
perform all project development functions other than securing the financing.
The Company completed a public offering on December 6, 1996 (the "Public
Offering") of 3.1 million shares of common stock of the Company at a price to
the public of $4.00 per share, and 3.1 million warrants to purchase shares of
common stock of the Company at $4.00 per share at a price to the public of $0.10
per warrant (the "Warrants"). On December 15, 1997, Gaines, Berland Inc., which
served as representative ("Representative") to the underwriters for the Public
Offering, exercised its over-allotment option for an additional 465,000 shares
of common stock and 465,000 warrants. The aggregate proceeds to the Company in
the Public Offering were approximately $12.0 million, inclusive of the
underwriter's over-allotment.
The Company was incorporated in the State of Delaware on May 6, 1981. The
executive offices of the Company are located at 515 North Flagler Drive, Suite
702, West Palm Beach, Florida 33401. Its telephone number is (561) 820-9779, and
its E-mail address is www.usey.com.
RECENT DEVELOPMENTS
On August 18, 1997, the Company acquired American Enviro-Services, Inc., an
Indiana corporation ("AES"), which specializes in the recycling of used motor
and industrial oils, waste water treatment, environmental consulting,
remediation services and Phase I, II and III environmental assessments. AES
provides 24 hour emergency response services throughout Midwestern United
States. The acquisition, which was accounted for under the purchase method of
accounting, was made in exchange for 665,000 shares of the Common Stock and
$150,000 in cash. The Company may consider additional acquisitions of companies
in the environmental business in the future.
AES will continue to operate as a wholly-owned subsidiary of the Company
and will be the nucleus of a new division called USE-Environmental. Howard A.
Nevins, the President of AES, has been elected to the Board of Directors of the
Company and has been appointed Executive Vice President of the Company.
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RISK FACTORS
Prospective investors should consider carefully the following risk factors,
together with the other information contained in this Prospectus, in evaluating
an investment in the shares of Common Stock offered hereby. The following
factors and other information set forth in this Prospectus contain certain
forward-looking statements involving risks and uncertainties. The Company's
actual results may differ materially from the results anticipated in these
forward-looking statements as a result of certain factors set forth in this
section and elsewhere in this Prospectus.
NO SIGNIFICANT REVENUES; HISTORY OF LOSSES/UNCERTAIN PROFITABILITY; WORKING
CAPITAL, CASH FLOW AND STOCKHOLDERS' EQUITY
The Company has a history of losses substantially throughout its existence.
To date, the Lehi Facility has not been operational. Although the Company
believes that there may eventually be profit and cash flow from the Lehi
Facility, there can be no assurances that this will occur. Although cash flow
from the Plymouth cogeneration plant has begun, net revenue from the Plymouth
investment is not expected until the year 2001. Due to a rate decrease on the
electricity sold from its facility at Steamboat I, that facility is now
operating at a loss.
For the six month period ended July 31, 1997, the Company incurred a net
loss of $496,000. At July 31, 1997, the Company had working capital of
approximately $1.5 million and a stockholders' equity of approximately $7.4
million, mainly as a result of the Public Offering. There can be no assurance
that the Company will ever be able to generate cash flows sufficient to meet its
obligations and sustain operations.
LIMITED AVAILABLE CAPITAL; POSSIBLE NEED FOR ADDITIONAL FINANCING
While the Company believes that its present working capital, together with
current and anticipated cash flow from operations, including that of AES, will
be sufficient to meet its anticipated cash requirements for the next twelve
months, there is no assurance in this regard. Unless the Company generates cash
flows from operations to fund its working capital needs, the Company will be
required to obtain additional equity or debt financing to continue to operate
its business. If the Company should require additional capital, there can be no
assurance that such capital will be available to the Company, or if available,
it would be on terms acceptable to the Company. If additional funds are raised
by issuing equity securities, significant dilution to existing stockholders may
result. Any inability by the Company to obtain additional financing, if
required, will have a material adverse effect on the operations of the Company,
including the possible cessation of operations.
IMPEDIMENTS TO COMPLETING FUTURE ACQUISITIONS.
The Company's future growth strategy depends on its ability to identify and
acquire appropriate companies in its existing lines of business, and companies
operating in other lines of business, to integrate the acquired operations
effectively and to increase its market share in such businesses. A number of the
Company's competitors are better known companies, with significantly greater
financial resources. There can be no assurance that the Company will be able to
identify viable acquisition candidates, that any identified candidates will be
acquired, that acquired companies will be effectively integrated to realize
expected efficiencies and economies of scale, or that any such acquisitions will
prove to be profitable. Acquisition of companies requires the expenditure of
sizeable amounts of capital, and the intense competition among companies
pursuing similar acquisitions may further increase such capital requirements. In
the event that acquisition candidates are not identifiable or acquisitions are
prohibitively costly, the Company may be forced to alter its future growth
strategy. As the Company continues to pursue its acquisition strategy in the
future, its stock price, financial condition and results of operations may
fluctuate significantly from period to period.
RISKS ASSOCIATED WITH ACQUISITIONS.
There may be liabilities which the Company fails or is unable to discover
in the course of performing due diligence investigations on each company or
business it seeks to acquire, including liabilities arising from non-compliance
with certain federal, state or local environmental laws by prior owners, and for
which the
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Company, as a successor owner, may be responsible. The Company generally seeks
to minimize its exposure to such liabilities by obtaining indemnification from
each former owner, which may be supported by deferring payment of a portion of
the purchase price. However, there is no assurance that such indemnifications,
even if obtainable, enforceable and collectible (as to which there also is no
assurance), will be sufficient in amount, scope or duration to fully offset the
possible liabilities arising from the acquisitions.
PRIOR BANKRUPTCY
In late 1986, the Company, then called Cogenic Energy Systems, Inc., was
impaired by a $2,100,000 judgment resulting from a contractual dispute. Although
ultimately settled, the protracted court case caused delays in planned expansion
and sales and led to a serious cash shortage. In mid-1989, the Company filed for
protection under Chapter 11 of the Bankruptcy Code and a Plan of Reorganization
was confirmed by the bankruptcy court in 1993. All claims under Chapter 11 have
since been paid and the Company has been discharged from bankruptcy.
EMERGING INDUSTRY; UNCERTAINTY OF MARKET ACCEPTANCE
Although the cogeneration and IPP industries have been in existence for a
number of years, they are still in their development stages. As is typically the
case in an emerging industry, demand and market acceptance for their products
and services are subject to a high level of uncertainty. The Company began
developing new power projects after USF merged with the reorganized Cogenic
Energy Systems, Inc. in November 1993, but has not yet commenced significant
marketing activities and currently has limited power marketing experience as
well as limited financial, personnel and other resources to undertake extensive
marketing activities.
PROJECT DEVELOPMENT
It is anticipated that certain types of projects, if undertaken, will
require the Company to raise additional capital and there can be no assurance
that such capital will be available on acceptable terms. The Company's ability
to develop new projects, including the Reno Project, is also dependent on a
number of other factors outside its control, including obtaining power
agreements, governmental permits and approvals, fuel supply and transportation
agreements, electrical transmission agreements, site agreements and construction
contracts, and there can be no assurance that the Company will be successful in
doing so. In particular, the Reno Project is still in the planning and
development stage and there are no contracts with any end users nor any
governmental approvals. Project development is subject to environmental,
engineering and construction risks. If additional financing is not available on
acceptable terms, the Company may have to cancel, decline or defer new projects.
Further, projects which are successfully developed may still face risks inherent
in start-up businesses, such as lack of market acceptance.
ACQUISITION OF NEW COMPANY, NEW BUSINESS
The Company's acquisition of AES on August 18, 1997 constitutes the
entrance of the Company into the environmental business, which constitutes a new
business segment. In addition to the operational risks inherent in the
environmental business, which include the potential for ground water and soil
contamination and the need to remediate such potential contamination, and the
requirement to obtain and maintain numerous local and federal governmental
permits and licenses, the Company also faces the risk that it will not
successfully be able to integrate AES into the Company and consolidate the
management and operations of the two entities.
REDUCTION IN REVENUE FROM STEAMBOAT GEOTHERMAL PROJECTS
The power purchase agreements with Sierra Pacific Power Company ("Sierra")
provided for price adjustments in December 1996 for Steamboat I and in December
1998 for Steamboat IA. Under the contracts, Steamboat LLC is required to sell
power to Sierra for additional 10-year periods at the then-prevailing short-term
avoided costs for electricity for Sierra. The new price for Steamboat I is
substantially less than the previous contract rate. Although the Company's
management is currently renegotiating its
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purchase agreement with Sierra, there is no assurance that future prices at
which the electricity generated by both of the Steamboat Facilities may be sold
will exceed the cost of production, or that Steamboat LLC will generate adequate
cash flow from operations to meet its investing and financing requirements.
Although the prices are variable and fluctuate, if a substantial reduction in
power prices for Steamboat IA takes place in December 1998, the result would
mean a further decrease in the amount of net earnings of Steamboat LLC which the
Company will receive, which, depending on the extent of the price reductions,
could result in the Company reflecting a net loss. However, the Company's
management believes that more satisfactory earnings can potentially be obtained
for the energy generated in the Steamboat Facilities through the successful
completion of negotiations with Sierra, the reduction of costs through the
renegotiating of the Steamboat Facilities' Operation and Maintenance Agreement,
and/or as a result of efforts by the Company to develop other options for sales
of both electricity and heat from the facilities. The Company believes it is in
a position to obtain a satisfactory price for electricity generated in the
Steamboat Facilities because (1) the existing contract with Sierra, which calls
for "short term" avoided cost in the second 10 years, is subject to negotiation
since no "short term" tariff has been recently published by Sierra with the
State of Nevada regulatory authority; (2) even if published, "short term" rates
may not be applicable to a 20 year (long term) contract; and (3) the Company is
developing other options for sales of both electricity and heat from the
facility, and heat is not subject to the power purchase contract. The Company,
with other geothermal producers in Nevada who are similarly affected, have
formed the Nevada Geothermal Industry Council, which is preparing to intervene
in the current rate hearings before the Nevada Public Service Commission. No
assurance can be given that such efforts will be successful.
The Company allocated $1,000,000 from the proceeds of the Public Offering
to provide capital for the potential acquisition of certain royalty interests
and fund certain improvements to the Steamboat Facilities which are expected to
result in higher electricity output. While negotiations with certain royalty
owners have already begun, no agreements have yet been concluded. Additional
royalty agreements, applying only to Steamboat I, call for payment of a total of
30% of the net revenue of Steamboat I after certain deductions. The resulting
effect on the net income of Steamboat LLC and on the Company's after-tax income
will depend on the other elements of power sales revenues outlined above.
Assuming the reduction in income from power sales discussed above, and the
buyout of no royalty interests, the cost of these net revenue royalties could be
in the range of $50,000 to $100,000 annually. The Company expects the Steamboat
Facilities to generate sufficient revenues to make any royalty payments
required. Negotiations with these interests have also already begun, but no
assurance can be given that the negotiations will produce successful results.
RELIANCE ON EXECUTIVE OFFICERS
The Company is dependent upon its executive officers and key employees,
particularly its President and Chief Executive Officer, Richard H. Nelson. The
unexpected loss of the services of Mr. Nelson could have a detrimental effect on
the Company. Although the Company plans to add additional full-time employees,
the Company presently has only seven full-time employees, exclusive of employees
of AES, and contracts with independent contractors for the conduct of certain
engineering, accounting, administrative and legal functions. The Company has
obtained $1,000,000 of key man insurance on Mr. Nelson.
The Company is also dependent on its Executive Vice President, Howard
Nevins, who is in charge of the Company's Environmental Division. The Company
has limited experience in running environmental businesses, and therefore relies
heavily on the continued employment and services of Mr. Nevins. The unexpected
loss of the services of Mr. Nevins could have a detrimental effect on the
Company. The Company is in the process of obtaining key man insurance on Mr.
Nevins.
GENERAL OPERATING RISKS
The operation of power generation facilities involves many risks, including
the breakdown or failure of power generation equipment, transmission lines or
other equipment or processes and performance below expected levels of output or
efficiency. Although the facilities in which the Company is or will be involved
contain certain redundancies and back-up mechanisms, there can be no assurance
that any such breakdown or failure would not prevent the affected facility from
performing under applicable power agreements. The
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development and operation of geothermal energy resources are subject to risks
and uncertainties similar to those experienced in the development of oil and gas
resources. The successful exploitation of a geothermal energy resource
ultimately depends upon the heat content of the extractable fluids, the geology
of the reservoir, the total amount of recoverable reserves, and operational
factors relating to the extraction of fluids, including operating expenses,
energy price levels, and capital expenditure requirements relating primarily to
the drilling of new wells. In connection with the development of a project, the
Company estimates the productivity of the geothermal resource and the expected
decline in such productivity. The productivity of a geothermal resource may
decline more than anticipated, resulting in insufficient recoverable reserves
being available for sustained generation of the electrical power capacity
desired.
GOVERNMENTAL REGULATION
Under present federal law, the Company is not and will not be subject to
regulation as a holding company under the Public Utility Holding Company Act of
1935 as long as each power plant in which it has an interest is a qualifying
facility ("QF") under the Public Utility Regulatory Policies Act of 1978
("PURPA"). A QF that is a cogeneration facility must produce not only
electricity but also useful thermal energy for use in an industrial or
commercial process or heating or cooling applications in certain proportions to
the facility's total energy output and must meet certain energy efficiency
standards. Under PURPA, a regulated public electric utility company must
purchase electricity at its avoided cost from an IPP which has QF status. QF
status is granted to IPP's which use fossil fuel in a manner which allows for
recovery and use of a certain percentage of otherwise rejected heat thereby
achieving a higher degree of fuel efficiency. QF status is also granted to IPP's
which use renewable energy sources such geothermal, hydro, solar, wind, and
waste products without regard to heat recovery. An IPP using fossil fuel, which
loses its ability to use recovered heat, could fall below the efficiency
standards and thereby lose its QF status. The regulated public electric utility
company, which may have been required to purchase electricity from the IPP,
could thereafter refuse to purchase such electricity. IPP's which have QF
status, and which are not fossil fuel driven, are not subject to efficiency
standards regarding QF status.
Prior to resuming operations, the Lehi Facility may be required to obtain a
permit to authorize the discharge of oil into the city sewer system, which
permit may limit the authorized levels of such discharge. Additionally, before
the Lehi Facility can become operative, it is required to install a continuous
emissions monitor ("CEM"). Although the Company intends to install a CEM, there
can be no assurance that it will be able to do so.
The construction and operation of power generation facilities, as well as
the operation of an environmental business, require numerous permits, approvals
and certificates from appropriate federal, state and local governmental
agencies, as well as compliance with environmental protection legislation and
other regulations. While the Company believes that it (including AES) is in
substantial compliance with all applicable rules and regulations and that the
projects and businesses in which it is involved have the requisite approvals for
existing operations and are operated in accordance with applicable laws, the
operations of the Company and its projects, including those of AES and its
businesses, remain subject to a varied and complex body of laws and regulations
that both public officials and private individuals may seek to enforce. There
can be no assurance that new or existing laws and regulations which would have a
materially adverse affect would not be adopted or revised, nor can there be any
assurance that the Company (or AES individually) will be able to obtain all
necessary licenses, permits, approvals and certificates for proposed projects or
that completed facilities will comply with all applicable permit conditions,
statutes or regulations. In addition, for the Company, regulatory compliance for
the construction of new facilities is a costly and time consuming process, and
intricate and changing environmental and other regulatory requirements may
necessitate substantial expenditures for permitting and may create a significant
risk of expensive delays or significant loss of value in a project if the
project is unable to function as planned due to changing requirements or local
opposition. Should the Company be unable to obtain or maintain any particular
permit or license, it would be forced to suspend certain of its current business
activities.
9
<PAGE> 11
ENVIRONMENTAL RISKS
As is the case in all power projects, strict environmental regulations
established by federal, state and local authorities involving air and other
emissions must be met. While the Company takes every precaution to insure that
such regulations are met at all times, and projects are not entered into which
do not or cannot meet such regulations, there is no assurance that such
regulations can always be met. Should a condition occur in which emissions
standards at a specific project fall below allowable standards, there could be
costs involved in remediating such conditions. Additionally, as with all
industrial sites, there are standards for the safe handling of fuels and
chemicals which must be met. Again, the Company takes every precaution to insure
such standards are met. Exigencies may occur -- a fuel spillage for
example -- which would require remediation with attendant costs.
Areas in which the Company has acquired geothermal projects are subject to
frequent low-level seismic disturbances, and more significant seismic
disturbances are possible. While such power generation facilities are built to
withstand relatively significant levels of seismic disturbance, and the Company
believes it will be able to maintain adequate insurance protection, there can be
no assurance that earthquake, property damage or business interruption insurance
will be adequate to cover all potential losses sustained in the event of serious
seismic disturbances or that such insurance will continue to be available on
commercially reasonable terms.
The operation of the Company's environmental business is subject to certain
federal state and local requirements which regulate health, safety, environment,
zoning and land-use. Operating and other permits are generally required for the
Company's environmental activities and these permits are subject to revocation,
modification and renewal. Applicable requirements are enforceable by injunctions
and fines or penalties, including criminal penalties. These regulations are
administered by the United States Environmental Protection Agency ("EPA") and
various other federal, state and local environmental and health and safety
agencies and authorities, including the Occupational Safety and Health
Administration ("OSHA") of the United states Department of Labor. In addition,
certain of the Company's environmental activities that traverse state boundaries
could be adversely affected if the federal government or on affected state
limits or prohibits, imposes discriminatory fees on, or otherwise seeks to
discourage the transport, within state boundaries, of materials collected
outside of the state.
UNCERTAINTY OF COMPETITIVE ENVIRONMENT
In addition to competition from electric utilities in the markets where the
Company's projects are located, the Company also faces competition from
approximately 150 companies currently involved in the cogeneration and
independent power market throughout the United States. Virtually all of these
companies are larger and better financed than the Company. Although the Company
believes that it will be entering segments of the marketplace where it will not
face extensive competition, there is no assurance that it will be able to do so,
and it will thereby be disadvantaged if it has to compete with the larger and
better financed companies. The entire industry also may face competition from
existing investor-owned utility companies and may be adversely affected by the
prices charged by such companies for conventional energy sources, which, in
turn, are affected by inflation and availability of fossil fuel.
INSURANCE
Although the Company maintains insurance of various types to cover many of
the risks that apply to its operations, including $2,000,000 of general
liability insurance as well as separate insurance for each project and separate
insurance for the operations of AES, the Company's planned insurance will not
cover every potential risk associated with its operations. The occurrence of a
significant adverse event, the risks of which are not fully covered by
insurance, could have a material adverse effect on the Company's financial
condition and results of operations. Moreover, no assurance can be given that
the Company will be able to maintain adequate insurance in the future at rates
it considers reasonable.
10
<PAGE> 12
EFFECT OF WARRANTS, OPTIONS AND CONVERTIBLE SECURITIES OUTSTANDING
As of September 23, 1997, the Company had outstanding options and warrants
which provide for the purchase of an aggregate of 4,920,350 shares of Common
Stock at prices ranging from $3.625 to $16.00 per share. This includes 3,565,000
warrants issued in the Public Offering (including the warrants issued in the
underwriter's over-allotment option, which was exercised in full). It also
includes private warrants for 125,000 shares of Common Stock issued in a
debenture conversion effected at the time of the Public Offering. 109,375
additional shares of Common Stock are issuable upon conversion of the remaining
convertible debentures. Additionally, in connection with the Public Offering,
the underwriters' representative (the "Representative") was granted an option to
purchase 310,000 shares of Common Stock at $6.60 per share and 310,000 warrants
at $.165 per warrant. This purchase option has not been exercised as of the date
of this Prospectus. These potential issuances of Common Stock, totaling
5,649,725 shares, would have a dilutive effect on the Company's stockholders by
decreasing their percentage ownership in the Company. Moreover, the holders of
such securities would be most likely to exercise or convert such securities at a
time when the Company could obtain capital by a new offering of securities on
terms more favorable than those provided by such securities. Consequently, the
terms on which the Company could obtain additional capital may be adversely
affected.
POSSIBLE RULE 144 SALES
Of the 5,010,620 shares of Common Stock outstanding as of September 23,
1997, 823,522 are "restricted securities" or "control securities" within the
meaning of Rule 144 under the Securities Act and may not be sold in the absence
of registration under the Securities Act, unless an exemption from registration
is available, including the exemption provided by Rule 144. Under Rule 144 as
currently in effect, 147,092 shares are currently eligible for sale, subject to
the volume limitations of Rule 144. The 665,000 shares issued in the Company's
acquisition of AES, and registered hereby, were restricted when issued and as of
September 23, 1997. The foregoing does not give effect to any shares issuable on
exercise of outstanding options and warrants. The effect of the offer and sale
of such shares may be to depress the market price for the Company's Common
Stock.
AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER
PROVISIONS; STAGGERED BOARD
The Company's Certificate of Incorporation authorizes the issuance of
Preferred Stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue Preferred
Stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of holders of the Company's
Common Stock. In the event of issuance, the Preferred Stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company, which could have the effect of discouraging
bids for the Company and, thereby, preventing stockholders from receiving a
premium for their shares over the then-current market prices.
The Delaware General Corporation Law includes provisions which are intended
to encourage persons considering unsolicited tender offers or other unilateral
takeover proposals to negotiate with the Company's directors rather than pursue
non-negotiated takeover attempts. These existing takeover provisions may have a
significant effect on the ability of a stockholder to benefit from certain kinds
of transactions that may be opposed by the incumbent directors.
The Company, by a majority vote of its stockholders at its 1997 Annual
Meeting of stockholders, amended its Certificate of Incorporation to provide for
a staggered Board of Directors. A staggered Board may be deemed to have an
anti-takeover effect since it may create, under certain circumstances, an
impediment which would frustrate persons seeking to effect a takeover or
otherwise gain control of the Company. A possible acquiror may not proceed with
a tender offer because it would be unable to obtain control of the Company's
Board for a period of at least two years. No more than one-third of the sitting
Board would be up for election at any annual meeting of Stockholders.
11
<PAGE> 13
QUALIFICATION REQUIREMENTS FOR NASDAQ SECURITIES, RISKS OF LOW-PRICED SECURITIES
Although the Company has satisfied the Nasdaq SmallCap listing criteria and
the Common Stock trades on the Nasdaq SmallCap Market, there can be no assurance
that the Company will be able to continue to meet the required standards once it
is listed. If it should fail to meet one or more of such standards, its
securities would be subject to deletion from Nasdaq. If this should occur,
trading, if any, in the Common Stock would then be conducted in the
over-the-counter market on the OTC Bulletin Board, an NASD-sponsored
inter-dealer quotation system, or in what are commonly referred to as "pink
sheets." As a result, an investor may find it more difficult to dispose of, or
to obtain accurate quotations as to the market value of, the Company's
securities. In addition, if the Company's securities cease to be quoted on
Nasdaq and the Company fails to meet certain other criteria, they would be
subject to Commission rules that impose additional practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors. For transactions covered by these rules, the
broker dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. The broker-dealer also must provide the customer with current bid and
offer quotations for the securities, the compensation of the broker-dealer and
its salesperson in the transaction, and monthly account statements showing the
market value of each such security held in the customer's account. In addition,
prior to effecting a transaction in such a security the broker-dealer must
deliver a standardized risk disclosure document prepared by the Commission that
provides information about low-priced securities and the nature and level of
risks in the market for such securities. Consequently, if the Company's
securities were no longer quoted on Nasdaq, these rules may affect the ability
of broker-dealers to sell the Company's securities and the ability of purchasers
hereby to sell their securities in the secondary market.
LIMITATIONS ON REPRESENTATIVE'S MARKET MAKING ACTIVITIES
The Representative has the right to act as the Company's agent in
connection with any future solicitation of warrant holders to exercise their
warrants. Unless granted an exemption by the Commission from Rule 10b-6
promulgated under the Exchange Act, the Representative will be prohibited,
during certain periods when warrants are exercisable, from engaging in any
market-making activities with regard to the Company's securities until the later
of the termination of such solicitation activity or the termination (by waiver
or otherwise) of any right that the Representative may have to receive a fee for
soliciting the exercise of warrants. Warrants are not exercisable until December
2, 1997. As a result, the Representative may be unable to continue to provide a
market for the Company's securities during certain periods while warrants are
exercisable. Such limitations could impair the liquidity and market prices of
the Common Stock and warrants.
DIVIDENDS UNLIKELY
The Company has never declared or paid dividends on its Common Stock and
currently does not intend to pay dividends in the foreseeable future. The
payment of dividends in the future will be at the discretion of the Board of
Directors.
LIMITED LIABILITY OF DIRECTORS
The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a corporation will not be liable to the corporation or its
stockholders for expenses incurred in derivative or third party actions arising
from a breach of their fiduciary duty as directors, except in certain
circumstances. Accordingly, except in such circumstances, the Company's
directors will not be liable to the Company or its stockholders for breach of
such duty.
USE OF PROCEEDS
This Prospectus relates to the Shares being offered and sold for the
accounts of the Selling Shareholders. The Company will not receive any proceeds
from the sale of the Shares but will pay all expenses related to the
registration of the Shares. See "Plan of Distribution."
12
<PAGE> 14
SELLING SHAREHOLDERS
The following table sets forth the name of each Selling Shareholder, the
aggregate number of shares of Common Stock beneficially owned by each Selling
Shareholder prior to the Offering, and the aggregate number of shares of Common
Stock registered hereby to be offered for each Selling Shareholder's account.
Because the Selling Shareholders may offer all or a portion of the Shares at any
time and from time to time after the date hereof, no estimate can be made of the
number of Shares that each Selling Shareholder may retain upon completion of the
Offering. All of the 716,430 Shares offered are issued and outstanding as of the
date of this Prospectus. To the knowledge of the Company, none of the Selling
Shareholders has had within the past three years any material relationship with
the Company or any of its predecessors or affiliates, except as set forth in the
footnotes to the following table.
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON
STOCK BENEFICIALLY STOCK TO BE OFFERED
OWNED PRIOR TO FOR THE SELLING
SELLING SHAREHOLDER THE OFFERING SHAREHOLDER'S ACCOUNT
- ------------------- ------------------ -----------------------
<S> <C> <C>
Howard A. Nevins(1)....................................... 238,000 238,000
G. Henri Meijer(2)........................................ 238,000 238,000
Kevin J. Schroeder(3)..................................... 49,000 49,000
R. Michael Harris, as Trustee of the R. Michael Harris
Revocable Trust U/T/A July 1, 1990...................... 70,000 70,000
Energy Enterprises, LLC................................... 70,000 70,000
Financial Research Associates, Inc........................ 11,430 11,430
Barry Minsky(4)........................................... 40,000 40,000
</TABLE>
- ---------------
(1) Howard A. Nevins is the Executive Vice President of the Company and sits on
the Company's Board of Directors. Prior to the Company's acquisition of AES
on August 18, 1997, Mr. Nevins was President and Director of AES.
(2) G. Henri Meijer is the Manager of the Company's Environmental Division.
Prior to the Company's acquisition of AES, Mr. Meijer was
Secretary/Treasurer and Director of AES.
(3) Kevin J. Schroeder was Vice President and Director of AES prior to the
Company's acquisition of AES.
(4) The shares being registered for resale by Mr. Minsky are shares of Common
Stock underlying presently exercisable options held by Mr. Minsky.
As of September 23, 1997, the Company had approximately 5,010,620 shares of
Common Stock outstanding.
The Selling Shareholders intend to sell all or a portion of the Shares
offered hereby from time to time on the Nasdaq SmallCap Market and such sales
will be made at prices prevailing at the times of such sales. The Selling
Shareholders may also make private sales directly or through a broker or
brokers. In connection with any sales, the Selling Shareholders and any brokers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act.
There can be no assurance that the Selling Shareholders will sell any or
all of the Shares of Common Stock registered hereunder.
PLAN OF DISTRIBUTION
The Selling Shareholders or pledgees may sell or distribute some or all of
the Shares from time to time through underwriters or dealers or brokers or other
agents or directly to one or more purchasers, including pledgees, in
transactions (which may involve crosses and block transactions) on the Nasdaq
SmallCap Market, in privately negotiated transactions (including sales pursuant
to pledges) or in the over-the-counter market, or in brokerage transactions, or
in a combination of such transactions. Such transactions may be effected by the
Selling Shareholders at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices, or at fixed
prices, which may be changed. Brokers, dealers, agents or underwriters
participating in such transactions as agent may receive compensation in the form
of
13
<PAGE> 15
discounts, concessions or commissions from the Selling Shareholders (and, if
they act as agent for the purchaser of such shares, from such purchaser). Such
discounts, concessions or commissions as to a particular broker, dealer, agent
or underwriter might be in excess of those customary in the type of transaction
involved. This Prospectus also may be used, with the Company's consent, by
donees of the Selling Shareholders, or by other persons acquiring Shares and who
wish to offer and sell such Shares under circumstances requiring or making
desirable its use. To the extent required, the Company will file, during any
period in which offers or sales are being made, one or more supplements to this
Prospectus to set forth the names of donees of Selling Shareholders and any
other material information with respect to the plan of distribution not
previously disclosed.
The Selling Shareholders and any such underwriters, brokers, dealers or
agents that participate in such distribution may be deemed to be "underwriters"
within the meaning of the Securities Act, and any discounts, commissions or
concessions received by any such underwriters, brokers, dealers or agents might
be deemed to be underwriting discounts and commissions under the Securities Act.
Neither the Company nor the Selling Shareholders can presently estimate the
amount of such compensation. The Company knows of no existing arrangements
between any Selling Shareholder and any other Selling Shareholder, underwriter,
broker, dealer or other agent relating to the sale or distribution of the
Shares.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of any of the Shares may not simultaneously engage in
market activities with respect to the Common Stock for the applicable period
under Regulation M of the Exchange Act prior to the commencement of such
distribution. In addition and without limiting the foregoing, the Selling
Shareholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including without limitation Regulation M,
which provisions may limit the timing of purchases and sales of any of the
Shares by the Selling Shareholders. All of the foregoing may affect the
marketability of the Common Stock.
The Company will pay substantially all of the expenses incident to this
Offering of the Shares by the Selling Shareholders to the public other than
commissions and discounts of underwriters, brokers, dealers or agents. Each
Selling Shareholder may indemnify any broker, dealer, agent or underwriter that
participates in transactions involving sales of the Shares against certain
liabilities, including liabilities arising under the Securities Act. The Company
has agreed to indemnify the Selling Shareholders and any such underwriters and
controlling persons of such underwriters against certain liabilities, including
certain liabilities under the Securities Act.
If the Shares are sold in an underwritten offering, the Shares may be
acquired by the underwriters for their own account and may be further resold
from time to time in one or more transactions, including negotiated
transactions, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, at negotiated prices, or at fixed prices. The
names of the underwriters with respect to any such offering and the terms of the
transactions, including any underwriting discounts, concessions or commissions
and other items constituting compensation of the underwriters and
broker-dealers, if any, will be set forth in a supplement to this Prospectus
relating to such offering. Any public offering price and any discounts,
concessions or commissions allowed or reallowed or paid to broker-dealers may be
changed from time to time. Unless otherwise set forth in a supplement to this
Prospectus, the obligations of the underwriters to purchase the Shares will be
subject to certain conditions precedent and the underwriters will be obligated
to purchase all of the shares specified in such supplement if any such Shares
are purchased.
If the Shares are sold in an underwritten offering, the underwriters and
selling group members (if any) may engage in passive market making transactions
in the Common Stock on the Nasdaq SmallCap Market immediately prior to the
commencement of the sale of shares in such offering, in accordance with
Regulation M of the Exchange Act. Passive market making may stabilize the market
price of the Common Stock at a level above that which might otherwise prevail
and, if commenced, may be discontinued at any time.
In order to comply with certain states' securities laws, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain states the Common Stock may not be
sold unless the Common Stock has been registered or qualified for sale in such
state or an exemption from registration or qualification is available and is
complied with.
14
<PAGE> 16
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for by the Company by Akerman, Senterfitt & Eidson, P.A., Miami,
Florida.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries,
as of January 31, 1997 and for each of the fiscal years ended January 31, 1997
and January 31, 1996, incorporated by reference in this Prospectus and the
Registration Statement have been audited by Richard A. Eisner & Company LLP,
independent auditors, as indicated in their report with respect thereto, and are
incorporated herein by reference in reliance upon the report of said firm given
upon their authority as experts in accounting and auditing.
15
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the Offering:
<TABLE>
<CAPTION>
AMOUNT*
-------
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 747
Printing Expenses........................................... 5,000
Legal Fees and Expenses..................................... 10,000
Accounting Fees and Expenses................................ 5,000
Miscellaneous............................................... 253
-------
Total............................................. $21,000
=======
</TABLE>
- ---------------
* Estimated, except Securities and Exchange Commission Registration Fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with the provisions of the General Corporation Law of the
State of Delaware (the "Act"), the Registrant's Certificate of Incorporation
requires indemnification of Directors and Officers of the Company to the fullest
extent provided by Section 145 of the Act, and also provides that such rights to
indemnification are not exclusive of any other right to which Directors and
Officers may otherwise be entitled.
In addition to the above-described provisions, Section 145 of the Act
contains provisions prescribing the extent to which directors and officers shall
or may be indemnified. Section 145 of the Act permits a corporation, with
certain exceptions, to indemnify a present or former director against liability
if (i) he acted in good faith, and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and (ii) in the case of
any criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. A corporation may not indemnify a person in respect of a claim, issue
or matter as to which such person shall have been adjudged liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnification or
such expenses which the Court of Chancery or such other court shall deem proper.
Section 145 of the Act requires a corporation to indemnify a director or
officer in the defense of any proceeding to which he was a party against
expenses actually and reasonably incurred by him when he is successful in his
defense on the merits or otherwise.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C> <C>
2.1 -- Merger Agreement by and between U.S. Energy Systems, Inc.
AES Merger Corp., American Enviro Services, Inc., and the
Shareholders of American Enviro-Services, dated as of August
4, 1997.******
3.1 -- Amended and Restated Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware
3.2 -- By-Laws of the Company**
3.3 -- Articles of Organization of Steamboat Envirosystems, L.C.*
4.1 -- Specimen Stock Certificate*
4.2 -- Form of Warrant*
4.3 -- Form of Warrant Agreement*
4.4 -- Form of Representative's Purchase Option*
5.1 -- Opinion of Akerman, Senterfitt & Eidson, P.A., counsel to
the Company
</TABLE>
II-1
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C> <C>
10.1 --
Plan of Reorganization of Cogenic Energy Systems, Inc.**
10.2 -- 18% Convertible Subordinated Debenture due 2004**
10.3 -- Employment Agreement, dated as of November 11, 1993, between
the Company and Richard Nelson**
10.3(a) -- Amendment to Employment Agreement between October 15, 1996**
10.4 -- Employment Agreement, dated as of December 11, 1993, between
the Company and Theodore Rosen**
10.4(a) -- Amendment to Employment Agreement between the Company and
Theodore Rosen dated October 15, 1996*
10.5 -- Purchase Agreement, dated as of January 24, 1994, between
Lehi Co-Gen Associates, L.C. and Lehi Envirosystems, Inc.**
10.6 -- Operating Agreement among Far West Capital, Inc., Suma
Corporation and Lehi Envirosystems, Inc. dated January 24,
1994*
10.7 -- Form of Purchase and Sale Agreement between Far West
Capital, Inc., Far West Electric Energy Fund, L.P., 1-A
Enterprises, the Company and Steamboat LLC*
10.8 -- Form of Operation and Maintenance Agreement between
Steamboat LLC and S.B. Geo, Inc.*
10.9 -- Letter Agreement, dated as of November 8, 1994, between the
Company, PSC Cogeneration Limited Partnership, Central
Hudson Cogeneration, Inc. and Independent Energy Finance
Corporation*
10.10 -- Agreement among the Company, Plymouth Envirosystems, Inc.,
IEC Plymouth, Inc. and Independent Energy Finance
Corporation dated November 16, 1994*
10.11 -- Amended and Restated Agreement of Limited Partnership of
Plymouth Cogeneration Limited Partnership among PSC
Cogeneration Limited Partnership, Central Hudson
Cogeneration, Inc. and Plymouth Envirosystems, Inc. dated
November 1, 1994*
10.12 -- Amended and Restated Agreement of Limited Partnership of PSC
Cogeneration Limited Partnership among IEC Plymouth, Inc.,
Independent Energy Finance Corporation and Plymouth
Envirosystems, Inc. dated December 28, 1994*
10.13 -- Purchase and Sale Agreement, dated as of December 31, 1995,
between the Company, Far West Capital, Inc., Far West
Electric Energy Fund, L.P., 1-A Enterprises and Steamboat
Envirosystems, LLC*
10.13(a) -- Letter Agreement, dated September 25, 1996, between the
Company and Far West Capital, Inc.*
10.14 -- Joint Development Memorandum of Intent dated September 20,
1994, between the Company and Cowen Partnership*
10.15 -- Agreement dated May 4, 1995 between the Company and Indus
LLC*
10.16 -- Security Agreement and Financing Statement among the
Company, Lehi Envirosystems, Inc., Plymouth Envirosystems,
Inc. and Anchor Capital Company, LLC dated June 14, 1995, as
amended*
10.17 -- Stock Pledge Agreement among Richard H. Nelson, Theodore
Rosen, Anchor Capital Company, LLC and the Company dated
June 14, 1995*
10.18 -- Loan Agreement among the Company, Lehi Envirosystems, Inc.,
Plymouth Envirosystems and Solvation, Inc. dated as of
December 15, 1995, as amended*
10.19 -- Pledge Agreement between the Company and Solvation, Inc.
dated as of December 15, 1995*
10.20 -- Lease dated September 1, 1995 between the Company and
Gaedeke Holdings, Ltd.*
10.21 -- Documents related to Private Placement*
10.21(a) -- Certificate of Designations*
10.22 -- Purchase Agreement between the Company and Westinghouse
Electric Corporation dated as of November 6, 1995 and
amendments thereof*
10.23 -- Letter of intent to the Company from Bluebeard's Castle,
Inc. dated August 8, 1996*
10.24 -- Form of Joint Venture Agreement among the Company and
Bluebeard's Castle, Inc. and Bluebeard Hilltop Villas dated
as of August 6, 1996*
</TABLE>
II-2
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C> <C>
10.25(a) --
Long-Term Agreement for the Purchase and Sale of Electricity
Between Sierra Pacific Power Company and Far West Capital,
Inc. dated October 29, 1988*
10.25(b) -- Assignment of Interest, dated December 10, 1988 by and
between Far West Capital, Inc. and 1-A Enterprises*
10.25(c) -- Letter dated August 18, 1989 by Gerald W. Canning, Vice
President of Electric Resources, consenting to the
Assignment of Interest on behalf of Sierra Pacific Power
Company*
10.26(a) -- Agreement for the Purchase and Sale of Electricity, dated as
of November 18, 1983 between Geothermal Development
Associates and Sierra Pacific Power Company*
10.26(b) -- Amendment to Agreement for Purchase and Sale of Electricity,
dated March 6, 1987, by and between Far West Hydroelectric
Fund, Ltd. and Sierra Pacific Power Company*
10.27 -- Loan and Option Agreement dated August, 1996 by and among
NRG Company, LLC and Reno Energy, LLC and ART, LLC and FWC
Energy, LLC, and amendments thereto*
10.28 -- Promissory Note dated August 9, 1996 for $300,000 from Reno
Energy, LLC to NRG Company, LLC*
10.29 -- Letter of Intent dated July 15, 1996 on behalf of Reno
Energy, LLC*
10.30 -- Limited Liability Company Operating Agreement of NRG
Company, LLC dated as of September 8, 1996, and amendments
thereto*
10.31 -- Form of Limited Liability Company Operating Agreement of
Steamboat, Envirosystems, L.C. dated as of October , 1996*
10.32 -- Form of Debenture Conversion Agreement*
10.33(a) -- First Amended and Restated Loan and Option Agreement, dated
April 9, 1997, by and between USE Geothermal LLC, and Reno
Energy LLC, ART, LLC and FWC Energy, LLC***
10.33(b) -- Note in the amount of $1,200,000, dated as of April 9, 1997,
made by Reno Energy LLC in favor of USE Geothermal LLC****
10.33(c) -- Security Agreement, dated as of April 9, 1997, made by Reno
Energy LLC in favor of USE Geothermal LLC****
10.33(d) -- Form of Security Agreement and Collateral Assignment,
entered into by and between USE Geothermal LLC and both FWC
Energy LLC and ART LLC****
10.33(e) -- Guaranty Agreement, dated as of April 9, 1997, made by FWC
Energy LLC and ART LLC in favor of USE Geothermal LLC****
10.34 -- 1996 Stock Option Plan*****
10.35 -- Employment Agreement, dated as of March 1, 1997, between the
Company and Terrence Page*****
10.36 -- Form of 9% Convertible Subordinated Secured Debenture due
2004**
10.37 -- Form of Employment agreement by and between U.S. Energy
Systems, Inc. and Howard Nevins.******
21.1 -- Subsidiaries of the Company
23.1 -- Consent of Richard A. Eisner & Company, LLP, independent
auditors of the Company
</TABLE>
- ---------------
* Incorporated by reference to the Company's Registration Statement on
Form SB-2 (File No. 333-94612).
** Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended January 31, 1994 (File No. 0-10238).
*** Incorporated by reference to the Company's Quarterly Report on Form
10-QSB for the quarter ended July 31, 1996 (File No. 0-10238).
**** Incorporated by reference to the Company's Current Report on Form 8-K
filed on April 24, 1997 (File No. 0-10238).
***** Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended January 31, 1997 (File No. 0-10238).
****** Incorporated by reference to the Company's Current Report on Form 8-K
filed on August 22, 1997
II-3
<PAGE> 20
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which offers or sales securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a) (3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in this Registration Statement;
(iii) Include any material information with respect to the plan of
distribution.
Provided, however, that paragraphs (a)(l)(i) and (a)(l)(ii) above do not
apply if the information required to be included in a post-effective amendment
by these paragraphs is contained in periodic reports filed with or furnished by
the Registrant pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(2) For determining liability under the Securities Act, treat each
such post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the Offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE> 21
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, U.S. Energy
Systems, Inc. (the "Registrant") certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of West Palm Beach, State of
Florida, on the 24th day of September, 1997.
U.S. ENERGY SYSTEMS, INC.
By: /s/ SEYMOUR J. BEDER
------------------------------------
Seymour J. Beder
Secretary, Treasurer and Chief
Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard H. Nelson and Seymour J. Beder as his
true and lawful attorneys-in-fact and agents with each having full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or their substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in their capacities on
the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ THEODORE ROSEN Chairman of the Board September 24, 1997
- -----------------------------------------------------
Theodore Rosen
/s/ RICHARD H. NELSON President, Chief Executive September 24, 1997
- ----------------------------------------------------- Officer and Director
Richard H. Nelson (principal executive
officer)
/s/ SEYMOUR J. BEDER Secretary, Treasurer and September 24, 1997
- ----------------------------------------------------- Chief Financial Officer
Seymour J. Beder (principal financial and
accounting officer)
/s/ HOWARD A. NEVINS Executive Vice President and September 24, 1997
- ----------------------------------------------------- Director
Howard A. Nevins
/s/ EVAN EVANS Director September 24, 1997
- -----------------------------------------------------
Evan Evans
</TABLE>
II-6
<PAGE> 23
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ TODD GOODWIN Director September 24, 1997
- -----------------------------------------------------
Todd Goodwin
/s/ ALLEN J. ROTHMAN Director September 24, 1997
- -----------------------------------------------------
Allen J. Rothman
</TABLE>
II-7
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
U.S. ENERGY SYSTEMS, INC.
(ORIGINALLY INCORPORATED MAY 6, 1981
UNDER THE NAME OF COGENIC ENERGY SYSTEMS, INC.)
U.S. Energy Systems, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is U.S. Energy Systems, Inc.
(hereinafter referred to as the "Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road in the City of Wilmington, County of New Castle.
The name of the Corporation's registered agent at such address is: CORPORATION
SERVICE COMPANY.
THIRD: The purpose for which the Corporation is formed and the business
or objects to be transacted, carried on and promoted by it, is the design, sale,
construction, installation and finance of diesel and natural gas powered
electrical generating systems and to exercise and generally to enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
general laws of the State of Delaware now or thereafter in force.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Thirty Five Million (35,000,000) shares of Common
Stock and the par value of each such share is One Cent ($0.01); and Five Million
(5,000,000) shares of Preferred Stock and the par value of each such share is
One Cent ($0.01). The Board of Directors shall determine, at its discretion, all
rights and privileges to be attached to such Preferred Stock.
The preferences, limitations, and relative rights of the above
two classes of stock shall be as follows:
A. PREFERRED STOCK.
(1) Shares of Preferred Stock may be issued in one or more
series at such time or times and for such consideration as the Board of
Directors may determine. Each such series shall be given a
distinguishing designation. All shares of any one series shall have
preferences, limitations and relative rights identical with those of
other shares of the same series, and, except to the extent otherwise
provided in the description of such series, with those of other shares
of Preferred Stock.
<PAGE> 2
(2) Authority is hereby expressly granted to the Board of
Directors to fix from time to time, by resolutions, providing for the
establishment and/or issuance of any series of Preferred Stock, the
designation of such series and the preferences, limitations and
relative rights of the shares of such series, including the following:
(a) The designation and number of shares comprising
such series, which number may (except where otherwise provided
by the Board of Directors in creating such series) be
increased or decreased (but not below the number of shares
then outstanding) from time to time by action of the Board of
Directors;
(b) The voting rights, if any, which shares of that
series shall have, which may be special, conditional, limited
or otherwise;
(c) The rate of dividends, if any, on the shares of
that series, whether dividends shall be non-cumulative,
cumulative to the extent earned, partially cumulative or
cumulative (and, if cumulative, from which date or dates),
whether rights, or in shares of the corporation's capital
stock, and the relative rights or priority, if any, of payment
of dividends on shares of that series over shares of any other
series or over the Common Stock;
(d) Whether the shares of that series shall be
redeemable and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which
they shall be redeemable, the event of events upon or after
which they shall be redeemable, whether they shall be
redeemable at the option of the corporation, the shareholder
or another person, the amount per share payable in case of
redemption (which amount may vary under different conditions
and at different redemption dates), whether such amount shall
be a designated amount or an amount determined in accordance
with a designated formula or by reference to extrinsic data or
events and whether such amount shall be paid in cash,
indebtedness, securities, or other property or rights,
including securities of any other corporation;
(e) Whether that series shall have a sinking fund for
the redemption or purchase of shares of that series and, if
so, the terms of and amounts payable into such sinking fund;
(f) The rights to which the holders of the shares of
that series shall be entitled in the event of voluntary or
involuntary dissolution or liquidation of the corporation, an
the relative rights of priority, if any, of payment of shares
of that series over shares of any other series or over the
Common Stock in any such event;
(g) Whether the shares of that series shall be
convertible into or exchangeable for cash, shares of stock of
any other class or any other series, indebtedness, or other
property or rights, including securities of another
corporation,
2
<PAGE> 3
and, if so, the terms and conditions of such conversion or
exchange, including the rate or rates of conversion or
exchange, and whether such rate shall be a designated amount
or an amount determined in accordance with a designated
formula or by reference to extrinsic data or events, the data
or dates upon or after which they shall be convertible or
exchangeable, the duration for which they shall be convertible
or exchangeable, and whether they shall be convertible or
exchangeable at the option of the corporation, the shareholder
or another person, and the method (if any) of adjusting the
rate of conversion or exchange in the event of a stock split,
stock dividend, combination of shares or similar event;
(h) Whether the issuance of any additional shares of
such series, or of any shares of any other series, shall be
subject to restrictions as to issuance, or as to the powers,
preferences or rights of any such other series; and
(i) Any other preferences, privileges and powers and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions of such series, as
the Board of Directors may deem advisable and as shall not be
inconsistent with the provisions of this Article Fourth and to
the full extent now or hereafter permitted by the laws of the
State of Delaware.
Before issuing any shares of a series of Preferred Stock the
Corporation shall deliver to the Secretary of State for Filing Certificate of
Incorporation, which shall be effective without shareholder action, that set
forth (a) the name of the corporation, (b) the text of the amendment determining
the terms of the series, (c) the date it was adopted and (d) a statement that
the amendment was duly adopted by the Board of Directors.
B. COMMON STOCK.
(1) After the requirements with respect to preferential
dividends, if any, on any series of Preferred Stock (fixed pursuant to
paragraph A(2)(c) of this Article Fourth) shall have been met, and
after the corporation shall have complied with all requirements, if
any, with respect to the setting aside of sums in a sinking fund for
the purchase or redemption of shares of any series of Preferred Stock
(fixed pursuant to paragraph A(2)(e) of this Article Fourth), then, and
not otherwise, the holders of Common Stock shall receive, to the extent
permitted by law and to the extent the Board of Directors shall
determine, such dividends as may be declared from time to time by the
Board of Directors.
(2) After distribution in full of the preferential amount, if
any (fixed pursuant to paragraph A(2)(f) of this Article Fourth), to be
distributed to the holders of any series of Preferred Stock, in the
event of the voluntary or involuntary dissolution or liquidation of the
corporation, the holders of Common Stock (and the holders of any series
of Preferred Stock, if and to the extent provided pursuant to paragraph
A(2)(f) of this Article Fourth) shall be
3
<PAGE> 4
entitled to receive the net assets of the corporation of whatever kind
available for distribution.
(3) Except as may be otherwise required by law or by this
Certificate of Incorporation, each holder of Common Stock shall have
one vote in respect of each share of such stock held by him on all
matters voted upon by the stockholders.
Effective as of May 6, 1996, each 40 shares of the issued and
outstanding Common Stock, $.01 par value, of the Corporation shall be reverse
split into one (1) share of Common Stock of the Corporation. This reverse split
shall affect issued and outstanding shares and outstanding options, warrants and
other rights to acquire shares of Common Stock. The total number of shares
authorized shall not be amended and shall be as set forth in the Article Fourth.
Each record and beneficial holder of shares of Common Stock of the Corporation
whose aggregate number of shares held in one name and one account is less than
40 shall be deemed by the Corporation to hold a fractional share of Common
Stock. All such fractional shares of the Corporation's Common Stock are hereby
immediately canceled. The holder of such fractional share shall be entitled to
cash payment in an amount equal to ten cents ($0.10) per (pre-reverse split)
share upon proper surrender of the holder's certificate or certificates.
FIFTH: The name and mailing address of incorporator is:
Name Mailing Address
---- ---------------
Peter Rothberg 280 Park Avenue
New York, New York 10017
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 9 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
4
<PAGE> 5
SEVENTH:
A. BOARD OF DIRECTORS
All corporate powers shall be exercised by the Board of Directors,
except as otherwise provided by statute or by this Certificate of Incorporation,
or any amendment thereof, or by the ByLaws. The By-Laws may be adopted, amended
or repealed by the Board of Directors of the Corporation, except as otherwise
provided by law, but any by-law made by the Board of Directors is subject to
amendment or repeal by the stockholders of the Corporation.
B. CLASSIFICATION
The directors shall be classified with respect to the time for which
they shall severally hold office into three classes as nearly equal in number as
possible. The Class I directors shall be elected to hold office for an initial
term expiring at the 1998 annual meeting of stockholders, the Class II directors
shall be elected to hold office for an initial term expiring at the 1999 annual
meeting of stockholders and the Class III directors shall be elected to hold
office for an initial term expiring at the 2000 annual meeting of stockholders,
with the members of each class of directors to hold office until their
successors have been duly elected and qualified. At each annual meeting of
stockholders, the successors to the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election and until their successors have been duly elected and qualified. At
each annual meeting of stockholders at which a quorum is present, the persons
receiving a plurality of the votes cast shall be elected directors. Election of
directors need not be by written ballot unless the By-Laws of the Corporation so
provide.
C. VACANCIES
Any vacancy on the Board of Directors resulting from death, retirement,
resignation, disqualification or removal from office or other cause, as well as
any vacancy resulting from an increase in the number of directors which occurs
between annual meetings of the stockholders at which directors are elected,
shall be filled only by a majority vote of the remaining directors then in
office, though less than a quorum, except that those vacancies resulting from
removal from office by a vote of the stockholders may be filled by a vote of the
stockholders at the same meeting at which such removal occurs. The directors
chosen to fill vacancies shall hold office for a term expiring at the end of the
next annual meeting of stockholders at which the term of the class to which they
have been elected expires. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
Notwithstanding the foregoing, whenever the holders of one or more
classes or series of Preferred Stock shall have the right, voting separately, as
a class or series, to elect directors, the election, term of office, filling of
vacancies, removal and other features of such directorships shall be governed by
the terms of the resolution or resolutions adopted by the Board of Directors
5
<PAGE> 6
applicable thereto, and each director so elected shall not be subject to the
provisions of this Article Seventh unless otherwise provided therein.
D. AMENDMENT AND REPEAL OF ARTICLE SEVENTH
Notwithstanding any provisions of this Certificate of Incorporation and
of the By-Laws, and notwithstanding the fact that a lesser percentage may be
specified by Delaware law, unless such action has been approved by a majority
vote of the full Board of Directors, the affirmative vote of 662/3 percent of
the votes which all holders of the then outstanding shares of capital stock of
the Corporation would be entitled to cast thereon, voting together as a single
class, shall be required to amend or repeal any provision of this Article
Seventh or to adopt any provision inconsistent with this Article Seventh. In the
event such action has been previously approved by a majority vote of the full
Board of Directors, the affirmative vote of the holders of a majority of the
outstanding stock entitled to vote thereon shall be sufficient to amend or
repeal any provision of this Article Seventh or adopt any provision inconsistent
with this Article Seventh.
EIGHTH: As authorized by Section 1202(b)(7) of subsection (b) of
Section 102, Title 8 of the Delaware Code (the "Code"), as the same may be
interpreted or amended from time to time, no director shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided, however, that the foregoing shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of the Code, or (iv) for any
transaction from which the director derived an improper personal benefit.
IN WITNESS WHEREOF, the provisions of the Certificate of Incorporation
as herein amended, and hereby restated and integrated into the single instrument
which is herein set forth, entitled Amended and Restated Certificate of
Incorporation of U.S. Energy Systems, Inc., having been duly proposed by the
directors and duly adopted by the stockholders in accordance with the provisions
of Section 242 and of Section 245 of the General Corporation Laws of the State
of Delaware, has been executed this 12th day of August, 1997 by Seymour J.
Beder, its authorized officer.
U.S. ENERGY SYSTEMS, INC.
/s/ Seymour J. Beder
-------------------------
Title: Secretary
6
<PAGE> 1
EXHIBIT 5.1
OPINION OF AKERMAN, SENTERFITT & EIDSON, P.A.
September 24, 1997
U.S. Energy Systems, Inc.
515 North Flagler Drive, Suite 202
West Palm Beach, Florida 33401
Re: U.S. Energy Systems, Inc. (the "Company")
Registration Statement on Form S-3
Ladies and Gentlemen:
You have requested our opinion with respect to the issuance of 716,430
shares (the "Shares") of the Company's common stock, $.01 par value per share
(the "Common Stock") included in the Company's Registration Statement on Form
S-3 (the "Registration Statement"), which is being filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act").
As counsel to the Company, we have examined the original or certified
copies of such records of the Company and such agreements, certificates of
public officials, certificates of officers or representatives of the Company and
others, and such other documents as we deem relevant and necessary for the
opinion expressed in this letter. In such examination, we have assumed the
genuineness of all signatures on original documents and the conformity to
original documents of all copies submitted to us as conformed or photostatic
copies. As to various questions of fact material to such opinion, we have relied
upon statements or certificates of officials and representatives of the Company
and others.
Based upon and subject to the foregoing, we are of the opinion that:
When the Registration Statement becomes effective under the Securities Act,
and when the Shares are issued and distributed against delivery of adequate
consideration therefor, the Shares will be validly issued, fully paid and
nonassessable.
We advise you that the foregoing opinion is limited to the securities laws
of the United States of America and the corporate laws of the State of Delaware
and that we express no opinion herein concerning the applicability or effect of
any laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
are included within the category of persons whose consent is required under
Section 7 of the Securities Act or the rules and regulations promulgated
thereunder.
Very truly yours,
/s/ Akerman, Senterfitt & Eidson, P.A.
AKERMAN, SENTERFITT & EIDSON, P.A.
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Date of State of
Subsidiary Incorporation Incorporation
- ---------- ------------- -------------
<S> <C> <C>
Lehi Envirosystems, Inc. 1991 Delaware
Plymouth Envirosystems, Inc. 1994 Delaware
USE International, L.L.C. 1995 New Jersey
Steamboat Envirosystems, L.L.C. 1996 Delaware
USE Geothermal, L.L.C. 1996 Delaware
American Enviro-Services, Inc. 1997 Indiana
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 20, 1997 (April 10, 1997 with
respect to Note C [2]), which appears on page F-2 of the Annual Report on Form
10-KSB of U.S. Energy Systems, Inc. and subsidiaries for the year ended January
31, 1997 and to the reference to our firm under the caption "Experts" in the
prospectus.
/s/ Richard A. Eisner & Company, LLP
New York, New York
September 22, 1997
